LegalZoom, the Los Angeles based provider of online legal solutions, announced a $500 million secondary transaction with Francisco Partners and GPI Capital.
Legal services are a $700 billion global market. Roughly 10% of that is small businesses and families – which is LegalZoom’s focus segment. The other 90% comes from corporate legal departments, who are spending on legal services to law firms and notaries, plus ancillary legal services (insurance, process outsourcing and other).
Legal services industry is gradually undergoing drastic changes, driven by technology. But the way the market is changing differs wildly per segement (corporate vs. small business vs. individual) and by type of service (complex advice vs. standardized services).
Corporates’ needs for standardized services are increasingly handled by large non-traditional legal services firms, including Big Five accounting firms and business processing firms. A silent technological arms race is under way and cale is becoming and advantage in a traditionally distributed industry.
Large legal services firms are heavily investing in their technological capabilities and spending on external legal tech services (a $20 billion market), with the goal to improve both their efficiency and effectiveness. Scale is an advantage here, which is why Big Five accounting firms are taking share from traditional law firms.
Traditional law firms are focusing on more complex and tailored legal services, where scale matters less (as they tend to be more de-centrailised). Still, technology increasingly plays a role there too.
For families, standardized legal services a mix of technology-driven self-help services are emerging (simple contracts, setting up a company, divorce).. Technology is not just disrupting the market but expanding it (similar to the way Uber expanded the taxi market). Some estimates show that only 50% of consumers and small businesses who would benefit form legal help seek it. Easier access to legal services has great potential expanding this market.
Ancillary legal service companies (insurance, process outsourcing) are also taking advantage from technological change, as they are increasingly able to handle more value add legal services, and benefiting from their scale versus traditional legal services.
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In the meantime, expore some data in the following links:
The most funded legal tech companies
The fastest hiring legal tech companies
The biggest exits in legal tech