I was at a panel in San Francisco this week titled: Law + Tech – The Unpopulated Multi-Billion Dollar Industry .

By "La La Land" I don’t mean Los Angeles or California, but rather "to be in one’s own world" as defined by the Urban Dictionary.  As I listened to the founders talk, I couldn’t help thinking that given the absence of a clear business model, or the understanding of what it takes to market to consumers or to lawyers,  that many of these start-ups will simply die after the founders run out of cash.  However, out of the ashes one or two  are bound to survive and have a lasting impact on the markets they are targeting.

This was an interesting group of companies – all focused on the idea that there is a need for changing the way legal services are identified, purchased, and delivered and the way that lawyers practice law.

You could classify these companies into three categories:

  • companies that want to connect consumers with lawyers and plan to monetize the traffic stream in some way;
  • companies that want to provide tools to increase law firm productivity;
  • companies that aim to deliver direct legal services through a network of lawyers online or provide a legal solution to a consumer through the use of a digital application.

Here is a list of these companies, some of which were at the Panel,  and one or two which announced within the past 30 days.

Companies linking consumers to lawyers:

MyLawSuit.com – seeks to link clients which have personal injury claims with personal injury lawyers. The company takes 5% of the recovery from the client side. Has a legal opinion that says this is not fee-splitting.

LegalSonar.com –  potential clients find lawyers by searching social media to see which of the searcher’s friends have had an experience with a lawyer and whether the friend would recommend them. Free to users, lawyers pay a fee for listing. Limited to Kansas City. Missouri for now, which is where the company is based. This is an interesting idea and makes more sense to me than traditional legal referral services offered by bar associations where recommendation of a lawyer for a client is more arbitrary. Company plans to expand nationwide.

AttorneyFee.com – company provides detailed legal fee information to users to help them evaluate legal services based on price.

LawGives.com – working on a software algorithm that would analyze a user’s factual statement (submitted through a secure web form) of their legal problem and match the client to the most suitable attorney based on a software analysis of all of the attorney’s experience, education, background, recommendations, and other selection factors. The proprietary algorithm being developed is based on advanced semantic search technologies. This is an interesting concept because if it works, it could be used in a variety of legal contexts such as in large law firms where there is sometimes a need to match the skills of lawyers within the firm to the needs of new cases and clients. LawGives.com would also be a challenge to typical bar sponsored legal referral methods which are based on antiquated pre-Internet technologies (telephone and categorized lists of lawyers). Ethics 20/20 Commission take note.

Start-ups that aim to increase the productivity of law firms:

LawLoop.com – comprehensive, affordable cloud-based practice management system that incorporates in one place document management, practice management tools, time-keeping and billing (next release), calendaring, Outlook email integration, and client communications. A unique feature is the ability to create client extranets between client, lawyer, and other third parties on the fly, by drawing a loop, not unlike creating a Google circle of contacts. Thus, for example, a secure deal space could be created instantly between all of the parties to a deal which would could contain documents, correspondence, and other supporting materials instantly. Price is affordable at $39.00 a user. More competition for RocketMatter and Clio.

LegalReach,com  – Provides cloud-based applications for lawyers.  An App Store now offers Referral Manager, an app designed to securely send and receive business to/from other attorneys while keeping track of vital statistics. Coming soon apps include: Website Builder, CLE Tracker and more. Attorneys can also create on-line Attorney Profiles so a dimension of the business model is to connect prospects with attorneys.

Kiiac.comContract analysis and contract standards tool that creates documents through the web browser using Google Docs. Create an NDA online. See also related Contract Standards web site. This is a fabulous resource for lawyers drafting contracts.

Startups that will offer legal solutions directly to consumers:

DocRun.com – DocRun is a SaaS solution that creates highly-customized, state-specific legal contracts and agreements instantly just by asking the user a series of simple, intuitive questions. Site is in alpha. The company has raised 1.1 in seed funding. At public launch, DocRun claims it will provide hundreds of personalized documents, including everything from prenuptial agreements to operating agreements to employment agreements, specially tailored to each individual user using a web-based Q&A engine. Sounds like they are building another web-enabled document assembly application.Claims documents will be very affordable.

UpCounsel.com – Company will offer sophisticated legal services from a network of lawyers to hi-tech start-up companies in California. Not yet launched.

Paperlex.com – Company will offer legal documents online and web-enabled document assembly tools to customize for the individuals personal circumstances. Read More.

Docracy is a new legal document start-up, founded by Matt Hall and John Watkinson, that grew out of a TechCrunch Disrupt Hackathon in New York City. The idea is to provide a free depository of legal documents that meets the needs of small business and start-ups which are crowd sourced by individuals who register for the site. The concept is to provide an open source site for legal documents in the same way that GitHub is an open source site for code. Read more.

LawPivot.com – Free crowd sourced legal advice from lawyers. Rumored to be getting ready to launch an eLance type service for consumers to connect with lawyers on specific projects.  Funded by Google Ventures. Will be interesting to see how LawPivot team creates an ethically compliant business model.

If you hear about other recent start-ups in the legal industry, funded or otherwise, we would like to know about them. Just mention them in the Comment field to this post. All of this recent activity reminds me of 2001, when we saw many law start-ups funded during the dot.com heyday. Most didn’t survive the crash. (USLAW.com; AmeriCounsel; MyCounsel  to name just a few).

Maybe it will be different this time around.

 INcreasing Profit Margins with Document Automation

For years some law firms, but not all, have used some form of document automation in their law offices. Ranging from an MS Word macro to long standing programs such as HotDocs, as well as automated forms distributed by legal publishers such as Willmaker by Nolo, some law offices have incorporated some form of document automation in their law practices. Document automation of legal documents that are generated in high quantity by a law firm is an indispensable process for increasing law firm productivity and maintaining profit margins in an era of intense competition.

Legal Document Creation the Old Way

The manual process of cutting and pasting clauses from a master MS Word document into a new document, is a productivity process which is fast becoming out dated. It reminds me of the time before there were automated litigation support programs, and legal assistants would duplicate a set of case documents three or four times. The next step was filling one file cabinet with a set of documents in alpha order, filling another filing cabinet with a set of documents in date order, and finally, filling another filing cabinet with a set of documents in issue or subject order to enable "fast"   retrievable of relevant paper documents. It took awhile, but almost all litigation lawyers now use automated litigation support methods.. This is not true of transactional lawyers, many of whom still use out-dated methods of creating legal documents, as if each legal document were a unique novel, poem, or other work of fiction.

Barriers to Change

An obstacle to wider use of automated document assembly methods, is typically the lawyer’s insistence on crafting the words in each clause to their own satisfaction. Because most lawyer’s do not have the requisite programming skill to automate their own documents, law firms by default will opt to use their own non-automated documents, rather than risk using the legal documents automated by an independent provider, because by definition the content of the documents is "not their own." As a result, many law firms do not even use desk-top document assembly solutions when the forms are published by an independent provider or publisher, remaining stuck using more time consuming and less productive manual methods.

Typically, when a law firm does use document assembly methods, a paralegal inputs answers from a paper intake/questionnaire into a document assembly program running on a personal computer. This results in the extra time-consuming step of inputting data from the intake questionnaire to the document assembly program, but it is still more efficient than manual methods.

Web-Enabled Document Automation

Now comes, "web-enabled legal document automation" methods."  Web-enabled document automation is a process whereby the intake questionnaire is presented on-line to the client through the web browser to be completed directly.

When the client clicks the "Submit" button the document is instantly assembled, ready for the attorneys further review, analysis, revision, and customization if necessary.  The result is a further leap in productivity because the client is actually doing part of the work at no cost to the lawyer, freeing the lawyer up to focus on analysis and further customization of the document.

This is what the work flow looks like when using web-enabled document automation methods:

Client Journey- Web-Enabled Document Automation Work Flow

Unfortunately, lawyers have been slow to adapt to this process as well,  because of their reluctance to use legal documents drafted or automated by someone else. However in order to automate their own documents they must either acquire the skill to do the job, or commit the capital to have a skilled professional automate their documents for them. For solos and small law firms these two constraints create formidable obstacles to using more efficient methods.

Since neither condition is common within smaller law firms (programming skill, investment capital), the result is that the law firm gets stuck using older less productive methods of document creation.

Vendors that provide web-enabled document platforms include, our own Rapidocs, and Exari, Brightleaf, HotDocs, DealBuilder, and Wizilegal, to name only a few, all claim that their authoring systems are easy to use, but I have yet to see lawyers without any kind of programming skill create their own automated legal documents in any quantity. Thus, law firms become stuck in a negative loop of their own creation which reduces productivity (and profitability) :

"My legal documents are better than yours; I can’t automate them for the web because I don’t know how; thus I will be less productive and be required to charge you more because of my own inefficiency."

Competition

In the consumer space, now comes the non-lawyer providers to take advantage of the solo and small law firm’s competitive disadvantage. Research by companies like Kiiac provide support the conclusion that 85% of the language in transactional documents is actually the same. In more commoditized areas, where legal forms have been standardized,  the legal form content is 100% the same in all documents. Taking advantage of this consistency of legal form content,  companies like LegalZoom, Nolo, CompleteCase, SmartLegalForms, and LegacyWriter , with their superior on-line marketing and branding machines, now sell legal forms by the thousands at low cost which provide a "good enough" legal solution for consumers who would do any thing to avoid paying the higher fees to an attorney.

Its true that the consumer doesn’t get the benefit of the attorney’s legal advice and counsel, and the accountability and protection that dealing with an attorney provides, but consumers don’t seem to care.

What can be done?

The "web-based legal document automation solution" , used by non-lawyer providers, is a disruptive technology  that is eating away at the core business base of the typical solo and small law firm practitioner. 

What can solos and small law firms do to compete in this challenging competitive environment?
The American Bar Association’s Legal Technology Resource Center reported last year in their Annual Technology Survey that only 52.2% of solo practitioner’s don’t have a web site.  Even if this number is underestimated, it is shockingly low compared with web site utilization by other industries.  If you don’t even have a web site, the idea of "web-enabled document automation" is still a "light year" away.

What can be done to encourage more wide-spread use of web-enabled document automation technology by law firms, particularly solos and small law firms? A follow-up post will explore some solutions, but I
am open to ideas from anyone.

Download our White Paper on Web-Enabled Document Automation

 

Unless you’ve been asleep for the last five years, you have probably heard of LegalZoom, the California-based, non-lawyer legal document preparation company that claims it has delivered over 1,000,000 wills to consumers, and that it is the largest incorporation company in the country.

LegalZoom is only one of hundreds of Internet-based legal form web sites that have emerged during the last 10 years and which are eating away at the market share of solos and small law firms. LegalZoom has been challenged by some state bars with the unauthorized practice of law, but hasn’t lost a case yet. They are serving thousands of customers who ordinarily would be served by solos and small law firms. They must be doing something that is in demand because they continue to grow at the expense of solos and small law firms.

LegalZoom, and non-lawyer legal form web sites like it, have a business model that consists of the following elements:

  • A legal service delivered purely over the Internet;
  • No physical offices, and thus no extensive rental costs to pass on to customers;
  • Limited services offered at a fixed price that can be easily compared with other providers including law firms;
  • The use of web-enabled document automation technology to reduce costs and increase productivity;
  • A secure customer portal where clients can execute legal tasks in their own personalized web space;
  • Access on their web site to thousands of pages of free legal information on hundreds of subjects;
  • Money-back guarantees to comfort consumers; and
  • Reliance on informed consumers to do part of the work, often called co-production, such as filing their own documents or executing their documents on their own based on provided instructions to keep costs down.

Consumers don’t seem to care that they are not dealing with a law firm. As lawyers, we know the service they are selling is risky for consumers, but for consumers it delivers a “good enough” result. LegalZoom would not be growing at this fast a rate if they weren’t offering something that consumers want and value.

How to Compete Against Legal Zoom and Other Non-Lawyer Providers

In the new, competitive environment that solos and small law firms face in the current economy, the keys to law firm survival are to expand the strategic options available by opening new client markets, reducing the cost of services, and delivering legal services in a way that distinguishes your firm from other firms in the pack. These strategic options should be mixed with more traditional approaches to differentiation such as specialization within a niche practice area.

It is time for solos and small law firms that offer personal legal services to the broad middle class to rethink their law firm business models. There are many opportunities for incorporating some of the elements of the LegalZoom business model into a more traditional law practice.

To name a few:

  • Consider offering "unbundled" limited legal services at a fixed price, both on-line and off-line;
  • Leverage a reputation in your local community and a physical office into an on-line brand that is both local to your community and extends throughout your state;
  • Add virtual law office functionality to your web site so that your clients can have the option of interacting with you on-line;
  • Figure out ways of using Internet-based technologies, such as web-enabled document automation to strip out costs from your overhead structure increasing profitability;
  • Figure out how to segment the market offering lower priced services for more routine matters in order to build trust so that when a client has amore complex problems they will turn to you for assistance;
  • Emphasize all of the advantages of using an attorney over a non-lawyer forms provider in your marketing materials and your elevator speech. Click here to see one such comparison.
  • Use web-based technologies to respond to both prospects and clients within hours rather than days.
  • Reduce the perceived risk that consumers have in retaining a lawyer by increasing transparency and structuring forms of performance guarantees.
  • Adopt project management technologies to better estimate costs and fees on more complex projects, translating that data into communications that clients understand.

The current depressed economy and its affect on the broad middle class is not going to change tomorrow. It is likely that solos and small law firms, will have to adjust to new pricing and market realities in the future as competition from non-lawyer providers of legal solutions continues to increase. Large law firms serving large corporations may be immune from these developments, at least for a few years any way, but the fact that Big Law is changing relatively slowly should not mask the rapid changes happening to solos and small law firm practitioners that serve consumers and small business.

I heard a report the other day that the volume of wills and estates practice in one state declined by 50% during the past year. I predict that this trend will continue and not reverse itself, despite any improvements in the economy.

Some commentators think that the monopoly will hold. History and the experience of other countries in deregulating the legal profession suggests otherwise.

Welcome to the "new normal."