This week’s interview is with the CEO, Amir Reshef, and Chief Revenue Officer, Teruel A. Carrasco of dealcloser. I asked them about their thoughts on legal tech and on investing in legal tech given their positions and experience.
How did you develop a passion for legal innovation and legal tech?
Amir: I've always loved tech and have always read about it and followed tech blogs. I also knew I'd want to one day join a startup. I thought I'd work for a few years as a corporate lawyer to learn things that would be relevant to a startup and then eventually switch over. However, while working at a large law firm I experienced the problem dealcloser solves firsthand and thought that I could help solve it. So the passion for tech was always there and then it evolved into a passion for legal tech and legal innovation through working as a lawyer. I always knew I'd work for a startup but thought I'd be employee number 20 - but I've been fortunate enough to co-found my own startup.
As someone with deep experience in the private equity space, how do you go about evaluating a potential investment in a legal tech company?
Teruel: There are a variety of methods used to evaluate an investment in a tech company. The most important is the strength of the founding team, the market size, a strong MVP or in this case product market fit. After initial interest there is extensive due diligence. With dealcloser, the strength of the founding team was off the charts, their solution was clearly positioned to solve an identifiable problem in the corporate transaction space. What we really like is the category of legal transaction management which is an emerging space with few competitors. The key is emerging with few competitors, which is an ideal situation to be in. So, dealcloser hit the right success formula with a strong team, an emerging space, clear business problem and strong solution to solve the problem. I was so impressed, I asked to join the team.
In your view, what is the most common thing overlooked by legal tech companies?
Amir: A lot of legal tech startups are fairly new. There are companies that have been around for a long time but there are many new and young companies. So the issue I see in legal tech isn't something that I think is overlooked but there just hasn't been enough time to address it. That issue is fragmentation. Lawyers are faced with multiple solutions to multiple problems and I'm sure it's overwhelming to adopt, learn and use many differing and separate solutions that don't integrate. As products start to integrate and consolidate, things will become more seamless for lawyers, which will make for a better experience. Like I said, I think we all know this is a problem, but it's hard enough to keep up with our own product road map, much less prioritize integrations with other vendors.
What brought you to join dealcloser?
Teruel: I can almost answer this question with the above answer. For me it was an opportunity to join an already strong team but they needed an experienced growth strategist of which I brought that particular experience to the team. Like an investment, it is about the team, vision, opportunity. I generally don't ask to join a team because I like them so much. In my case, I had been consulting, angel investing but really wanted to get into a startup to make a direct impact. It was great timing and it has been an amazing ride thus far.
What are your thoughts on the current investment environment for legal tech? What seems to be driving much of the large investments we see in the news?
Amir: I think now more than ever, legal tech is getting attention as something legitimate with a lot of potential. Let's be honest, legal tech is very niche and not at all sexy compared to other types of technology (though of course I love it!). But recent investments that have been announced should be indicating to investors that the potential opportunity is huge. The legal industry is a huge industry, after all. It should also indicate to investors that lawyers and law firms are starting to take innovation seriously. Law has a reputation for resisting change, and that's been historically true. After all, faxes are still used in the legal industry, and I even had to use a typewriter a few times back when I practiced (which took me forever to figure out). But that's changing. Today, law firms are actively looking for tech. As a result, there are many legal tech companies making good progress and getting good traction, including dealcloser. These companies make for worthwhile investments. It seems to me that now more than ever, it's a good time to be a legal tech company. Law firms are more open than ever before to trying out cool, new tech and investors are hopefully starting to pay more attention to legal tech.
Teruel: Legal tech investment is fast emerging as an important investment category. Some of the largest investment done so far this year have been in legal tech, Clio. Kira Systems, Ironclad are examples. Only a few short years ago an investment in legal tech was not considered an attractive investment or considered highly niche. Today I would argue that is no longer the case. In my view, the driving force behind these investments in legal tech can be described by noting where the legal industry is now to where fin tech was several years ago. The legal industry is facing multiple competing forces that are pushing it to evolve and evolve rapidly. (From the Corporate Law perspective) Law firms are contending with corporate RFPs, fixed fee transactions, client demand to have a more seamless experience with their corporate attorney. The other is the emergence of the small/solo firm that are now using technology to take market share from their much bigger much more expensive competitors. These disruptive forces are creating incredible opportunities for investors.