Legal tech startups bringing law, order to fragmented industry

It’s long known that the legal industry has not embraced technology as quickly as other industries.

As a result, there are a number of legal tech startups eager to not only help lawyers, but automate some of the processes bogged down by pen and paper. Here, we take a look at two companies that recently secured funding, Justpoint and New Era ADR, to see their approaches.

Justpoint

Victor Bornstein, founder and CEO of Justpoint, told TechCrunch that his company is leveraging artificial intelligence to create efficiencies for both prospective plaintiffs and attorneys, initially in personal injury. It is currently working with over 1,000 law firms.

Personal injury lawyers rely heavily on ads and easy-to-memorize 800 numbers to attract clients, but Justpoint believes that using data is a better tool.

Here’s why: the Boulder, Colorado-based company has collected over 300,000 historical claims and uses data extraction models to plug into a law firm to provide a score on how good the firm is at winning cases, like sexual assault, medical malpractice and product liability.

That’s one side, the second is equipping the firm with information on if a certain claim is worth the law firm’s time to take, mainly because of the time involved in diving into a case and that firms often put up their own money initially to file lawsuits and obtain expert witnesses. Justpoint also brings medical expertise in-house to process the data and train the model.

“Lawyers have an incentive,” Bornstein said. “A claim could receive $2 million, but if they settle quickly, it will save a lot of effort, though they will receive much less. We’ve looked at how to make claims more efficient so lawyers can take a claim to the end instead of settling.”

The company recently raised $6.9 million in a seed extension co-led by Divergent Capital and Charge Ventures. Additional investments came from Crossbeam Venture Partners, Honeystone Ventures, Interplay.vc, Weekend Fund, Turing co-founder Vijay Krishnan, Mainstreet co-founder Jackson Moses and Stonks founder Ali Moiz. It brings the total amount raised to $7.9 million.

Justpoint makes money when the lawyer wins their case, a point Bornstein said is the company’s incentive to send claims worth spending the lawyer’s time on.

“That puts a lot of work on us validating the claims,” he added. “I’s also why we are seeing an uptick in legal technology. Many firms are not interested in using technology, but this allows us to do the work for them. The way we see it is in 10 years, the legal tech space will bloom in a way we have not seen.”

New Era ADR

On the dispute resolution side, New Era ADR, which launched in 2021, is going after a piece of the over $250 billion litigation and dispute resolution industry.

Co-founder Rich Lee explained that legal disputes often take 18 to 24 months and hundreds of thousands of dollars to resolve. New Era is building a digital and virtual tool that cuts down on both the time and cost of resolving disputes by up to 90%. The company highlights risks so that the law firm can reduce unnecessary litigation gamesmanship.

“We are taking the temperature down, reducing acrimony and building the law back on story-telling,” Lee added. “Court systems and arbitration systems don’t allow for digital, so we rewrote them.”

New Era manages all of the case intake, payments, scheduling and facilitates virtual meetings with arbitrators so that clients can get binding resolutions in as little as 60 days.

The Chicago-based company recently raised $4.6 million in seed funding led by Nextview Ventures, with participation from Jump Capital. The company’s original pre-seed investors, Motivate Ventures and Alumni Ventures, also participated in this round along with a group of individual investors, including David Kalt, Sean Chou, Pete Kadens and Lon Chow. This latest round gives New Era total funding of $6.3 million.

New Era charges a flat fee per case, and in less than a year, was named as the dispute resolution platform in over 50 million contracts. So far in 2022, the company has already surpassed its 2021 revenue. Lee said the goal is to triple that in the next year.

Continued investment in legal tech

Justpoint and New Era are among friends in raising capital to bring the legal industry into the digital age, with many of them also leveraging AI.

Earlier this month, Zero Systems brought in $12 million in Series A funding for its software that automates much of the manual workflow law firms handle every day. In February, Ex Parte, a SaaS startup using AI to predict litigation outcomes, raised $7.5 million in Series A funding. Also, contract platform Common Paper secured $4.5 million in seed funding.

“There’s been growing enthusiasm for legal tech for a while now,” Zack Hutto, director of advisory within Gartner’s legal and compliance practice, told TechCrunch. “Corporate law spending is up 50% and we are projecting budgets will make a three-fold increase by 2025.”

He cited a September Crunchbase News report that showed venture capital funding into legal tech topped $1 billion, which was a record amount compared to previous years.

That was not something Hutto was surprised by, saying it was proof of all of the demand, which resulted in VCs wanting to grab a piece of the pie.

He feels like the rise has been a dramatic rise because it started from a small base. Corporate legal departments are spending millions of dollars, but are not using technology as much as you might expect. The legal profession was most insulated from technology and digital transformation, so the trend of startups coming in was bound to happen, though there is still some skepticism of how transformative those tools will be, Hutto added.

“PDF invoices do not give you the kind of insight to make better decisions around that spend,” he said. “One-third of departments were using those in 2010, and fast-forward to the last couple of years, and that number has increased to around half of organizations using e-billing technology, but you still have to marvel at the fact that there is a large, unpenetrated market there.”