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The law and our legal system is critical in our lives and our businesses, but the ways in which we typically access it hadn’t changed much until recently. 

As a result, lawtech has seen fast growth in the last few years, but what does the sector look like in the UK and where is it heading?

The growth of the lawtech sector

The growth of the UK lawtech market has picked up pace with an increase of 101% in the last three years — faster than other tech sectors during the same period, according to LawtechUK’s 2021 Shaping the Future of Law report.

“Initial fast paced growth in the lawtech sector began with the development of products that supported legal professionals to do their job, but that’s expanded vastly to take on the opportunity to support small to medium sized businesses and consumers with legal issues,” says Alexandra Lennox, director of LawtechUK, Tech Nation, a government-backed programme supporting the transformation of the legal sector through technology. 

A YouGov report found that in England and Wales six in ten consumers experience a legal issue every four years, and 53% of these cause them anxiety.

Whilst paper processes reigned pre-covid, the sector was forced to consider a more digital future”

Valla is a platform that helps people understand their employment rights and represent themselves in court if needed. 

“[Lawtech’s] still a very new area,” says Danae Shell, Valla’s CEO. “But the biggest change that I’ve seen since I entered the space was about three years ago with increasing support for lawtech in the UK and increasing awareness within the investor community and an appetite for it, unlike earlier feedback that the legal industry was one that could never change.”

Lennox reckons Covid was a forcing function in the growth of lawtech in recent years, as well as the strong support of the government and regulators.  

“Whilst paper processes reigned pre-Covid, the sector was forced to consider a more digital future,” she says. “This, when coupled with the support the sector is receiving both from the government, through a number of grants, and the legal services regulators, via LawtechUK’s Regulatory Response Unit, means this trajectory is likely to continue.”

Overcoming barriers

However, being a new sector comes with its challenges, such as a lack of data that startups can use to lure in investors and spend on R&D. While average R&D investment across all business sectors is 5% of revenue, few legal businesses target as much as 1%, says the report.

“I’ve had feedback from investors that they don’t really know what ‘good’ looks like in the industry yet,” says Shell. “That’s a challenge for new lawtechs as it’s harder for investors to build confidence about an investment without previous data to understand the industry.”

It is extremely difficult to find funding for lawtech and it is only now, because of the pandemic, that we’re seeing better funding rounds”

Legal Utopia is a lawtech scaleup that connects users with lawyers and uses AI to help them understand legal issues. Founded in 2017, the startup raised through crowdfunding and angel investors in early 2022, says Fraser Matcham, its chief product officer. 

“It is extremely difficult to find funding for lawtech and it is only now, because of the pandemic, that we’re seeing better funding rounds,” he says.

Lennox points out that the challenges faced by B2B and B2C lawtechs are also different. B2B lawtech is more mature right now and includes startups such as Amplified Global, a legal tech that seeks to simplify legalese for regulatory compliance. Legal Utopia and Valla are B2C lawtechs, a subsector that is maturing.  

“On the B2C side, one area that needs improvement is the availability of data which is required to develop new products and services,” she says. “For B2B, improving adoption which equates to revenue is key — there needs to be greater trust and understanding of lawtech amongst law firms and legal departments of all sizes.”

LawtechUK’s Lawtech Sandbox

Change, though, is underway. Lawtech in the UK enjoys a largely favourable regulatory environment and initiatives such as LawtechUK support the digital transformation of the sector.  

The Sandbox was pivotal for us as it helped us realise that we are a legaltech solution

LawtechUK’s work programme includes a government-backed lawtech sandbox that helps to fast-track the development of lawtech by supporting UK founders and legal businesses that are developing new products and services, for the benefit of business and society. 

Lawtechs such as Valla, Legal Utopia and Amplified Global were all part of the LawtechUK’s Lawtech Sandbox.

“The Sandbox was pivotal for us as it helped us realise that we are a legaltech solution — it gave us the opportunity to explore the segment in which we fit and to discuss it with different regulators and work with large companies,” says Minesh Patel, Amplified Global’s founder. “That is critical because the legal sector is essentially a white male club where a traditional mentality still exists.”

Shell adds that for Valla, the biggest advantage was getting access to regulators and getting their questions answered. “The other major advantage was the connections and conversations that we were able to make because we were in the Sandbox — both with other lawtechs and other major operators in the legal industry,” she says.  

Is lawtech “the new fintech”?

Now, numbers show that lawtech in the UK is growing at a pace similar to the early boom of fintech. 

Fintech is more productised as opposed to legal which is more services-driven currently”

The LawtechUK report found investment in lawtechs could reach up to £2.2bn per year by 2026, with a high scenario of 50% annual growth rate, which is comparable with fintech investment in 2018. A middle scenario of 30% annual growth rate would be in line with the current investment in healthtech.

However, Lennox argues that while it’s convenient to compare lawtech and fintech, as both our financial and legal systems can be key to a well functioning society and economy, and in both the legal and financial worlds there are well established incumbents ripe for disruption, it isn’t always a helpful comparison. 

“Fintech is more productised as opposed to legal which is more services-driven currently — although this is changing,” she says. 

The correlation between fintech and lawtech also draws from the sectors’ dependence on regulatory compliance. Fintech grew in a heavily regulated environment with significant barriers to entry and powerful, well-capitalised incumbents. Whereas in lawtech, whilst there are a number of legal service regulators, a lot of legal activity falls outside the regulatory regime which is unknown by most.

“Everyone asks — why hasn’t the lawtech growth curve been like that of fintech?” says Matcham. “It’s because fintech has had a regulated, standardised database in the industry that has been there for decades that they’ve just been able to plug into which lawtech doesn’t have.” 

Lennox agrees that open banking was key to the acceleration of fintech and in contrast data availability is very poor in the legal sector, which makes programmes like LawtechUK even more important as it seeks to break down some of the barriers preventing the sharing of data. 

Sponsored by

Lawtech's logo

LawtechUK, is a government-backed initiative within Tech Nation, established to support the transformation of the UK legal sector through technology

Learn more

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