The legal tech industry is experiencing a significant decrease in venture funding this year, with projections indicating a total of approximately $725 million. This figure represents a sharp decline from the previous two years, during which funding for legal tech startups was around $2 billion annually.
This downturn is particularly striking given that the legal industry had been making strides in integrating new technologies, such as cloud-based tools and other tech tools involving filings and communications. However, interest appears to have cooled, with a slowdown in both dollars and deal flow. So far this year, only 129 deals have been reported, compared to 268 last year and 284 in 2021.
Notably, there has not been a single nine-figure round this year. In contrast, last year saw seven deals worth $100 million or more. In 2023, there have only been three rounds of $30 million or more.
Despite the overall decline in funding, some legal tech startups have managed to secure significant investments. For instance, San Francisco-based EvenUp raised over $50 million in a Series B round in April. New York-based Masttro, a wealth information platform for high-net-worth families, raised a $43 million Series A in March. Israel-based Darrow secured a $35 million Series B last month.
While the current funding landscape may seem bleak for legal tech startups, some experts believe that the industry’s future remains promising. Gartner experts expect legal departments to increase their spending on legal technology threefold by 2025. This suggests that while funding may be down now, the demand for innovative legal tech solutions is likely to grow in the coming years.
A Closer Look at the Funded Startups
EvenUp is an AI-driven support for personal injury lawyers. It raised $50.5 million in Series B funding on April 6, 2023. The funding round was led by Bessemer Venture Partners and Bain Capital Ventures. EvenUp currently has over 300 customers who pay annual subscription prices in the thousands to hundreds of thousands of dollars.
Masttro is a multinational financial technology organization offering state-of-the-art solutions to significantly wealthy families, family offices, and financial advisors. It raised $43 million in Series A funding on March 10, 2023. The funding round was led by FTV Capital and Citi Ventures.
Darrow is a leading justice intelligence platform that uses AI to parse through large amounts of publicly available documents to search for class action litigation potential across areas like data privacy violations and environmental contamination. It raised $35 million in Series B funding recently.
Future Outlook
As the legal industry continues to evolve and adapt to new technologies, it will be interesting to see how these trends develop and what impact they will have on the future of legal tech. The current downturn could be seen as a market correction after years of rapid growth. However, with Gartner’s prediction of increased spending on legal technology by legal departments, there is still much potential for growth and innovation within the sector.
The key will be for startups to continue innovating and providing valuable solutions that meet the needs of their customers. Those that can do this effectively will be well-positioned to attract investment and thrive in the years ahead.
