An Open Letter from Seyfarth’s New Chief Strategy Officer

by Joshua Kubicki

On July 1, 2015 I become Seyfarth Shaw’s Chief Strategy Officer. This is a new role for the firm and a new role for me. Entering this role, I join an exceptional team of law firm and legal industry leaders, with a distinguished record of accomplishment. Our mission is to create unparalleled value by designing real answers to the right problems — the problems that matter most to our clients — and to deliver those solutions through a unique client experience.

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LexHacks - a legal hackathon on June 6 -7 in Chicago

by Joshua Kubicki

LexHacks is a legal hackathon that will produce solutions that improve the delivery of legal services, expand access to legal services, and advance the legal industry.

In the United States, it is estimated that 80% of individuals’ legal needs go unmet. Roughly 38 million Americans who would benefit from legal assistance are not receiving any. Businesses also face challenges related to the expense of legal services.

Developers, designers, lawyers, lean thinkers, project managers, data analysts and other professionals can work together to create solutions that improve the efficiency and delivery of legal services, as well as the access to legal services. At LexHacks, these professionals will form teams and work together to compete for cash prizes for developing software-based solutions to challenges posted by sponsors.

For complete rules and to sign up to participate, visit LexHacks.com.

The Intrapreneur’s Dilemma

by Joshua Kubicki
The Intrapreneur’s Dilemma

When someone tries to innovate within a traditional organization,
few will understand what he/she is doing,
but everybody will understand who is a trouble-maker.

After the innovation has been embraced by the organization,
few will remember who started it,
but everybody will remember who was a trouble-maker.

This is the dilemma encountered by many intrapreneurs -
they risk punishment for success.

~ David Nordfors | President & Co-Founder IIIJ

The Intrapreneur’s Dilemma

Companies are heavy: thick with layers of management, columns of workers, and sticky procedures. Altering the direction or just making an impact within a company takes tremendous energy and resources. It is the nature of a mature organization to support its core mission and business model, not destroy it. Startups are light: thin and airy in terms of structure and organization. Changing direction is easy and is in a startup’s nature as it seeks to find a business model and market. Launching a startup inside a company (intrapreneurship) is thus extremely challenging. Intrapreneurs live inside the belly of their corporate parent but must not feel captive (which is easy) but rather opportunistic as they are not alone and are surrounded with resources, channels, and cover. Yes this comes at a price but everything is a trade-off — just ask a startup founder what their salary is.

An intrapreneur for this essay means someone or some small group that initiates change or experimentation on their own — with no mandate or dedicated resources from their company. While many companies have platforms such as “skunk works”, R&D labs, innovation centers, and so on — true intrapreneurship is the pursuit of change from within without a predefined ecosystem to explore such change. The formal innovation initiatives have their place and provide tremendous value but the pure form of intrapreneurship is the focus here and is what David speaks of in the title quote.

Me? I have been an intrapreneur for most of my professional life. I have enjoyed tremendous success as well as infuriating failure as an intrapreneur. In fact for a moment in my career I was an intrapreneur-for-hire in many respects as organizations hired me to define and catalyze change in some fashion. But a for-hire scenario is much different than an organic intrapreneur. Let me share a quick story.

Around the turn of the millennium the legal staffing industry was in its glory days. Law firms had massive amounts of work, were flush with cash and wanted more. I was leading the DC office of a leading legal staffing company — Ajilon, now Special Counsel. My focus was on temporary staffing — specifically supplying temporary lawyers for large litigation or M&A projects — both of which were in great supply at this time. There was so much work and the projects were getting so large that it was common for the local talent market to dry up. This talent pool easily was into the several thousands. Agencies based in DC began recruiting from Baltimore and Philly and even Pittsburgh. On many of my projects I even had dozens of lawyers from the west coast commuting to work in DC for several weeks. It was insane and fun.

With this acceleration came scarcity and quality erosion. Some agencies were not even interviewing or meeting their candidates in the feeding frenzy for talent. At first law firms did not realize or care. Eventually though this market had so much work that temps would leave projects mid-way to join another project that might pay a bit more, last a bit longer or have better working conditions. Speaking of conditions — it was common practice at the time for these projects to be housed in Class C real estate — often subterranean and 100% artificial light with folding tables and chairs where the temp lawyers would sit for ten, twelve or fifteen hour shifts. It was not pretty.

Law firms typically “managed” these projects themselves — everything from the work-product to the logistics (meals, schedules, furniture, technology, etc). The youngest lawyers in the firm — often with only 1 to 2 years of experience — were put in charge. With no business, professional, management or even legal experience, these young lawyers were tasked with keeping the project on course and under control. It was unsustainable.

Around this time I had begun to experiment with how I was dealing with my clients. I was in sales and so being close to my customer was a key to my success and my bank account. More than this motivation though was my eagerness to rid myself of the friction associated with the current business model that dominated my industry. I disliked the “body tossing” or throwing unvetted temps to my clients because quite frankly I knew I would have to fire these same people in a week or so. I also did not enjoy the complaining and whining I got from the temps as they looked to me to cure the problems that were outside my control — like work environment or lack of clear management. I was empathic but powerless. Or so I thought.

I had small lean team around me to help organize and run my book of business. There were only four of us but the amount of work we could get done was amazing in terms of our peers inside and outside the company. We each felt the opportunity to change the way legal staffing was done. Our team looked and acted like co-founders each with distinct roles but often these roles blurred into one another, as we all would jump into a challenge to solve it together. There were plenty of late nights, weekends, beer and pizza and so on as we scrambled to deliver our expanding new services to our clients. We were not software hackers but service hackers as we worked creatively to solve unique issues and crack human and process challenges. We were removing the burden and cost of running these large projects incurred by our customer law firms. We were developing deep skills and project management techniques to take on the loads of administrative, logistical and human capital work that needed to be done. We were designing new services and a new business model for the legal staffing industry.

few will understand what he/she is doing,
but everybody will understand who is a trouble-maker.

While we did not purposely set out to create a captive startup — in essence that is what we did. Our efforts led to capturing $25 million in revenue and robust margins within eighteen months — an unheard of accomplishment inside the company. We did this through experimentation — small bets with plenty of failures and mounds of learning. Leading the team and having lone P&L responsibility for it, it was my job to sell our “new” services not just to clients but also internally to my CEO and CFO. While we were bringing in high margin dollars we were also taking bountiful commissions — a couple of us anyway — as we were on sales compensation plans (this was my Incentive — see below).

Our business activities were also creating friction inside the company, as we needed high bandwidth and new methods to accomplish tasks that had pre-determined “hard-wired” workflows and process — like payroll, benefits, time keeping. Adding to this friction, we began charging for our services differently and added new services that did not exist prior. Accounting, human resources, and senior management often reached out to me with demands for conformity and compliance. My intention was not to break rules but the simple fact was that our team had created such velocity and acceleration in our new business that we needed to bend — if not break status quo internally simply to get the job done and our clients satisfied.

few will remember who started it,
but everybody will remember who was a trouble-maker.

We were truly successful with our new model. The legal staffing industry changed significantly as part of our efforts and what is today called “managed document review” in the ediscovery and staffing world has much of its origins in the model that our team created. The lessons learned from this experience are powerful and demonstrative of what life is like as an intrapreneur.

I did receive multiple awards for innovation and gained the recognition as a leader but my role always had an invisible asterisk beside it to note that I was not a “company man” but rather a rule breaker. I cherished that label then as I do now. But I would come to pay a price for this success.

they risk punishment for success.

After the tremendous success of our new business model inside the company and the industry, our corporate leadership began to embrace the value we were bringing and so wanted to extend control over our team and activities. This could have been a powerful amplifier to our efforts but due to the nature of most corporate environments, including this one, it was instead a stifling and hostile approach. Compensation plans were under serious threat. Resources that we had hacked were now being over-extended as the company looked to scale our services without the proper understanding of it. Others in the company began to sell our new model but were not trained to deliver in terms of quality or capability. I was brought in on a number of projects that other offices and sales people had sold but were under-delivering on. These diversions made my own business efforts suffer and I had to rely on my team more and more to step up and manage in my place. The clients were getting upset. Internal staff and resources were getting frustrated with mounting special challenges in adapting to the new business model. The rest of the industry was catching up fast. My team was exhausted and growing in resentment as they saw our success get diluted and downplayed over and over again. It was becoming toxic.

My team and I ultimately left the company as we saw the value of our efforts get compromised time and time again. Our company simply thought that scaling this new business was as easy as selling more of it. We wanted to see it succeed in the way we knew it could and should. I found a younger more aggressive company that craved the type of innovation we had built and so joined them. My prior company quickly realized the ramifications of losing my team and so filed a lawsuit against me for well over $20 million. The rest as they say is sealed in settlement papers.


This story is not unique. Countless intrapreneurs have found themselves in similar circumstances. It is because of this that companies have established programs and efforts to help alleviate the burdens faced by internal innovators. In other cases, companies have outsourced their innovation through such platforms as Innocentive. Recently innovation has become even more of a trend as more companies have learned that their typical operating environments does not allow for much innovation or intrapreneurship. To those individuals inside companies that have not taken these steps — beware — you will need strong conviction, uncanny business acumen, and a laser focus on your goals to achieve what you are attempting. And you will need one hell of an incredible team to make it work – no matter how small.

Here is what I know it takes to be a successful intrapreneur — success being the execution of building and launching a new innovation inside a mature company. Career success for the intrapreneur is a different thing altogether and is heavily influenced by the intra’s ability to adapt, leverage, and survive. The following “traits” have been defined based on my initial work shared in the story above, numerous subsequent engagements and from trading notes with others.

Incentivized: Most intrapreneurs have a clear incentive for doing what they are doing. For many it can be money – especially those that are in sales or marketing. Their compensation plans are often elastic enough to provide adequate additional cash to make the effort worth it. Those that do not have a direct link to making more money often will have a passion or a strong sense of customer loyalty. These attributes can actually be more powerful than money, as was in my case. My checks were nice but without a conviction to make the business model better and the loyalty to my customers, I could have easily made decent money without all of the associated headaches with being a troublemaker. The point is, there must be incentive or nothing will happen. That is why organizations that lack any sense of encouragement coupled with enticement need to build something more substantial than a suggestion box. Nobody works for clear plastic award trophies alone.

Subversive: This word tends to have a negative connotation so perhaps rebellious would be better. That said the intrapreneur does need to have a sense of anti-establishment tendencies. If the current business is doing all the right things, there will be no need for the intrapreneur. Therefore, the intrapreneur tends to see the gaps, confounding processes, and oppressive management of their current environment and works against them to accomplish their goal. Mind you, this subversion is not directed at hurting the company but rather to strengthen it despite itself. The vast majority of intrapreneurs have a neutral-to-positive outlook on their company and want to help it. If they wanted to hurt it, they would simply leave. In my case, I did picture a long career at the company and only left after it began to hurt me deliberately – not an uncommon result unfortunately.

Unrelenting Focus on the Customer: This is a no-brainer. Most, if not all, intrapreneurs see a customer that is either neglected in some way or ignored by the current business model of the company. They see that there is a better-defined problem that they can solve rather than selling the same old product or service for old, ill-defined, or irrelevant problems the customer may have. The saving grace for the intrapreneur is the early adopter customer – the one that is willing to test, measure, and learn alongside the intrapreneur and most importantly pay for doing so. There are no such things as pilots or betas for the intrapreneur-without-a-company-mandate. Co-creation is key here. Without a paying customer the intrapreneur does not stand a chance.

Lean Team and Analytics: Intrapreneurs have a huge challenge if they want or must work alone. They will need help – from “co-founders”, executive sponsors, administrative heroes, and customers – at least one. As the innovation grows, the intrapreneur must be on alert to “convert” those they find within the company that can be helpful. For executive sponsors, nothing works better that clear ROI analysis or some form of benchmarking for success. Capturing and analyzing the build process will be essential to making the case later on that this innovation will work. This data will also help quantify the investment of time and effort put in by the intrapreneur to demonstrate that the innovation is not a substantial deviation from what the intra’s actual job is. Further, since most mature companies are run based heavily on Key Performance Indicators (KPIs), it is in the intrapreneur’s interest to begin shaping and defining new KPIs relevant to their innovation

Being Captive (aka No Escape Velocity): Escape velocity in the external startup sense is used to describe the stage at which a startup has reached a point of sustainable growth. It can survive on its own. For the intrapreneur there is nor real escape velocity other than when the parent company begins to monetize and integrate the intrapreneur’s invention into the core business model. While there is escape velocity for the new product or service, most intrapreneurs are marginalized or otherwise limited in their ability to seize the moment and ride the wave of success they built. The intrapreneur must be aware of this and prepare both their ego and emotional ties to their creation. Most likely they will not be allowed to “follow” their innovation inside the company.

Okay with being alone: Being an intrapreneur is the worse kind of alone: unlike startups founders for who there is a huge community, there are few if any meetups or peer groups for intras, no slick and cool conferences, no content or media companies covering this area. This lack of peer network can be isolating at times and company peers will more than likely ignore intrapreneurial efforts, shun them or resent them. The team must be able to work in conditions that often feel isolated and exposed. Many in the company may be waiting for the intra to fail. Others may simple downplay efforts. Nevertheless the intrapreneur must not measure their satisfaction based on anyone else initially – only the customer.


So why even attempt intrapreneurship inside your company? Why risk the alienation, misunderstanding, and turmoil to build something valuable for your company not yourself? For me it has always been the sense of adventure and compelling motivation to build. Working inside a company has many challenges but it also has many advantages like infrastructure, platform, and access to markets. Often, an intrapreneur would be unable to leave the company to build their innovation on their own as an independent startup. The parent company provides a paycheck, security, and resources while also presenting significant challenges as outlined above. The choice to pursue an innovation must take into account all of this. The intrapreneur can easily lose much in terms of their career and job satisfaction all in an attempt to create value for their company. They will be trying to push their company forward while being pushed down by this very company. But if they are successful the riches of experience and leadership (and sometimes money) are theirs. That is in essence the intrapreneur’s dilemma.

Business Design for Law Firms | Part 2

by Joshua Kubicki

In part 1 of this series, I introduced a case study of a typical law firm problem – our client was having trouble competing for business and maintaining its operations.  In this post, I share some specific corrective actions we directed our client to make.

While we structured our analysis of the client’s operational predicament building on our methodology we focused much of our effort on an audit of the firm’s business model.  We then applied our findings to the nine components of the business model canvas.   With this client, three canvas components consumed much of our attention – Cost Structure, Pricing/Revenue, and Key Activities (which we labeled as Process).

Cost Structure.  Legal is business.  This is LTI’s motto, which we have trademarked.  Immersed in practice, lawyers easily forget that a law firm is unmistakably a business.  The economics of business, however, remain acutely in play; lawyers do not get a pass when it comes to generating sustaining profits.  Accordingly, a firm’s leadership must endeavor to stay on top of the financial health of its business at all times.

In our case study, the client needed to sharpen its focus on the underlying financial metrics of the firm.  We examined, adjusted and clarified metrics such as utilization, overhead cost allocation, bill rate elasticity, and write-off/pre-bill practices.  In so doing, we discovered the firm was awash in a variety of questionable costs.  Much of these costs stemmed from the manner in which the firm was deploying (or not deploying) its human capital.

Pricing/Revenue.  The client sought specific guidance in pricing fixed-fee representations.  To guide the client’s fixed-fee pricing we first needed to appreciate the firm’s costs of service. Actual costs inform pricing.  Early in our engagement we challenged the client’s definition of cost.  Our client had developed a “cost per hour (CPH)” metric.  CPH was figured by taking the salary, burden, and overhead of each fee-earner and dividing it by that fee-earner’s actual hours billed in the previous year.  The metric focused heavily on billed time as an input (to the detriment of overall productivity cost  – the hard costs a firm pays to obtain and deliver services).  Regardless, the costing structure the client used and understood, though imperfect, still possessed value for our purposes, as long as the client generally understood the limitations of the CPH metric we could use it to assess and remodel the firm’s fixed-fee pricing structure.  It was also a starting point to gain a deeper understanding and ultimate use of a more finite cost equation down the road (something that is in the works now.)

To develop executable fixed-fee pricing for our client we isolated and analyzed past workflow and billing data for the types of litigation the firm anticipated would be subject to future fixed-fee arrangements.  We drilled down into timesheet data and billing data (pre-bill and realized).  We further broke out the historical data to define three different tiers of case files within each litigation type (think – easy, moderate, and difficult).  Once we had aggregated and distilled the data set (which on occasion required some reverse engineering and extrapolated estimates) we could cross reference the CPH data with the litigation types and tiers to identify margin and/or loss for each such type/tier, giving due regard to the firm’s non-fixed-fee revenues/costs and where those revenues/costs stood as a percentage of the firm’s total revenues/costs. 

To address potential shortfalls in margin and to eliminate losses from the broader equation we identified for the client adjustments that could (and in some instances, had) to be made to the firm’s cost structure and workflow.  The client, consequently, made hard choices in the areas of, among others, human resources, practice management, office administration, fee schedules, and fee-earner roles and responsibilities.  To preserve and enhance the business, the client could no longer continue the practice as usual and acted as the circumstances, and the needs of the business, dictated.

Process.  As there is a relationship between cost and price, there exists a relationship between process and cost.  How a firm performs services impacts cost.  Performance is indelibly tied to process/workflow.  This is true even in the practice of law.  For our client, based mainly on the findings, we articulated various ways in which process/workflow could be modified to stimulate efficiencies and stymy costs.  For example, returning to the subject of fixed-fee representations, we recommended a matter management platform.  Like many firms, the client’s lawyers worked voraciously on client matters, focusing on litigation results but arguably neglecting the price and cost elements of how the firm was achieving results.  The recommended platform uses financial and workflow data to create accurate and realistic budgets that track cost and profit in near real-time.  The platform also, among other capabilities, assists matter managers in staffing, task identification, and task delegation, to include monitoring resource (lawyer/paralegal) activity and performance.   The client has decided to deploy the platform.  Currently, through collaboration among LTI, the client, and platform vendor, workflow templates are being designed for installation on the platform so that each type and tier of case file will have a repeatable template to follow in terms of who performs what task and how much time it should take. 

This case study demonstrates that law firms should, periodically, take the time to assess their legal practice as a business.  In this instance, our case study firm became a victim of its commitment to the downstream client.  That is not unusual.  Focused on the practice of law, the firm lacked opportunity to address sufficiently the underlying economics of the business.  This is, in part, why LTI exists.  Our role is to apply a design mindset, our expertise in law firm business modeling and execution, to keep practitioners in business.  Yes, attorneys are practitioners first, but when they don’t act as business people too, the ability to succeed in the profession becomes tenuous.  

In Part 3 of this series, we will share further takeaways from this case study, such as our views on the keys to pricing law firm work product and business design for legal services.

Posted by Josh Kubicki & Chris Wood

What does business design for a law firm look like? Or how we helped our client regain profit and a key client. Part 1.

by Joshua Kubicki

The practices of Design and Law have been recently paired in the media due to some pundit and academic interests. The greater legal industry though still has no idea what design is and how it pertains to the practice and business of law. I have been in the business design practice now for over ten years.  My company, LTI, has been leveraging business design for the last five years.  Rather than sharing clever videos, drawings or wishful thinking narratives, I thought it best to describe what business design really is by sharing a recent example. 

Problem:  The client words best sum it up. Here is an excerpt from the first email I received from one of the founding partners.

Over the past 2 years, we have lost a significant portion of our revenue due to one major insurer going to a flat fee system, which we did not get the contract because our bid was too high (our bid of course was based on expected volume from that carrier and what we needed to cover overhead, etc.).

Long story short – we need to become more efficient and consider different processes or systems in order to compete with these new models.

Solution:   We executed a 45 day project that entailed a complete review of the following: finances and all related metrics (utilization, realization, rates, burden, et al.), human capital, workflow and technology.  We used our proven method of analysis, a process heavily derived from the business model canvas.  We take a client-centric approach to our work – always evoking the client point of view to ensure services/products are addressing client pains and concerns.

Outcome: The firm was able to more than double projected profit for 2014, remove and otherwise lower costs, and right size itself to better compete in the insurance defense market.  Most importantly, it regained the client it had previously lost which at that time represented close to 50% of the entire firm’s revenue.

Explanation: We were engaged by an insurance defense law firm to help them re-design their business model from the ground up. 

The pressure this firm was feeling was real and widespread.  Failure was imminent.  There was nothing special or different about this firm in terms of how it was setup and run.  It looked similar to many other firms out there so there really was no readily apparent reason for failure other than the market was changing and the firm simply could not keep up. 

Like so many firms, this one was built around the practice of law (sounds obvious) but not the business of law.  It had many fine lawyers and paralegals.  It had legal and business support staff as well.  The problem was that there was no strong emphasis on building and sustaining the law firm as a healthy business entity - one that would grow and change with the market and client base.  Few firms have this ability unfortunately.   Now more than ever this is becoming an essential capability.  Simply being a lawyer is not enough anymore.  Law firms have to run as businesses.  In the era of fixed fees, the importance of business design is even more essential.

So how did we redesign this business?

There are 9 essential components to any business.  Those familiar with the business model canvas will recognize most of these.  Over the years we have adapted these to better fit the legal market.  Initially we conduct a review and audit of the law firm.  This entails your typical audit of financials, technology, client roster, and the team.  With this law firm, we also met with every person in this firm (fee earner to staff) in order to ascertain human capital talents, utilization, and to gain a first-person narrative of the challenges facing the firm. 

Based on these activities we then apply the nine elements to expose the weaknesses, strengths, and failure points of the current business model.  This is essential as most law firm lawyers and staff have a gut sense as to what the problems are but too often also have blind spots that are vital to uncover and share.  Once the entire current business model is defined and shared with the leadership, there can be an honest (and direct) dialogue and decision around how and in what manner to proceed. It is imperative that there is 100% agreement as to project strategy and execution. 

9 Components

Value Proposition 

Our findings for this client

Like so many firms, our client’s value prop was essentially the same as so many other firms’ – plain vanilla and did not speak of any unique factors.

Like many firms, they emphasized their trial skills but considering that less than 1% of insurance claims go to trial – this was not the most compelling value prop.

Our client was not leveraging its institutional knowledge of it clients to any benefit.


Client Segments


While over 90% of their revenue came from insurance defense, they were built and sounded like a general practice firm.

Since many of the lawyers had general practice experience, the firm was still structured as such.  They were not optimized to serve their main client base.


Client Development

Individual lawyers were left to find clients on their own with little to no support or training.

Equity partners enjoyed strong client relationships but those were coming under pressure as their clients were promoting new fee structures that emphasized cost value.

The firm was resting on its personal relationships rather than developing two-way business relationship with its clients. 


Client Relationship

Our client was trying to position itself as the “go to” defense firm while its clients were looking for right-sized efficient claim resolution partners. 

Our client is in fact key trial counsel for many of its clients but they were ignoring the business needs of their client base – predictable budgets, early case resolution, and efficient workflow/billing practices.


Cost Structure

Simply stated, the underlying cost of delivering legal services to clients was not adequately tracked, maintained, or respected.  There was a typical cost+ approach to generating revenue and profit.  It was only when costs of operating the firm significantly outpaced projected revenue that the firm took action – too often stopgap and unsustainable measures.


Pricing / Revenue

Pricing was heavily based on hourly rates.

Little to no incentive for reaching annual billable goals or for being efficient.

Utilization rates were dangerously out of alignment with several fee earners representing a loss on an annual basis.   Ability of other fee earners to cover these losses eroded as business slowed and costs increased.


Key Resources

There was an unclear and disconnected technology strategy.

Workflow was siloed with little to no visibility across projects or fee earners.

Support staff was being used for non-essential and antiquated tasks.


Key Activities

Communications and workflow were burdened by heavy and inefficient use of paper.

Little to no documented processes or workflows.

De-centralized communications and responsibilities.

Limited responsibility for operations and business performance.


Partners (Business)

Firm was not engaging appropriate outside experts and had little to no oversight/performance review process in place to maintain quality.

Firm was not viewing clients as partners.


In Part 2 of this case study, we will provide the solutions we recommended based on these findings as well as some detail as to the pricing strategy used to regain the firm’s most important client

Legal Startup Funding | 2014 So Far [Update 10/24/14]

by Joshua Kubicki

angel-funding.jpg

For those keeping track, 2014 is tracking to match or beat 2013 investment in the legal startup market.

A strict view would include only those startups that are exclusively in the legal market, offer services that directly compete with lawyers, or offer tools that lawyers would use.

An expansive view include any startup that has some business focus on the legal market but is not exclusive, has a meaningful impact on the business or practice of law, or offers legally-related or informed products/services.

The Strict View investment to date in 2014 = $254+M (Non-US funding not included)

Docusign $85M 3/14 + $30M 10/14

TechLaw Solutions $8.4M (acquisition)

ClaimKit $560k 8/14

Druva $25M 8/14

Traklight $350k 8/14

Juristat $257k 7/14

FIxed $1.2M 7/14

DTI Undisclosed (Omer buyout of Harvest Partners)

Workshare (UK) $8.4 in 5/14 

TrademarkNow (FIN) $3.5 in 5/14

AccessData $18M (acquisition)

HireAnEsquire $350k 4/14

EverPlans $3.8 in 1/14 & 4/14

Avvo $37.5 in 4/15

BridgeUS (formerly LexSpot) $800k in 3/14

Clio $17.9M in 3/14

CS Disco $2M in 1/14

Cycada $3.8M 2/14

Onit $2.33M 1/14

Ravel $8.1M 2/14

Clearpath $400k  debt

LawPal $400K debt

Teleborder Undisclosed Amount 7/14

The Expansive View funding to date in 2014 + over $266.7M

(these are examples and not exhaustive)

Innography $3.5M 1/14

Wickr $9M 3/14

If I have missed any please let me know.  If you agree or disagree with the definition of the views – also please let me know.  I am still working out the parameters for how to classify legal startups.

Make that $400 billion for US Legal Market Size

by Joshua Kubicki

The entire US legal market can be valued at well over $400 billion.  Mind you this is when all the segments of the market are combined.  So while this is a holistic approach, in practice any "legal market" aimed business will be focused more specifically on its narrower relevant market.  But I wanted to be bombastic. While this is more of a “back of the napkin” approach, I have attempted to use "normalized" figures and logical extrapolation.

Slide 1.png

So how do we get to $400 billion?  It is a rather simple but incomplete exercise.  Early in February I was putting together my ReInventLaw talk.  My focus was to be not so much on the immense size of the overall market but on the complexity of the market and all of its segments – some related and some not.  I was going to begin with this slide

$274 billion basically represents the size of the practicing lawyer market – from solos to BigLaw.  This number is based on revenues as collected by the US Bureau of Labor & Statistics.  So this number is fairly justifiable putting aside strict economical analysis (such as breaking this down to each of the sub-markets - small law & big law to be overly simplistic).  Regardless this is a good start towards the $400 billion. 

No we look at how quickly the legal market gets complex. Below are a series of slides which demonstrate some of the major related markets that easily contribute to the legal market.

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As one can see the breadth and depth of the “legal” market is indeed wide and deep. Most people (lots of lawyers) tend to define the market as being only what lawyers do. This is a mistake. Looking at the various and justifiable components of the legal market, one begins to see how the market value increases rapidly.

  • Research: $7.2bb (Thomas Legal $3.3bb, LexisNexis $2.6bb, Wolters Kluwer $2bb, Bloomberg Law $331mm)
  • Ediscovery: $5.5bb (2012)
  • GRC: $5.17bb
  • Legal Temp Staffing: $1.5bb (2005)
  • LPO: $1.1bb (2012)

So lets move to the more challenging math. These elements of the legal industry are difficult to pin down in terms of size but with the limited data available one can extrapolate and make an educated guess on market value.

  • In-house legal department costs: $5bb (salaries & operation costs for in-house lawyers.)  This is likely much higher as this number is for the Fortune 500 alone.
  • 50% of US consumers have at least one legal event per year but only 20% of them use a lawyer.  For the remainder, there is roughly $45bb in untapped market potential.
  • There are 23 million small businesses in the US.  Roughly 7 million did not seek the help of a lawyer when presented with a significant legal event.  Those that did get legal help, report that they spend on average $7600 per year. This creates an untapped market (the 7 million who avoid lawyers) equal to roughly $45bb
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With the combination of the above "latent" or "untapped" market along with the connected and tangent verticals - the total legal market gets to $400bb quite easily (ignoring other obvious markets like the law firm consulting market, litigation finance, and new tech - LegalZoom, Clio, WireLawyer, and ERM Legal).  There are other areas that could be added to this number as well but it gets truly challenging and takes some genuine ingenuity.  How much "legal related" work do the big accounting firms do?  How is the massive plaintiff market calculated? What new areas of legal practice are being created that did not exist before (such as breaking cell phone carrier contracts like CellBreaker or ensuring TOS compliance as some other startups are taking on?)  

Again let me repeat that this holistic number is only useful to demonstrate that the aggregated  legal market is quite massive.  The point is that those in (and outside) the greater legal market must understand that this is a complex and growing market overall.  Opportunity abounds.  While law firms and incumbent service providers are only focused on their collection of sub-verticals or markets, a growing number of others (and some firms) are digging deep and exploring these new and existing markets. It is evident that there is no shortage of opportunity or incentive to innovate within the legal economy .

2013 was a Big Year for Legal Startups; 2014 Could Be Bigger

by Joshua Kubicki

Roughly $458 million was invested into legal startups in the last year by investors. This is a remarkable increase from the $66 million invested in 2012. And 2014 began with a strong January seeing almost $12 million done in four deals. Awareness and confidence in the legal startup arena is growing.  This is in part due to the increase in number of legal facing startups and also in part due to a galvanizing of this particular startup community.

Here is an overview of some of the noteworthy deals.

For my full TechCocktail story, click HERE.

LexRedux | Recap & Rants for Legal Startups

by Joshua Kubicki
LexRedux NYC 2013 

LexRedux NYC 2013 

When the idea to have an event that later became LexRedux occurred to me it was born out of the notion that there needs to be a more focused dialogue on legal startups.  In the great transformation debate currently circling the legal industry, legal startups themselves have never really been a focus.  While there have been a few events in the past, I saw a gap – a need for a nuts-and-bolts conversation between founders and investors in this space.  This became the goal of LexRedux. Thankfully David Perla and Rob Saccone, my new co-conspirators, agreed.

So from that simple perspective I can say that the event was a success.  We had over forty legal startup founders attend along with a handful of investors, most of whom actually have money at work in this sector.  There were also a number of other “interested parties” such as active academics and prior founders.  The night began with some active and robust networking.  After everyone was settled in and relaxed, we got the panel started.  I moderated the evening and was flanked by David Perla, Tony Abbena, Daivd Mars, Josh Abromowitz, and Rob Saccone.  To get things rolling, the first question I posed was “what is the legal market?”  I referred to the often-cited monetary figure of $300 billion – which thankfully all of us on the panel and most attendees agreed is meaningless.  While it may represent the aggregated verticals/niches within the legal industry, by itself it is of little importance to legal startups as nobody is going after the entire legal economy.  As the panel shared, the true power in pitching lies in the bottom-up math that demonstrates that particular startup’s ability to gain real revenue based on their particular market, resource allocation, and true ability to sell.

Perhaps one of the most poignant moments on the evening belonged to Perla though.  During a discussion on growth and sales there was much lamenting by the crowd over long sales cycles and “unknown” buyers that tend to describe the large law firm market.  But there were also murmurings by the B2C and B2-small-law startups over how to sell as well.  Perla owned the moment when he interrupted the conversation with a simple yet powerful demonstrative question: “Raise your hand if you are a founder.  Now keep your hand up if you have taken any sort of sales training in the last twelve months?”  Out of the thirty or so hands that were raised – all but three remained up.  It was simply shocking and telling.  The entire crowd took a beat before a collective gasp and chuckle resonated.  Perla’s point was made.  If you are a founder – you better be able to sell.  And if you don’t know how, you better learn.

Tools and instruments such as a sales funnel, pipeline tracking, cycle times and trends – all of these and more better be constantly on the mind of any founder and she better be able to recall her startup’s figures on these at any given moment with close to real time accuracy.  While much weight is given to the “relationship” nature of selling in the legal space – relationships can be measured.  A key lesson gained from this conversation was that if a founder falls prey to chasing loser clients and non-buyers they might as well close up shop now. 

ReInventLaw NYC | Legal Startup Founders gather on stage.

The other poignant moment of the evening came when the entire panel declared emphatically that unless a founder’s passion splashes off him in a pitch – or really any other time – the likelihood of stalling or failing increases.  The point is simple – if the founder is not excited about the startup why the hell would anyone else be? Really there is not too much else to say on this besides this one minor point: many legal founders tend to be lawyers.  Lawyers traditionally are not a flamboyant or exuberant bunch.  When they are, it is usually for the benefit of a client, not themselves.  We did explore the notion that a lawyer’s DNA (which is giving this cliche too much weight) may be a challenge when founding a startup.  That said, any lawyer founder simply has to force the issue and get amped.  In fact, I will submit here that at a later event – ReInventLaw – I got so amped over what legal startups are doing that I ditched my planned talk and instead called all the founders up on stage with me to get the audience to acknowledge them and give them a huge hand for being the brave ones – the courageous ones – the heroes.

If I can summon this kind of energy there is simply no reason why the founders cannot.  In fact many founders were up on stage that day giving talks and while all were indeed good talks, I will say that none of them brought to the stage the enthusiasm or energy that is needed to get a crowd behind them.  Clever products, neat branding, and a slick deck or wardrobe simply are not enough – to get funded or to sell products.   I am not sure why this was.  Perhaps because the founders did not think this was their audience.  Perhaps it was nerves.  Or perhaps they are simply exhausted from working day and night on their growing companies (the best excuse).  While I can see that some of these excuses or others may have merit, they are nothing more than that, an excuse.  Reality is, any founder who did not bring their A game let an opportunity slip by them.  These talks were taped and will be released via the ReInventLaw channel.  This creates the opportunity for a talk to live on in the digital medium.  When investors search for startups they will find these – as will potential customers, employees, acquires, etc.  What a shame that too many of these talk are easily overlooked – not due to lack of content or professionalism but a lack of energy, inspiration, sexiness or simply, confidence. 

Every interaction with the public is an opportunity to either strengthen brand, sell, or extend network.  Especially at a gathering of like-minded folks that is being taped for distribution.  When I built a captive startup inside a global corporation I can tell you that I needed to get noticed – both externally and internally.  I needed to use the platform of the global brand but differentiate what my small group was doing.  Not a single interaction passed where I did not take a chance on – building our brand, selling, or extending our network.  This does not mean I was a maniacal sales person – in fact the opposite – as many of my former clients/peers will tell you.  Put simply – it is an energy that lets you do this – an attitude, an internal perspective that what you are doing is right, works, and makes more sense than any of your competitors.  Founders need to rise the occasion on every occasion.  Period.

While I know I am blending a bit of LexRedux recap in with a bit of ranting and soapboxing, the point should not escape you the reader . . . . legal startups are a serious bunch – the market is burgeoning – the customer/client is awakening – the investors are lining up.  Legal startup founders have accomplished a lot but also have much to learn.  That is okay though as any startup founder has ignorance – the successful ones, however, cure it fast.  

Legal by Design* at ReInventLaw

by Joshua Kubicki

As a practitioner and student of business design for over ten years now I am conflicted by the recent emergence of “design” within the legal industry. It has been lonely in the wilderness for a long time so I welcome those that want to explore and apply design to this sphere. That said, I am nervous and irritated that hyperbolic buzz and selfy marketing may distort, confuse or worse dilute what design is and how it can be used to benefit the legal economy (as has been done with "predictive coding" and "early case assessment.") “Legal by design” may sound cool but unpacking what this truly means and applying it to a business takes skill, patience, and quiet leadership.*

I am speaking at the upcoming ReInventLaw NYC event. To be honest I toiled with my topic, as we are free to choose. Initially I thought that I should take the stage with the goal of putting my stamp firmly on the design trend by sharing my reality based case studies – successes and failures – as well as stories of my attempts to convert lawyers to a design mindset. But alas I have only six minutes and figured that I would be tempted to cram too much in. Yes I could put the effort into it and “design” my talk to work and be effective but then another thought occurred. 

With design becoming a rising topic in legal innovation threads, I had a strong feeling that others at ReInvent would be touching on this. When the schedule was released, sure enough there were four separate talks that use “design” in their titles. Now I am not aware of what each of these speakers will actually say and I look forward to hearing them. Any light shed on this topic is good news for the most part and each of these speakers seems capable of delivering a wonderful talk. My fear is that the audience will be left with a “so what?” feeling - that while design seems interesting, the actual framework and execution will remain a mystery. And let us be honest, when most people, let alone lawyers, first hear of “design thinking” or “business design” the recurrent reaction tends to be one of dismissal and skepticism. 

The power of design exists beyond whiteboards and sticky notes. My expertise, business design, lies within the often chaotic and emotionally and ego protected domain of a business’s DNA. Working in and on active businesses takes great fortitude, confidence, and mostly an ability to execute. Managing client expectations is more essential in this domain than anywhere else and it takes a continuous effort to align goals and avoid expectation creep –upward or downward.  It is not for the faint-hearted – client or practitioner. The value that can be derived though is immense and so for the clients that are willing to take this path to tapping innovation, revenue and/or margin, there is much to gain.  Beyond the financial metrics – which of course is the primary focus – a client will typically also gain a new cultural aspect to their work environment, a stronger customer base, and more engaged employees. These are the intangibles that are tough to “sell” on the front end but often accompany the process.

In short, design is a active detailed process not an afterthought when trying to describe a basic business iteration or same old product or service in a new fresh way.  I have seen it being used as such lately. I hope and trust that the four folks speaking at ReInvent talk from the standpoint of applied design – giving it the respect and attention it deserves. I hope the audience is left with a feeling of curiosity and energy. Good luck to these speakers – I am eager to hear their talks.

On a related note I am happy to share that I will be teaching “Service Design for the Legal Industry” this coming Fall at MSU Law.   

* Note: I am using "Legal by Design" generically and am not specifically referring to Paul Lippe's upcoming talk.

LexRedux | The Why, Who, and How

by Joshua Kubicki

“LexRedux is an event for the bold, the courageous, and for those that DO rather than just talk. Is it exclusive? You bet it is. Each of our attendees has the capability of extending immediate value to any other attendee for the sole purpose of accelerating the legal startup community.”

This is what is found on LexRedux.co – the site Law Angels launched this week due to heavy interest in this upcoming event.  I want to shed more light on this event – why we are doing it, who we are doing it for, and why it is invite only.  BTW it is pronounced Lex (leks) Redux (ree-ducks).

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Anyone who knows me knows that I am an eager open collaborator.  I pride myself on being a connector of people and ideas.  In fact I tend to look upon with distaste any clique, exclusive club, or closed circle.  It is just off-putting to me.  So I get it that we may be turning people off by making this event “invite-only."  Many of the people we have had to turn away are indeed great and valuable people.  We do not mean to diminish their importance in any way by not inviting them.  In fact we are honored and psyched that so many people want to take part in this event – even before we have firm details.   So let me explain a bit.

Law Angels is an emerging early-stage investment group solely focused on the legal vertical.  I had the idea for the group some time ago as I witnessed a knowledge gap in the typical investor crowd when it came to legal focused startups.  There are simply not enough legal savvy investors out there for legal startups to look to for help – financial and intellectual.  So I founded Law Angels.  Now when I say “founded” I really mean got the ball rolling.  I did not and am not doing this alone.  All the Law Angels have been instrumental in either inspiring this or taking action to help make things happen.  Rob Saccone, David Perla, and I are leading the LexRedux effort.

We wanted to make LexRedux happen for a number of reasons. The first and most important is that there is an absolute need for a legal startup community to be formed around the risk-takers themselves – the founders and their investors.  There are a number of other groups and events focused on innovation and startups in general –and most of these are terrific.  Based on our work with startups and investors though we knew that there was something missing as many did not go to these events.  Why? Simple. These events do not focus on the specific challenges and market realities that this group faces everyday.  We knew we could address this and so LexRedux was born.

Why just legal startup founders and investors (funders)?  In truth we have also invited a small dynamic group of thought leaders.  The folks were chosen based on their current work and focus in this space.  There are a lot of great folks that have an interest in this space.  Some of these people are good friends or contacts of good friends.  Each of us has had to say “no” to people we would rather have attend but in order to keep this event potent for the founder and funder we needed to keep the mix of folks tightly controlled. The topics of debate/dialogue will be centered on the very specific challenges of launching, growing, funding and exiting a legal startup.  We will have a handful of successful entrepreneurs who have had exits in this space. We will have another handful or professional investors and bankers that work in this arena and know the ins and outs of running a thorough diligence and valuation protocol.  We will have the people who won and lost in the client acquisition battles that almost every legal startup company is saddled with.  This type of conversation is vital to have and essential if we want to have more startups and more successful startups. 

Finally, in true startup fashion, LexRedux is an experiment – our MVP – an educated guess.  We could fail.  It may be the best thing ever.  We do not know, as it is a first.  Because of this we want to keep tight control on it in terms of focus and numbers.  It will help us learn. It will help us gain a better understanding on what the next direction/focus is for LexRedux.  Or we may learn something completely different.  But by keeping the numbers low, the dialogue hyper-focused, and inviting only those that we did – we stand a better chance of learning from this and applying it going forward.

So do not dislike us for making this exclusive and not being able to include all those that wrote us or inquired.  Celebrate that we are doing something in this space.  If you want to stay in touch and learn of the outcomes from this event or hear about any future event – go to lexredux.co and register with us.  And follow #lexredux.

Thank you.

Josh's Latest TechCocktail Article

by Joshua Kubicki

THE LEGAL SECTOR CONTINUES TO RIPEN FOR DISRUPTION

Want to pay less for a lawyer? There are startups for that.  Want your lawyer to be more productive? There are startups for that. Want to NOT use a lawyer at all?  Yes, there are even startups for that. Make no mistake, lawyers serve a purpose in today’s business environment, but as the legal sector continues to expand, the traditional lawyer’s share of the pie is shrinking.

The demand for US law firm services is shrinking in 2013 by about 5 percent while the overall global legal market is expanding. Traditional legal services are still key to businesses, but how those services are delivered, and by whom, is changing. Entrepreneurs are taking notice and so are investors.

Currently there are a number of recent funding rounds closed or about to be closed for legal startups. The investors range from independent angels to notable venture firms. The founders at LawDingo recently announced that it closed a $690k round to further their “talk to a lawyer now” platform. This builds on the earlier funding and success from being a part of Y Combinator. Speaking of YC, SimpleLegal just came through the last batch and is piloting its “transparency for legal bills” platform with many clients – large and small.

Legal Disruption is Not Just Business Models

by Joshua Kubicki

George Beaton has instigated quite the reply thread on one of his latest posts.  "The Rise and Rise of the NewLaw Business Model" has generated literally 28+ comments and replies.  In many ways this corpus represents the current thinking and challenges to this thinking in the the legal transformation space.   

I submitted my comment just now and realized that it was almost a full post so I am posting it here as well.

The lead into to my post - in case you do not wish to read all the preceding 27 comments - which I think you should take the time to do - is this: There is much debate over NewLaw and its role in the legal market.  Much of the debate focuses on comparing NewLaw to BigLaw which I believe is just part of the story.  Early in the thread the question was posed as to 'where is all this disruptive technology' that is supposed to be shaking the legal market.  Nobody directly answered this fair question and so here is my shot.

While this thread covers much of the real-time debate and trends in the legal sector it is ignoring an underlying enabler that is fundamental to any change in any industry.  Technology.

To Joel’s challenge earlier – what are these big technological disruptions? No one in this thread has taken up his justly thrown gauntlet so I shall do so now. 

We can discuss, debate, and dialogue around business model changes, incumbent tendencies and capabilities for response to change, and new entrants to our hearts are content.  In fact, there are far too many conferences and events where this artificial and “feel-good” chatter occurs.  A simple inescapable fact is that technology will and is quickening the pace of iteration in legal services.  Notice I use “iteration” not disruption or revolution.  The legal market is not, has not, and will not be the sole domain of lawyers.  Lawyers do not operate in a vacuum with only their lawyer brains – they use tools.  The tools of a trade are often a direct reflection of the maturity and capability of that trade. Tools are indeed part of the legal market – make no mistake.  Westlaw and Lexis are players – not that I think they are long for this world. We tend to define legal services far too narrowly and look only inside business models to for innovation and disruption. 

As the tools available become more powerful, efficient, and let’s use current jargon, ‘smart,’ so to will the services that the users of the tools provide.  So also will the business models for tech and tools are not just for front-end use but are actually more fundamental to change when employed in the back-end of a business – see data warehousing, logistics platforms, and integrative financial tools.  These back-end solutions are what drive pricing, resource management, and delivery flexibility – all key to law firms BTW.  What to change a business model – look here first.  And where knowledge and communication are essential to a specific business (see the legal sector) technology is already demonstrating its power to make communication more efficient, accessible and meaningful.  Legal is simply catching up.

Axiom is often trotted out as a key indicator of NewLaw’s emergence and potential disruption.  Where did Axiom spend a large portion of its $28m funding?  Technology and tools.  It is not so much that Axiom is doing anything new.  It hires and provides lawyers to clients.  What is new is the “how.”  And how has Clearspire attempted to differentiate and grow? By investing in technology and tools?  Look at the BigLaw players Seyfarth and Littler mentioned earlier.  While it is challenging to learn what exactly these groups are creating and using (for good reason as it is their competitive advantage) we can look to the external market for signs of meaningful technological disruption (again I am using Joel’s word here and prefer iteration).

Legal project management software while not sexy or “cool” is becoming a norm in the legal sector.  Yes there are still many challenges with getting it into the incumbents’ hands but it is happening and at a greater pace.  Mind you this is much different and a heck of a lot more meaningful that taking an LPM CLE or seminar from a consultant.  These LPM systems are integrated platforms that cut across task codes, billing, workflow, and resource management.  Talk to Axiom et al. mentioned above to learn the power these tools hold. 

Legal research is also being iterated.  We all know that it is harder to bill for research at a firm these days.  It is seen as a cost of doing business for firms.  While the promise of robust knowledge management systems has not yet prevailed, this has a created a commitment to status quo due to lack of tools, not desire.  While research is good for “churn baby churn” billing – with the pullback in client pay-fors – providers are keen to have more powerful tools.  Enter the number of startups from Neota Logic, Ravel Law, Fastcase, Jurify, Mootus and many others.  Do any of these have critical mass yet?  Fastcase certainly does and is perhaps the least disruptive/iterative of the bunch.  But that is a common trend in technology adoption.  Seldom is the most disruptive play the leader in the market initially.  I get the sense that Ed Walters at Fastcase knows this and it careful with the scale and frequency of his innovations.

What is perhaps most important about this is that while the incumbents may not have the culture or systems to adopt the new tools rapidly, new entrants are not so constrained.  See Alex Hamilton at RaidiantLaw as he chimed in above. NewLaw has the advantage of being able to test and adopt tools while also building a business model that incorporates them from the get go.

Legal services are not immune to iteration or disruption they are merely just resistant.  The quandary for traditional players is that they are being enveloped by news tools and tech by new entrants but more so by their clients.  When clients begin testing and using new tools, the service provider will be made to use them as well in order to better integrate into their clients’ environments.  This is happening and will only accelerate.  Talk to Westfield Insurance about their approach here.  This, I argue, is where the meaningful change is occurring.  Perhaps not at the pace some would like but rest assured, technology adoption often looks like a hockey stick – flat at the beginning then rapid increase in usage.

Untapped Value Within the Law Firm

by chris wood

To increase profits (and morale) a firm may need to look no farther than its existing attorney assets.  As an alternative or supplement to risky, and costly, investments in lateral hires and marketing programs, a firm can benefit by elevating, and then unleashing, the client sales and marketing savvy of its existing attorney ranks.

In the post-recession environment, law firms seek to deliver more with less.  Firms are cutting staff, trimming partnership ranks, and decreasing first-year hires to protect revenues.  To the extent firms reinvest revenues, they tend to focus on business development.  For most firms, this means spending heavily on marketing initiatives and lateral hiring.  Though logical in theory, this approach posits problems:

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1.       Lateral hiring seldom meets expectations.  A fairly recent survey of BigLaw by the American Lawyer and LexisNexis discovered that only 28% of survey respondents believed that hiring laterals has been a “very effective” business practice.  Other sources indicate 30% to 40% of lateral hires, simply stated, fail.

2.       Marketing initiatives don’t work if firm lawyers can’t close the deal.  Good marketing requires good salespeople.  Lawyers readily admit they often lack sales skills; they have been trained to advocate for clients, not woo them.

While many a consultant and HR professional may say they can remedy the failings of lateral hiring, risk always will exist.  Consultants and HR experts can implement programs to objectively reduce the revenue risks associated with a lateral hire, but they cannot eliminate them.  On occasion, events beyond the control of any one actor will derail even the best constructed hiring strategy (e.g., a lateral’s long-term “in” at his largest client, the GC, unexpectedly leaves the company; the client surprisingly changes from a litigation to a settlement strategy on its biggest matters; the client reverses an acquisition growth strategy, deflating its deal flow).  Or, unforeseen personality, firm culture, or client conflicts emerge.  The low rate of firm satisfaction with lateral hires, coupled with the fact that firm partners usually make such hires assisted by substantial, expert HR resources, indicate that no lateral hiring strategy, regardless of who crafts it, is a sure thing.  Each hire represents a calculated gamble.

Marketing initiatives also have limitations.  Consultants and in-house marketing departments can develop plans that attempt to insulate marketing from, among other shortcomings, lackluster due diligence/implementation, subjective politics/territorial in-fighting, inadequate program monitoring/tracking, and subpar adherence to program objectives/procedures.  Marketing plans, however, will not reap targeted returns if attorneys are not committed to mastering marketing skills and proactively applying them.  Even if a firm’s marketing group devises an outstanding sales pitch, hitting the right clients with the right messages, the attorney who will be providing the communicated services, ultimately, must convince the client that he should be retained.  Clients hire attorneys, not their marketing departments or consultants.  Accordingly, a firm’s marketing budget should include investment in developing the business acumen of all firm attorneys, from associates to partners.  Moreover, training matters to lawyers and can boost firm loyalty.  The earlier lawyers learn to think like MBAs, to understand practicing law necessitates the selling of legal services, the better off the lawyer and her firm will be.  Indeed, if lawyers hone marketing skills early in their careers and receive the freedom to deploy them, firms may have greater success in harvesting and retaining rain-makers, thereby reducing the need to bet on laterals.

 

Kubicki at LawTechCamp Toronto

by Joshua Kubicki

Joshua Kubicki was recently at LawTechCamp in Toronto on June 8th.  He was speaking on a panel organized by LegalZoom evangelist, James Peters.  The topic was how legal startups can navigate and develop in the face of potential ethical and other regulatory constraints imposed by the legal profession. 

Here Josh is being interviewed about what the Legal Transformation Institute is and the importance of building a community specifically focused on supporting and launching legal startups.

 

Intrapreneurs in BigLaw

by chris wood
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BigLaw, for some legal professionals, has become synonymous with “tradition-bound, ossified law firms that so many lawyers ... imagine as one enemy of progress in our profession." Rather than defend the billable hour/partnership model as “a bargain made throughout the generations that has served democracy and capitalism well," BigLaw should address client dissatisfaction and lead the industry forward through innovative practices. 

To its credit, BigLaw has sought ways to dissipate dissatisfaction, to placate client frustrations.  Firms have offered alternative fee arrangements in select matters, reduced operating costs, adopted SaaS technologies, shuffled staffing, and collaborated with non-legal service providers to generate engagement efficiencies.  These actions may preserve current business.  They do not assure future or return business. 

To secure competitive advantage, to cure the industry’s ills, BigLaw should reimagine how it delivers legal services.  While we do not suppose or espouse a one-size-fits-all panacea, we do suggest BigLaw shares a common problem that must be remedied: 

A business model that undervalues, deemphasizes, and even suppresses “intrapreneurial” endeavor. 

Intrapreneurship is the application of entrepreneurial practices within an existing organization.  To move markets meaningfully forward, industry players (borrowing from Clayton Christensen) must deliver “disruptive innovation,” which shifts market paradigms, or, to a lesser degree, “sustaining innovation,” which improves existing service and product offerings.  Neither can occur robustly in the absence of original thinking, which is best spurred by an entrepreneurial environment.  BigLaw can do better at incorporating the entrepreneurial spirit into its business model by deploying intrapreneurial principles and modifying worn processes.  Some examples:

1.        Partner compensation systems.  Ironically, firms that focus on rewarding individual success – a partner’s entrepreneurship in making it rain – may inhibit the firm’s ability to function in an intrapreneurial fashion.  When profit distributions are tied primarily to a partner’s business origination, collectibles, and management statistics, partners naturally concentrate on boosting those individual statistics.  This can “discourage teamwork and true collaboration.” Here lies the rub.  “For any intrapreneurial venture to succeed, collaboration is key to stimulate and refine innovation and to execute efficiently and effectively.” Thus, while a firm should give weight, and even substantial weight, to a partner’s rainmaking, a firm seeking to encourage intrapreneurial innovation should ensure partner compensation systems also promote firm collaboration on intrapreneurial programs.

2.        Associates and the billable hour model.  The billable hour has been the bedrock of BigLaw practice models for 50 years, if not longer.  In this model an associate’s value to the firm, and therefore compensation, primarily is measured by the number of hours billed to clients.  Bonus eligibility often escapes associates who fail to meet mandatory minimum billable requirements, which often exceed 1,900 hours.  To obtain bonuses and promotion, attorneys focus on billing time.  A 2002 ABA study found the billable hour “treadmill” saps an attorney’s ability to engage in professional activities beneficial to the firm beyond billing time to a client, and does not reward intangible contributions such as creativity or the use of technological advancements that improve productivity. In his forward to the aforementioned ABA report, Associate Justice Breyer wrote:  “As one lawyer has put it, the profession’s obsession with billable hours is like ‘drinking water from a fire hose,’ and the result is that many lawyers are starting to drown.”  In this environment, attorneys lack incentive to engage in intrapreneurial thinking or the associated processes of testing and honing entrepreneurial ideas.  Relatedly, the ABA report discerned that the billable hour model decreases the “collegiality of the law firm culture.”  If a firm seeks to instill intrapreneurial activity as a firm value, hindering collegiality will not advance that goal.  To advance the goal, associate compensation systems must recognize contributions that directly produce revenue and reward associate creativity geared toward enhanced client satisfaction (the ultimate firm deliverable).

3.        Suggestion boxes.  If the image of a suggestion box in a firm’s hallways appears foreign to you and perhaps slightly amusing, you are not alone.  That is the point, however.  What processes do firms use to harness attorney (and staff) ideas that can generate business or improve the delivery of client services?  Informal, let alone formal, processes seldom exist within firm operating models to stimulate the exchange of savvy ideas.  An intrapreneurial model considers virtually all personnel to be the possible originators of the next, great service, and employs protocols (beyond the scope of this article) to ensure the free flow, assessment, and, when appropriate, implementation of viable ideas.  A well-managed protocol facilitates opportunities for the firm to realize monetary and non-monetary benefits, and leads personnel to feel valued and appreciated, a sensation frequently absent from the firm environment.

4.        Mission and values.  The practice of law, in simplest terms, is about providing solutions to clients’ legal issues.  Accordingly, firm mission and value statements often revolve around the client and how a firm will deliver exceptional service.  Yet, if firm partner (and employee) interests are not aligned, if the firm lacks a common commitment to its mission and values, failure often ensues.  Thus, where a firm’s values include intrapreneurial initiatives, which they should, the firm must build a platform on which intrapreneurs can thrive.  The platform's planks likely will reach numerous facets of the firm’s operations, such as partner and associate compensation, client development programs, P&L and budgeting, market and competitive monitoring, and lawyer and non-lawyer performance objectives.  By way of example, firms tend to view first and second-year lawyers as an “expense,” for whom the performance objective is to migrate from loss to profit center.  In an intrapreneurial setting, firms treat young associates as an investment.  They should be encouraged to perfect legal expertise and generate revenue, and, like the firm’s other lawyers, be armed with the soft skills needed to master the business of law and a license to explore innovative solutions to client issues.

By building intrapreneurial principles into BigLaw value systems, firms can retain control of their future.  Literature, to the contrary, pronouncing the demise of BigLaw and its supposed institutional inability to respond to market changes underestimates BigLaw’s tremendous talent pool and brainpower.  Talented personnel abound within firms and can perpetuate BigLaw’s winning ways.  First, however, personnel, at all levels, must be nurtured and unleashed.

Lawyers as Angels | Investing in Legal Startups

by chris wood

  | post by Chris Wood & Joshua Kubicki |

Attention BigLaw lawyers and all others making a healthy income.  The practice of law is changing.  If you believe such change should transform traditional practice models or that transformation is inevitable, get involved; play a role.  If you believe change will not alter the legal landscape or affect your practice, hedge your prediction.  Regardless of mindset, lawyers can benefit from the law's current market posture by participating in the U.S.'s strengthening legal startup community.  Specifically, lawyers can serve the heavenly role of "Angel" for legal industry (and other segment) entrepreneurs. 

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An angel is an investor that participates, for financial, professional and/or philanthropic reasons, in the early stage of a startup, before Venture Capitalists enter the picture but after funds from savings, friends, and family have been depleted.  Angels typically are "accredited investors,"meaning, generally, they have a net worth of $1 million+ or annual income exceeding $200,000.  In 2010, the average return across all angel investments, including winners and losers, was 23%.  The Angel Capital Association has identified over 300 angel funds in the United States, spread over 19 industry sectors.  While these sectors touch on everything from "metals and mining" to "mobile and telecom," "legal" is not one of them.  For a $300 billion U.S. industry ripe for change and arguably already embarking on a transformative journey, the absence of legal from the Association's noted sectors portends a wonderful entry point for lawyers (and other investors) seeking to diversify their investment portfolios. 

Demand is growing for forward thinking legal service providers.  Corporations and individuals, with greater frequency, are seeking alternatives to the fees they pay for what they perceive to be commodity offerings.  Even for legal engagements requiring subject matter expertise, clients are protesting the big fees charged by BigLaw by exploring other sources for representation.  Responding to consumer sentiment, innovative lawyers and non-lawyers – often deploying technological solutions – are bringing to market new methods to help citizens navigate the legal system.

This trend is undeniable and is being institutionally examined.  Stanford Law School has a course dedicated to the subject.  The course overview (with text emphasized) reads in part:

The private commercial practice of law is undergoing fundamental change. Modern technological, economic and business forces are placing extreme pressure on the traditional private attorney law firm model.  These forces will transform, eliminate or replace virtually every aspect of legal services provided by attorneys.  Traditional foundations of the large law firm model are becoming (or have already become) relics of a bygone era. Today, the business need for clients to select a one-stop, full-service law firm for their important legal work has, in a variety of circumstances, disappeared.  Sophisticated clients are utilizing a wide range of legal services firms and companies for their legal work.  As a result, the diversity of legal business models and manner of providing legal services has greatly expanded.

The following examples demonstrate the diversity of action and trends about which Stanford and we write. Avoiding the obvious poster children - LegalZoom and RocketLawyer - consider three, non-traditional, legal providers on the rise.

1.      LegalForce (http://www.trademarkia.com/).  Since going live with its online offering in fall 2009, this technologically savvy entity has aided clients in filing 23,000+ trademarks.  LegalForce's website receives more than 1.5 million, monthly, unique views.  Leading brick and mortar firms in the trademark area cannot match this productivity.  In 2008, Greenberg Traurig led all traditional law firms with less than 2,000 filings.  No contest.

2.      Potomac Law Group (http://potomaclawgrp.com/).  PLG provides legal expertise across multiple practices.  The hook?  By dispensing with the trappings of the traditional law firm and offering the services of seasoned, home-based practitioners, overhead is slashed and clients receive, "sophisticated legal advice and counseling from top tier attorneys at very attractive rates."  Instead of charging $600 to $1,000 hourly, PLG's hourly rates tend to be around $300.  Clients are noticing; monthly billings have jumped 10-fold in 12 months.

3.      Wevorce (http://wevorce.com/).  While the average divorce costs $25,000+ and a year to conclude, Wevorce has mastered a collaborative problem-solving model that promotes peaceful resolution of marriage's end within 90 days, for about $6,500.  Combining online tools with the expertise of practitioners in the field, Wevorce's success rate is phenomenal.  109 of 110 initial clients have amicably parted through the service; no court intervention necessary.  In a country where nearly half of marriages end in divorce, Wevorce's market potential is substantial.

Lawyers (and their firms) should embrace these types of emerging forces in the law.  Whether motivated by the desire to hedge against the status quo, or to promote entrepreneurial ingenuity, those who actively promote the legal world of tomorrow stand to benefit today and in the future.  

Attorneys who join angel funds can earn their keep, among other ways, by applying domain expertise to attract legal startups and identify, among those entrepreneurs, investment-worthy business models for legal services and products.  In return for contributing investment dollars and domain expertise, attorney angels stand to gain financially.  Fund members are tested, experienced, and learned business movers and shakers.  They know how to make money - thus, the 23% average return mentioned previously.  

Legal angels further benefit by scaling reputation through mentoring and displaying domain expertise; expanding networks through relations with accredited investors and entrepreneurs, who constitute potential clients; hedging against market disruption by betting on the other side of the coin; and acquiring superior investing skills.

Lawyers can enjoy angel success targeting any number of sectors; they need not concentrate solely on legal (think “all eggs in one basket”).  For proof, look to Jason Mendelson and his outfit the Foundry, or Liz Sigety and her group Delaware Crossing.  However, initially focusing your angel due diligence efforts on the industry you know best, and which fits your experience, will aid you in assessing startup potential, and elevate your attractiveness to startups and funds seeking angels with direct access to, and insider knowledge of, the legal market.

Like any investment, angel investing has risks.  If not your cup of tea, still remember the practice of law is changing.  Whether as an angel and/or through other strategic action, what steps are you taking to positively position yourself (and your firm) in the evolving marketplace?

Latest TechCocktail Post

by Joshua Kubicki

6 REASONS THE LEGAL INDUSTRY IS RIPE FOR STARTUP INVASION

Most people want to avoid lawyers. They are in the same class as cops; you do not want one until you need one. In the startup world, there are plenty of articles written about how lawyers ruin startups or stall innovation and deals. But there is a growing awakening that, while lawyers themselves may be perceived as obstacles, the legal profession and industry represent opportunity. This sector, which historically has been ignored by entrepreneurs and investors, is beginning to experience a startup invasion.

Here are six key facts that make the legal industry ripe for disruption and innovation.

1. The US legal industry is roughly a $300 billion market. This includes the traditional lawyer-to-client transactions, the expert tools that lawyers rely on, and the technology lawyers use to provide their services. What this amount does not include is the under-reported and untapped demand by middle-income individuals and families for more accessible legal help. It also does not include the billion-dollar legal education market. Most of this money is caught up in antiquated and stale processes and mechanisms that represent a significant target for innovation and transformation.

For the complete article, click HERE

Supply and Demand: Third-year Law Students and the Unrepresented

by chris wood
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Two pressing issues, among others, confronting the U.S. legal market are (1) the dearth of “practice-ready lawyers” graduating from U.S. law schools, and (2) the lack of legal representation accessible to U.S. citizens, especially low to moderate-income Americans.[i]  By changing the third-year law school experience to focus primarily on the assistance of unrepresented individuals, we can enhance the practice readiness of new lawyers and access to justice in the U.S.  The idea of third years doing far more than engaging in traditional curricula has been gaining traction for years, and most law schools currently provide some clinical opportunities for their third-year students.[ii]  A paradigm shift among legal educators is not necessary to provide students the broader, experiential platform espoused here.  Some general facts to consider:

·         Roughly 18 million low-income Americans (those at or below the poverty level) have legal needs, but do not obtain legal assistance.[iii]   

·         Roughly 20 million moderate-income Americans (above the poverty level but earning $60,000 or less), have legal needs but do not obtain legal assistance.[iv]

·         DIY (do it yourself) legal representation is rapidly expanding.  For example, 97% of tenants in landlord/tenant matters in Utah self represent.[v]

·         DIY growth probably stems from the fact that most DIYers cannot afford a lawyer.[vi]  DIYers often make too much money to receive legal aid, but not enough to pay a lawyer.  The legal system is “labyrinthine, inaccessible, unusable” and accordingly, many DIYers “are likely losing claims and paying penalties they could have avoided with a lawyer at their side.”[vii]

·         40,000 to 44,000 law students graduate from U.S. law schools each year.[viii]

·         49% of 2011 graduates obtained jobs at law firms, down from 58% in 2002.[ix]  This is the “new normal.” [x]

My resulting conclusions:

·         38 million Americans, give or take, who would benefit from legal assistance, are not receiving any.

·         Many DIYers, individuals and small businesses, are not self representing because they want to, but because they have no alternative.  These DIYers also would benefit from legal assistance.

·         Thousands of third-year students could render legal assistance to those going without, either through full representation or guidance on “unbundled” legal questions.

·         In the new normal, third years must expand their professional horizons; less than half will be employed by law firms.  Engaging in comprehensive experiential training will bolster practical skills, provide needed exposure to real world clients, and prepare tomorrow’s lawyers, particularly solo practitioners and those who lack a mentor, for the challenges ahead.

While national and state bar associations, the judiciary, legal practitioners, other industry experts, and law schools recognize the need to improve access to justice and the preparedness of our next generation of attorneys, associated discussions seldom address the topics together.  Merging the topics for resolution, however, merits examination.  Each year, tens of thousands of budding lawyers need experience practicing their legal calling (under appropriate supervision), and hundreds of thousands of citizens need legal guidance.  Through properly tailored, fully experiential third-year curricula, the needs of both students and citizens can be met.[xi]  Two birds, one stone.

[i] See, e.g., http://worldjusticeproject.org/country/united-states (U.S. receives lowly ranking among wealthy nations in the provision of civil and criminal legal services); http://bestpracticeslegaled.files.wordpress.com/2011/08/2011_hod_annual_meeting_10b.pdf (“The current educational and structural model for preparing law students and forming new legal professionals is under fire on many fronts.”).

[ii] See, e.g., http://lawdigitalcommons.bc.edu/cgi/viewcontent.cgi?article=1009&context=jlsj (Margaret Martin Barry, Practice Ready:  Are We There Yet?); http://law.wm.edu/academics/programs/jd/electives/clinics/index.php (William & Mary Law School, clinics overview).

[iii] In 2011, US census data indicates, there were about 46 million low-income Americans.  Approximately half of those individuals, extrapolating from a 1994 ABA study entitled “Legal Needs and Civil Justice,” likely had legal issues (23 million), yet only 1 in 5 of those individuals (4.6 million) sought/received assistance.  That leaves 4 out of 5 (18.4 million) unrepresented.

[iv] In 2011, extrapolating from US census data, there were about 60 million moderate-income Americans/households.  The previously mentioned ABA study states that 52% of moderate-income Americans had legal issues (30 million), with only 33% of those individuals seeking/receiving assistance.  That loosely leaves 20 million unrepresented.

[v] See, e.g., http://www.nytimes.com/2010/01/02/opinion/02broderick.html (“An increasing number of civil cases go forward without lawyers,” including “life-altering” matters). See http://www.americanprogress.org/wp-content/uploads/issues/2011/06/pdf/objection.pdf

[vi]  http://online.wsj.com/article/SB10001424052748704229004575371341507943822.html ("You can hardly find a lawyer who charges less than $150 per hour, which is out of reach for most people").

[vii] http://www.abajournal.com/news/article/middle-class_dilemma_cant_afford_lawyers_cant_qualify_for_legal_aid/ ; http://online.wsj.com/article/SB10001424052748704229004575371341507943822.html

[viii] See, e.g., http://www.nalp.org/uploads/NatlSummChart_Classof2011.pdf ( NALP summary chart for 2011 graduates).

[ix] http://www.nalp.org/0712research

[x] See, e.g., http://www.reinhartlaw.com/Services/BusLaw/CorpGovern/Documents/art1111%20TE.pdf (“The reality of today’s economy means fewer opportunities for law school graduates. With fewer clerkships, internships, and law firms hiring new graduates – and access to mentors – law schools are graduating more lawyers with less experience.”)

[xi] The content and scope of the curricula – from devising methods to supplement student experience with professor instruction, to deploying technology in teaching and providing legal services, to harmonizing rules governing third-year instruction and practice, to designing business models third years can use in their representations - are topics for another day.