Legal tech buzzed throughout 2021 with IPOs, new ‘unicorns’

  • LegalZoom.com Inc, CS Disco Inc and Intapp Inc went public in the summer
  • At least two companies in the legal tech sector have topped $ 1 billion this year

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(Reuters) – 2021 was a busy year for the burgeoning legal technology sector as several companies went public and investors poured capital into private companies in the space.

LegalZoom.com Inc, CS Disco Inc, and Intapp Inc had IPOs that year, and a number of legal tech companies attracted venture capital and private equity investors in large rounds of funding, some of which reached hundreds of millions.

At least two companies, Clio and Everlaw Inc., achieved unicorn status by achieving ratings of over $ 1 billion.

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“Everywhere you look there is the headline about an acquisition or a large fundraising campaign … I also think that if you overlay the IPOs that have taken place, there is a kind of maturity signal that I consider to be quite important,” said Christian Lang. Head of Strategy at Legal Tech “App Store” platform Reynen Court Inc and founder of the NY Legal Tech Meetup.

Other legal industry observers also said that activity in the market this year, which included a series of mergers and acquisitions, indicated a maturing sector.

Legal Tech includes companies that market a variety of tools and services to law firms, corporate legal departments, and consumers. The sector includes products for e-discovery, legal cost analysis, lawyer selection, document review and contract management.

This year, “significantly more” capital was invested in the legal market compared to the two previous years, said Scott Mozarsky, managing director of M&A consultancy JEGI Clarity.

According to industry observers, investor attentiveness has gradually increased over the last several years, while the legal acceptance of technology in the industry is slowly increasing.

Some cited the increase in technology usage due to COVID-19 as a factor as law firms and in-house legal teams considered newer ways of working. However, they said that legal and consumer adoption is still in its infancy.

“The pandemic has certainly shed light on technical skills that some lawyers would never have proactively sought out,” said Lucy Bassli, founder and head of the consulting firm InnoLaw Group PLLC and former Assistant General Counsel at Microsoft Corp.

This has led to investment and “market opportunities”.

The three legal tech companies that went public in a matter of weeks this summer address different parts of the industry. Glendale, California-based online legal services company LegalZoom and Palo Alto, California-based professional services software provider Intapp went public in June, while e-discovery company CS Disco, based in Austin, Texas, went public in June. went public in July.

Legal tech IPOs were relatively rare. Zach Abramowitz, founder of consulting firm Killer Whale Strategies, said the number in 2021 was “rightly unprecedented.”

Legal tech companies of all sizes have attracted private capital injections this year, including the newly minted “unicorns”.

Vancouver, Canada-based law firm Clio raised $ 110 million in April on a valuation of $ 1.6 billion. Oakland, Calif.-Based e-discovery software provider Everlaw said its valuation is over $ 2 billion after a $ 202 million round of funding in November.

Part of this year’s legal tech funding commitment came from private equity.

Private equity firms have been ramping up their investments in the legal market for about five years, Mozarsky said, but private equity in 2021 “put an exclamation mark on its commitment to the market” based on the number and size of transactions.

Francisco Partners invested $ 400 million in Paradigm legal software platform for the company, Reuters reported in October. K1 Investment Management announced in January that it had invested $ 200 million in the merger of e-discovery company Reveal with Brainspace.

It’s unclear whether funding for private legal tech companies will continue at a similar level in 2022, but there are signs that more companies in the industry will soon be going public.

Legal data and analytics firm FiscalNote Holdings Inc said it will go public through a merger with a blank check firm in a deal worth approximately $ 1.3 billion. Exterro Inc CEO Bobby Balachandran recently confirmed that the e-discovery and information governance company is aiming for an IPO, possibly next year.

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Sara Memorize

Sara Merken reports on privacy and data security as well as legal business, including legal innovations and key players in the legal services industry. Reach her at sara.merken@thomsonreuters.com

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