What Do Legal Tech Startups Really Need
What Do Legal Tech Startups Really Need
by Melissa Rogozinski, Chief Executive Officer
A version of this article first appeared in the December 5, 2022 issue of Legaltech News.
According to Lexology, “legal tech is software and technology which is used by law firms or legal teams to facilitate their processes and improve their effectiveness.” It includes tools that provide everything from practice management, cloud-based document management, electronic data collection, predictive analytics, communication collaboration and so much more.
The legal tech startup space is one of the most exciting and dynamic in the world, with a vast and growing number of companies competing for market share. Legal technology startups are innovative, often some of the first companies to disrupt industries, because their products improve efficiency, cost-effectiveness, and overall quality of service.
Some Important Factors of Legal Tech Startup Success
Over the last couple of decades, venture capital dollars have poured into the sector, and startup valuations have skyrocketed. However, the post-pandemic environment has triggered what one VC describes as “the proper end of a cycle.” So, what does that mean for legal tech startups now?
It means that legal tech startups will need to prove to investors that they can raise capital the old-fashioned way: Sales.
The following six steps will help make sure your startup is set up for sales success and, ultimately, be worthy of capital investment:
1. Build a Team with a Passion for the Space
If you are building a legal tech startup, your team should be passionate about the space and be willing to push forward no matter the challenges. Working at a startup can be difficult, but if you have the right team working on your project, things will fall into place.
It is also encouraging to engage experts who thoroughly understand the issues a startup will face. Leadership must plot a sensible course, recognize when they are veering off course and collaborate ideas for alternative solutions to stay on track. The members of the team must be agile and assertive enough to recognize when turnarounds are needed and to execute them quickly.
2. Time Your Launch Carefully
If you want to build a successful legal technology startup, timing is everything. Your idea will get off the ground if you are in the right place at the right time with the right solution.
It can be tricky because there are no hard-and-fast rules of when things need to happen for an idea to launch successfully. But if you can identify when certain events are likely to occur – like changes within your industry and client needs – you can get ahead of the curve by starting sooner rather than later.
About ten years ago, having practice management technology in the cloud was a controversial concept in legal technology. However, it is now widely accepted as more cloud apps become available. Getting the timing right requires a combination of research, due diligence, and luck, but it is critical to the success of a startup.
3. Find a Stable Source of Funding
Predicting and planning a capital strategy is critical to the longevity and success of a startup. Every investor, bank or other potential lending source for a startup wants proof that you are willing to pony up your own funds and assets before they will agree to risking their capital with your company.
Some businesses have succeeded solely through their own bootstrapping efforts, while others have received funding from venture capital (VCs) or private equity (PEs) investors. VCs often provide significant support for early-stage companies looking to scale quickly. With a proper due diligence and reporting process, investors in legal tech companies can be fearless in taking risks on innovative ideas with startups.
4. Implement Effective Growth Strategies
If you want to want to drive real revenue growth in our current economic environment, then you must find new ways to think about, study and prepare to meet the needs of the new legal solutions buyer.
Features and benefits no longer sell. Consumers want to know that you understand them, their business goals, and the obstacles in their way. Bring marketing and sales together as one team to collaborate about your target buyer, and prepare marketing content and resources as a solution that leads to sales.
5. Iterate and Evolve
The most successful startups are nimble enough to evolve an idea with multiple iterations of success, each leading to another.
The idea must be tested and iterated over time to remain relevant and valuable. This process can be done through testing with customers, partners, or employees.
It also includes testing against competitors via benchmarking studies and other data collection methods. In addition, your product should have multiple features, functionality and customer service standards that will drive the user experience forward.
6. Embrace the ‘Fail Fast and Fix It’ Approach
However, for your company to succeed in this space, you must be able to pivot quickly and adjust if things need to be revised. If you are not willing or able to do this — or if you cannot fix things fast — you risk failing or at least struggling for a long time before finding your footing.
Legal tech startups are no different from other businesses when it comes to focusing on product development, sales, customer acquisition, and retention.
Legal tech startups are disrupting the legal services industry by offering convenient, affordable, automated solutions that make it easy for anyone with a legal need to access quality legal advice. The increasing demand for legal and digital services has created an opportunity for companies to rethink their business models and approach to customer service.
Your company could be the next legal tech success story if you have the right team, timing, funding, growth strategies, and is nimble enough to evolve and deliver high-quality customer success!