Justin Kan Raises $10M for New Legal Startup
techcrunch.com
techcrunch.com
We are excited to be building in the legal space. Raising money is a necessary step, but Atrium LTS' biggest accomplishment so far is the great team of experts we have assembled here. My cofounders are Augie Rakow (former partner at Orrick, where he worked on over 100 financings and represented Cruise through their acquisition to GM), BeBe Chueh (lawyer turned founder who sold her last company to LegalZoom) and Chris Smoak (Amazon AWS, multiple time YC founder, founder of early FB payments platform Gambit). I think our early team is doing a great job of moving quickly and we are looking for more talented people to join that team.
Read more here: http://www.atriumlts.com
"It’s not just about the capital, but about getting a funnel of companies and individuals that could be potential customers as Atrium"
Good luck with your new business!
To expand on my point further: the same logic could be used to say entrepreneurs with the means to do so should only pay employees in cash and not equity (because you can afford to do so and believe the equity will have higher economic value ultimately). However, pretty much all seasoned founders I know want to compensate employees with some equity, under the theory that those employees will be more motivated to see the business be successful.
I think the same logic applies to your investor base (which is one of the selling points that crowd funding sources like Angel List or Funders Club maintain).
AKA Golden Handcuffs of the lesser variety.
As someone who helps investors with some of their investments that is often a missed point. Reviewing your list of investors I've worked with several of them. Knowing exactly who to call to get an answer, advice, or help can be just as important or actually more important than money. Obviously.
I remember when an investor approached me many many years ago to buy something that I was selling that the firm wanted. I remember thinking 'I'd rather have access to your connections than your money'.
I think I'm probably within your core demographics. I read everything on the aforementioned site and I'm still unsure as to what you guys are building. Can you provide us with a bit of a snapshot?
I'd love to be excited given that I'm a fan and I work in the field you're entering, but so far I'm just very confused.
It's to build awareness and recruit great people. They talk about the problem they're solving, their legit team, and list the positions they're hiring for. All wrapped in a clean design.
And the truth is you shouldn't have even had to 'read everything'.
https://zero-f.co/ https://techcrunch.com/2017/03/06/just-kan-zero-f/
I was originally intending to incubate more companies but have decided to focus on Atrium LTS as I think it is a huge opportunity.
At some point with the former project I was in talks with both legalzoom and Avvo, but I was never able to close a mutually beneficial deal and was eventually acquired.
I've always been a legal maverick, graduating early from law school and simultaneously completing 3 legal clinics including a externiship/judicial clerkship. Generally, I'm a workhorse, having ran 27 half marathons last month. I checked the jobs and it doesn't look like your team is searching, but I would be interested in talking if your team could use extra legal talent for developing firm tools.
Sorry for the off topic question, but... whoa. Can you talk briefly about how this works?
In most cases it wasn't because they objected to what was trying to be done or that they were lazy (they always seemed to work the longest hours). They just never seem to have the cycles to focus on what needed to be reviewed.
I hope these efforts can help make that part of my world a little more efficient.
As someone who spent 7 years working in biglaw, I can attest that there are many technology-related things that would make lawyers more efficient. For example, the large law firm I worked for ran Windows XP until 2011. This lag is due to (1) the fact that senior lawyers are generally very resistant to new technologies; and (2) the fact that law firms run custom/old software (to do things like format legal briefs to meet the standards of the relevant jurisdiction), which is mission-critical and may not be compatible with software updates.
I'm curious to see what Justin is building here, and hopefully some of the other news coverage with elucidate where the demand is going to come from for his new product/services.
Perhaps they're envisioning their "user" as corporate legal clients, who are going to pressure their law firm to use his project management software? An indirect model like this might make sense, but it sounds like a tough slog to me.
Anyone else know more?
I think that's true, but I also think that these "technology-related things" are things that do not exist. Take your example: Windows has not improved in any way that is relevant to lawyers since Windows 2000. What is the point of upgrading?
I see many things in my practice where I could see technology making things more efficient. But almost never do I see legal technology that actually addresses that need. For example, the entire legal world runs on PDFs. Court opinions are in PDF form, documents are produced as PDFs, case filings are in PDFs, signed contracts are circulated as PDFs. But for some reason everyone wants to build web-based tools that cannot deal natively with PDFs, or by some miracle manages to be worse than Acrobat at handling them.
In another example, client confidentiality is a big deal in law firms. But everyone wants to build web-based tools that upload unencrypted documents god-only-knows where.
In a final example: web technology is built on getting good answers to questions everyone is asking. That's the premise underlying Google: if a website is popular as a link target, it's probably a good result. Law is often about exactly the opposite: how do I distinguish my case from all the other ones that go in a way that's bad for my client? In other words, what are the parameters that create the exception to the rule? The techniques used everywhere else on the web are awful for that.
Security, for one thing.
I agree that others have missed the mark (lacking encryption, not compatible with heavily-used formats like PDF). My point is that this article does not demonstrate why lawyers will actually adopt use this startup's new technology.
> "spend less time [billing] on research"
is not, and never will be, an effective value proposition; and which would be obvious to anyone in anything but the most niche putt-putt fields of practice.
Rayiner is of course authority enough on this subject qua the intended market. But I'm here to confirm further that legal technology startups which ignore these central things -- PDFs are essential, confidentiality is maintained on in-house systems with their own vendors, and depth and specificity is critically more important than survey-like breadth -- will probably fail to address any real needs.
Source: I worked at a highly atypical IP litigation boutique (where drafts were written in LaTex and we scripted common ediscovery stuff), and later in relevance ranking at a legal tech startup.
I'll note that for many cases these days, there is an incentive to enhance efficiency. Alternative fee arrangements, e.g. fixed monthly fee irrespective of hours, are getting more and more common, particularly with regard to big corps that get sued regularly over the same sorts of cases. Not even commodity work even--these are complex cases for Fortune 100 companies handled by well-regarded firms.
I disagree about pagerank being appropriate for legal research. Pagerank-type algorithms will help you find the seminal, widely-cited cases in an area. But if you want background law, it is easier to just consult a relevant treatise or other reference book that has those pre-digisted and laid out for you. What really takes time when doing legal research is finding cases that have features in common with yours: similar procedural posture, similar factual wrinkles, etc. Usually, you're looking for a way to argue the opposite of the general rule set forth in the seminal cases. Pagerank-type algorithms won't help you find that; boolean searches on specific phrases will.
On the latter point: https://www.judicata.com/ understands legal research and has built a legal research tool in the right way.
Your explanation about the value of exceptions to rules in research is correct and would occur to, say, pretty much anyone who has drafted a motion (worth clarifying: not a drag on you). Far from a disagreement, the truth of this premise is why - as I pointed out - the most experienced/valued appellate drafters effectively rely on boolean. (Except, I guess, the 'within' operator might count as a semantic operator. Although that's been in lexis and west for as long as I've seen them, and I suspect have found immense use for much longer than that...)
edit: Adding that of course only one of the two following premises need be incorrect (firms should use products which enable them to spend less time on research; the citation graph enables lawyers to spend less time on research while yielding identical quality; firms should use citation graph -based products). Depending on your circumstances, only one may in fact be wrong.
> is not, and never will be, an effective value proposition
It will be if it means you provide better value for the cost, attracting more and more valuable business.
Or, if you can just deliver the same results at the same cost, with fewer associates and paralegals. Sure, the firm won't make more money, but everyone still in it will. And firms don't have interests, individual partners do; firms interests are just a shorthand for those of the partners.
Basically, no, the normal rules DO NOT APPLY to the legal market. And being 'cheaper' is usually not a good thing for a lawyer when dealing with big corporate clients. Less expense translates to lower perceived prestige, something this industry is obsessed with.
And to your last suggestion, here's the problem. There leverage in the law firm model is billing more hours by more associates and staff. The way that a partner makes more money is to have more people working under him, classic pyramid structure. If you eliminate the associates, the partner makes less money. Now, you might say, why not then charge more for the partners time? Because it's way easier to charge 3x associates at a going rate than a single partner at a 2x rate. Because clients see that big scary hourly number at balk, say that some other law firm doesn't charge that much, and why are you worth that much an hour. It doesn't work, even if the same amount of work gets done at the same price. And, the only measure of "amount of work" that lawyers have is billable hours! So a client would see a higher rate for less work. They don't take kindly to it.
I'm not defending any of the above, I hope you realize. I am frustrated with the industry because there are soooo many gains to be had here. It's absolutely silly how backwards and inefficient most law firms are.
That's got to be one of the funniest things on HN ever.
The hell it is. The fact that dozens of potential choices exist does not mean a market is competitive, you are missing the possibility of price fixing on an industry wide scale.
Now, I've met some - very few - lawyers that were worth their rates (one of which is commenting in this thread) but for the most part it is simply a title that in and of itself seems to make a mediocre performer suddenly worth a very large amount of money on an hourly basis.
The funny thing is that I suspect the rest of the world probably looks at IT people in much the same way (only we don't have the equivalent of a bar association, and if we did I suspect the minimum rate for a programmer would shoot up).
Lawyers on the internet will tell you a lot for free, and look at all the documents you want for $20/hr, as long as you don't hold them responsible for putting it in front of a judge. And no matter how many excess lawyers come out of law schools, fees don't go below $x00 for most lawyers.
In litigation, those rules are probably necessary for the benefit of the system. In transactions, there should be fewer.
Which are made of lawyers. So price fixing.
You might be assuming something about what counts as valuable business from the perspective of the firm or practitioner (or partner) -- consider that 'we have an army of associates poring over every detail with a fine-toothed comb' was instituted by those very same people in pursuit of value, defined however -- but my assumptions from 3 years ago may have since been obsoleted as well.
Btw, a clarification about the nature of the research that's being purported to be being cut down on: it's not the type which is like "hey paralegal, go on lexis and get me all the cases in this motion" Which, yes, makes sense: it frees up more and higher-value hours for more time spent on the memo, etc. It's rather purported to automate the time otherwise spent finding, say, available expertise, seemingly contrary decisions, analogous circumstances, distinguishing principles articulated (or ideally by asking the first of ^, you can locate the second, match the third, and cite the fourth) etc.
And all of which, yea the more it were to occur, would deliver more value for all involved.
As for pitching law firms on efficiency, that's actually an uphill battle in many ways. Lawyers bill by the hour, which means that there is not a natural demand for tools that increase efficiency. Post-recession, there is an increasing amount of fixed-fee work, which helps on this front. But the bread-and-butter for many firms (especially prestigious ones, who don't have to accommodate fixed-fee arrangements) is hourly work.
Here's one, but there are 2-3 more that fit this pattern:
"My job industry is Law. We are still using paper files for cases. Software would make it easier to file and search for case information. I personally would Pay $1500 for a business license for this type of software, but I can't speak further with a developer because my boss is old-fashioned."
Anyone wanting to disrupt the legal industry (in the US) is going to have to deal with MS Word in one way or another. There are hundreds of thousands of attorneys who have worked with nothing but Word and Word-related tools for decades, so someone entering the space will likely need to build project management, collaboration, and communication systems around the Word ecosystem. That or build a product so compelling and easy to migrate to that people are willing to walk away from Word.
The existence of the MS Word shackles means that an incremental solution is inherently limited by being compatible with the MS Word format, one way or another. Even if you convince one client to move to your solution, everyone else they interface with will still be using MS word, so you must take that into account. Import/export features can smooth the way, but will hold you back on the kinds of features you'll be able to develop.
Building an entire suite that delivers a new, improved workflow is more tempting for the client, but then you're building a lot more up-front and limiting yourself to clients that actually have significant legal-related costs to defray. And again, it's still likely that your client will continue to work with people who won't be using their new tool, so will have to resort to MS Word on occasion.
And to top all that off, there are a LOT of people that need to be able to use this tool. It has to be built for lawyers, sales people, procurement people, VPs, CEOs, paralegals, customer success, consultants, among others. And even if you're only talking about contracts, even contracts vary widely in length, complexity, and importance.
All in all, it's a really interesting space, and I really enjoyed working on the problems there. Someone is definitely going to crack it within the next few years. Would be glad to talk more over email.
As for why some of this isn't done yet: The legal profession is old school. If you want to know where your work is, you can ask for a status memo, and you'll get billed for the time it takes to write it. Or the phone call. Either way. In industries where the product is the billable hour, you'll find things get done the way they've always been done.
You'll find small and mid size firms using more technology, but you'll also find that the more highly a company thinks of itself, the more it thinks it needs a large firm (which will bring its legacy processes, because they do work, even if not entirely efficient). Nobody gets fired for hiring Skadden, but then you also don't get to bitch when they do things the way they have for the last 50 years either. They didn't bring in $2.5B last year by accident - they're effective, and are going to be averse to process change if it risks outcomes.
If you're working on tech in this space, you also need to be aware of that. It's a tough sell to larger firms. They won't sacrifice outcomes or billables because it's all working really well for them, and they always have a glut of un/underemployed contract attorneys if they just need to throw highly educated bodies at a problem.
If a startup like Atrium can streamline legal workflows, then new school firms don't need to bill for writing that status memo.
That should lower prices and attract more customers. Seems like a win/win.
That's the opportunity - but it's really hard when instead of software they can go get an actual living, breathing attorney to work on contract for $25-35 an hour. More in California because of their OT laws, so maybe that's where the opportunity exists initially for disruption.
Critically, though, I don't think anyone's figured out how to charge billable hours for what your software does. Since you can still bill contract attorneys out at 3x what you pay them, it's tough going.
Big law firms aren't really looking for efficiency. They charge for every 10th minute that they're doing something. If they have more work than they can handle, they'll hire more associates at lockstep salaries based on their "year" - or contract attorneys at less than half that if they only need some spare capacity to do rote tasks. Their labor costs are known and very stable, and with the sheer number of underemployed lawyers out there, it's going to stay that way. No matter what, they're billing those associates or contract attorneys at far more than they're paying them. And the kicker is, the culture of "prestige" in the industry will basically prevent the largest firms from ever marketing that they'll do the same work in fewer hours. They don't pitch on a lower bill than their competitors, they pitch on expertise in a given area of law and a favorable track record of outcomes from similarly sized/situated clients. And because of that, few GCs want to take a chance on a firm doing things differently.
I'm not saying there isn't a place for Atrium - I'm not saying it's a hard sell to be negative. I really want them to succeed. It's just more likely to be in the small and mids where their clients do apply more pricing pressure, and maybe eventually in the larger firms if it really catches on. I think there's also an in-house play, because in-house counsel is often stretched pretty thin and needs better tooling to manage internal workloads and its supervision of outside counsel.
Every 10 minutes? Every large law firm I'm aware of bills by the sixes.
I think both of these are pretty high bars, especially since Lawyers bill by the hour.
Finding a good efficient lawyer is much more about the Lawyers personality, knowledge, and ability and much less about the technology. A good lawyer can solve things very quickly at little cost. A bad lawyer can take the same matter, spend a ton of money researching it, working it, discussing it, etc, and still come out with a poor result.
I'm interested to see what he's building, but I won't be surprised if it doesn't upend the legal world.
Not to be too cynical but given those two options of good and bad lawyers - who is going to be able to charge more fees to an unsuspecting client?
Edit: I can't believe that I said "Not to be too cynical" about lawyers....
That's my point, finding a great lawyer isn't easy, and I don't think it's related the underlying technology. The tech can make a great lawyer even better.
Of course, I can see why lawyers generally resist that kind of transparency...
I'm guessing getting it adopted, you need to acquire large corporate clients who want to demand this sort of accountability from law firms they hire, more than acquiring the law firms as clients
Edit: I see from their website they claim it is a "$96 billion industry". There are only 1.3 million active lawyers in the U.S. (ABA), so I am curious what this number represents.
In any case, an industry where 1.3 million highly paid people work should be a worthwhile market to pursue.
> Kan promises more to come — including more details about the tech the company is building and how it will begin offering that technology to customers...
I like how the only specific details about the company is an alphabetical listing of every single person who invested in it, and then another couple paragraphs explaining to us why that list is somehow meaningful.
I wonder where people get the idea that "funding isn't a goal"...
When I was at YC, there was a defined schedule, so I had lots of free time to mess around on snapchat. Now that I'm back in the startup world, I spend most of my time thinking about and working on my company, and forget to snapchat.
Klaus says hi.
Shouldn't you have been thinking about and working on YC when you were there?
I believe it's a subtle message to people who work in the law industry.
Welcome back to the game. What happens to the other products in your incubator?