According to our expert panel at last week’s Evolve Law event in Los Angeles, unlike in the fashion industry, there are not many choices for legal services to fit consumers of different shapes, sizes and levels of affluence. In legal services you either buy a bespoke suit or buy a pattern to DIY. But this is changing with technology.
Nortman evaluated legal tech deals, including Axiom, while at Battery Ventures and expressed a fondness for companies attacking highly regulated industries in her current role as partner at LA-based fund Upfront Ventures. “Legal tech companies can’t be built by 21 year olds right out of Stanford” she stated, “you need domain expertise and an understanding of the pain points.”
As General Counsel and VP of Business Development at Avvo, King agreed with Nortman’s comment about legal tech companies needing more sophistication than the typical startup, adding from personal experience that “many legal tech companies need lawyers on board right out of the gate.” Avvo was sued almost immediately after they launched because their ratings system was seen as defamatory by some lawyers, but the suit was dismissed because ratings were ruled an opinion protected by the First Amendment. As a result Josh has become a passionate advocate of free speech and consumer rights, and “rarely takes the cease and desist letters he receives as serious threats.”
During the conversation, the comparison of legal services to the fashion world was repeated multiple times. While purchasing legal services is obviously much more complex and nuanced than buying a piece of clothing, the analogy is useful to shed light on the future possibilities for legal services and to highlight areas of opportunity for legal tech entrepreneurs.
The legal services industry is currently dominated by the “bespoke suit” model, where expensive specialty vendors provide a completely customized option tailored to your specific measurements. While the bespoke suit model will likely remain the standard for large corporations, this business model is unrealistic for a large portion of the market. Rampenthal, General Counsel and Corporate Secretary at LegalZoom, cited numbers from the ABA claiming that “up to 92% of the population doesn’t have access to legal services.”
Made to Measure
“Many lawyer regulators are trying to preserve a monopoly,” said King, “so they try to enforce a system where the only alternative to a bespoke suit is to buy a pattern and make it yourself.” LegalZoom’s Rampenthal agreed and pointed out cracks in the assumption that traditional law firm work is bespoke at all. “The reality is that most law firms pretend it’s bespoke,” he said, “but they also use patterns and only customize the final ~10% of the work depending on the form and complexity of the agreement.” They’re selling a bespoke suit, but it’s actually made to measure.
The Do-It-Yourself legal services companies such as LegalZoom and RocketLawyer have blazed the trail making online legal services a $4 billion and growing industry. Now specialized options are emerging such as Separate.us for divorce and LegalYou for pro se legal representation. These DIY models address a totally different segment of the market but carry a larger risk of user error. Many individuals and small businesses are willing to take that tradeoff.
Ready to Wear
Right now there isn’t really a ready-to-wear option for legal tech. Nortman commented that “trends that have dominated other industries have yet to hit the legal world,” and in this case an off the rack option may still emerge in the form of commoditized legal services. Avvo’s King was enthusiastic about this impending trend, stating that “a lot of legal services can’t be commoditized quickly enough.” Rampenthal disagreed, “legal services are being productized, not commoditized.”
Brick and mortar retailers still dominate the fashion industry with more than 90% market share, but e-commerce continues to grow rapidly. UK-based online-only fashion company Asos has a market cap of more than $3 billion, and Amazon expected to be the largest clothing retailer by 2020 with more than $50 billion in revenue for apparel. Online-only models are already already working in the medical industry with companies like Doctors on Demand and Maven, so can online legal consultations be far behind? News flash: it’s already happening. Lawdingo is connecting lawyers and clients instantaneously by phone and chat, and the recently launched Pickle Legal is connecting attorneys and clients through video on a mobile device. These companies are not trying to force the bespoke suit on a DIY generation, and they understand that clients no longer expect lawyers to be in the same room as them to provide legal services.
Rental and Subscription
In fashion, there is big money in collaborative consumption with swapping, sharing and renting clothes through peer-to-peer marketplaces. Companies like Rent the Runway use logistics and data science to allocate inventory to customers on a temporary basis, analogous to how we use use data to match attorneys to clients on a project basis at Hire an Esquire. Subscription-based services are also on the rise, with companies like JustFab offering customized monthly clothing, shoe and handbag subscriptions based on personalized customer profiles. JustFab acquired custom shoe subscription company Shoedazzle, which was founded by lawyer and LegalZoom founder Brian Lee. Mostly non-tech companies have been offering subscription based legal services for a while with slow and steady traction. BigLaw firms are also experimenting with the subscription model, including FLEX by Fenwick & West which offers startups on demand in-house counsel on a monthly basis. These forays into subscription based pricing have yet to bring about the death of the billable hour, but this may change as more technology companies offer solutions to decouple legal services delivery from the billable hour.
Bricks + Clicks
In retail, companies that only had a brick and mortar presence are now also have an online presence. Companies are often selling more online than in their physical stores, and e-commerce is an integral part of even the oldest retail brands’ presence. Law firms are starting to adapt as well, with Davis Wright Tremaine’s De Novo platform is an excellent example of an AM Law 200 firm incorporating technology and an online presence into their practice. In fashion, new tech unicorn Farfetch is an online storefront for boutiques, curating high end offerings by matching buyers with sellers. This model of curating and recommending products could one day be applied to small and medium sized firms in order to help clients select from a crowded and often undifferentiated array of options.
As with every industry, legal services are undergoing a rapid transformation through the incorporation of new technology. Other industries are often 10 to 15 years ahead of legal, so perhaps fashion is a bellwether for the future of legal services. Summing up the discussion, Rampenthal highlighted the need for better distribution of work and the ability to route new matters to individual lawyers best suited for that matter, stating “it’s all about finding operational efficiencies.” Though the bespoke suit model may remain intact for some portion of the market, clients are clearly seeking more efficient, tech-enabled ways to consume legal services and entrepreneurs are already creating products to make these designs a reality.