
Justin Kan Raises $10M for New Legal Startup - imjk
https://techcrunch.com/2017/06/15/justin-kan-atrium-lts-funding/
======
justin
Hello HN!

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](http://www.atriumlts.com)

~~~
chrome-style
I am wondering - why did you decide to raise outside money at all? I assume
you would have been able to do the round yourself, save time / effort around
the fundraising process and concentrate on product instead?

~~~
downandout
I have often wondered the same thing when similarly successful people raise
money for startups. With $X00 million in the bank, it would be better to self-
finance for $10.5MM that _if they truly believe in the business_. However, if
they believe that the probability of success is very low, I suppose it would
make sense for them to use their name to get others to take the financial risk
for them. For this reason, as an investor, I would shy away from
stratospherically wealthy entrepreneurs looking for money, but SV VC's seem
quite willing to give money to people that don't need it.

~~~
justin
This assumes you believe that investors can't help you succeed in your
business. I believe our investors can help us a lot.

~~~
downandout
Fair enough. I was speaking generally. In the case of this specific venture,
you may very well turn out to be correct.

Good luck with your new business!

~~~
justin
Thank you!

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).

~~~
jacquesm
> 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.

AKA Golden Handcuffs of the lesser variety.

------
gnicholas
Most startups are pitched with a problem statement: our users want X, and
here's how we're going to give it to them. This article talks about how
lawyers don't do X and how Justin thinks they should — but not necessarily
that they want to.

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?

~~~
rayiner
> I can attest that there are many technology-related things that would make
> lawyers more efficient.

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.

~~~
pnmahoney
I can vouch for the fact that legal technology as a category does not address
the needs of lawyers. And which is obvious to most practicing attorneys. As an
example:

> "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.

~~~
rayiner
> "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.

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.

~~~
pnmahoney
Really?? The move away from standard billing had always felt like it would
"always be in the future"; but I take that back if that's now A Thing in lit
heavy on case research. Still assuming that ^ research is better facilitated
by pagerank+semantic centrality, as opposed to the boolean features that the
attorneys who do the most motion drafting work are already most well-versed
in. The most valuable usage I'd heard of this type of product (the adoption of
which I'd had reasons to keep asking extensively around about) was from my pal
in international arbitration whose colleague wanted to do a search across
courts in one screen. So maybe that was it. ¯\\_(ツ)_/¯

~~~
rayiner
Yes. Even in the context of billable-hour matters, it is typical for firms to
write off hours that exceed certain targets per sub-unit of the matter. That
is, in effect, a shift towards pricing based on unit of work ( _e.g._ a motion
to dismiss) rather than pure hours.

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.

~~~
pnmahoney
I'll own that I could see why you might think that I think a certain way but
consider that we do not disagree? I pointed out that - with a premium on
billing efficiency - the linchpin the product's actually delivering value in
such an environment would still rely on (what I note as) _the assumption that_
a semantic+graph -based product does in fact cut down research hours, compared
to the boolean-based approach.

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.

------
yannyu
There actually is a lot of legal-industry-specific technology out there that
most people have never heard of. It works well enough for what most lawyers
and firms want, but it seems to have hit a local maxima for one major reason:
nearly all the software and tools are written around Microsoft Word and the
Office suite.

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.

~~~
r00fus
I think the "track changes" in Word is the killer feature that's used - if
that could be replaced and the editor can read/write .docx you could pitch a
wholesale replacement of MS Office.

~~~
yannyu
If that's all it were, then someone would have repackaged Google Docs and sold
that to the legal world. While "track changes" is absolutely essential to any
product that aims to replace MS Word for legal docs, a replacement will need
to have much more than that.

------
SmellTheGlove
This is a good idea. I hope it gets traction (I'd love to work on this problem
as well).

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.

~~~
programmarchy
Isn't this just evidence that the old school is ripe for disruption?

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.

~~~
PatentTroll
Lowering prices on mid-top tier legal work won't attract more customers,
demand is largely inelastic. And their customers, who are fortune X00 types,
don't really care about the cost. Oh, sure, they bitch and moan about bills
and write op eds about how law firms are terrible and the billable hour is
bad. But, in the end, like OP says, companies routinely go back to the same
crop of biglaw firms. There is no such thing as 'disruption' in this industry,
it never has been disrupted.

~~~
SmellTheGlove
The only disruption that occurred was 2008-2011 or so, when the economy tanked
and demand for legal services took a fall. Except most biglaw partners
realized their labor model could change without consequence - they laid off
tons of associates and when the demand came back, they replaced them with
contract attorneys, paralegals, some offshore, some software and a small
number of actual associate attorneys. It turns out what their 1st and 2nd year
associates were doing was largely replaceable at a much lower cost.

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.

------
redm
For any legal startup to work, Lawyers either A) have to really want what he's
building or, B) have to have it to be competitive against other firms.

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.

~~~
arethuza
"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."

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....

~~~
redm
"who is going to be able to charge more fees to an unsuspecting client?"

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.

~~~
arethuza
I'd love to have some kind of portal where you can actually track activity on
your legal work and see billing as it happens.

Of course, I can see why lawyers generally resist that kind of transparency...

~~~
pitt1980
reading between the lines, it looks like that's what's being attempted

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

~~~
crypto5
Do lawyers usually send very detailed itemized bills?

~~~
PatentTroll
Yes

------
joshuaheard
I built a legal app years ago. One problem I had getting investors is that the
legal market is so small. Microsoft dropped it as a vertical years ago.
Corporate law is even a smaller segment of the legal industry. VC law is an
even smaller segment of corporate law. How big is the market for this product?

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.

~~~
maxxxxx
If each of the lawyers makes 100k per year you already have a $100 billion
industry.

~~~
crypto5
It is a lawyer's fees industry's size, not a legal software industry's size..

~~~
maxxxxx
Fair enough. I have no idea how industry sizes are calculated. I always think
they are made up numbers anyway.

In any case, an industry where 1.3 million highly paid people work should be a
worthwhile market to pursue.

------
birken
> And while Kan is still loathe to go into all the details...

> 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"...

------
goeric
As a startup founder who dealt with numerous legal things on the ops side,
there's clearly room for a lot of improvement. While Clerky seems to focus on
the startup's side of the problem, it seems like Justin is tackling the firm's
side of the problem (that allows company's like Clerky to take their
business). This is really interesting to me and I would definitely bet on
anything Justin leads. Really excited to see where this goes.

------
philfrasty
What happened to Justin's Snapchat? Still kicking? Kinda stopped following
when Insta-Stories launched. Miss Klaus though <3

~~~
justin
Still snapping some. It's actually much harder to remember to make social
media now that I'm out of YC.

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.

~~~
Danihan
>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.

Shouldn't you have been thinking about and working on YC when you were there?

~~~
justin
YC is structured by-design to have time you spend as a partner working with
companies, and time to do whatever you want. I liken it to being a university
professor.

------
neom
This is awesome and I'm really happy to see venture dollars being spent on the
legal industry. One of my gripes has always been that quality legal is
traditionally expensive to obtain because the "quality" part in legal work
tends to come from literally practicing law for a long time and knowledge
about many things quite deeply. Over time law firms obviously grow in standing
and therefore size, increasing costs. This can easily leave a huge part of
society under-served. In theory, much of the cost is research by humans, and I
presume research by humans garnering key insights could be done somewhat
algorithmically by scanning case law for key points. I hope we see more and
more automation and ML services applied to the industry of providing council
around aspects of the law.

~~~
PatentTroll
I don't think much legal cost is in research, industry-wide. Most lawyers
specialize in one niche and already know all the relevant big cases in their
field. More nuanced research isn't all that time consuming really. And a whole
big swath of legal work has absolutely nothing to do with researching law,
there's a lot more to it. And a huge part of society doesn't need super-
experienced lawyers. The under served market needs warm bodies who are
qualified to represent clients at some state bar who are willing to work for
peanuts. Like, just someone to sit there in a suit and look menacing would
help out most of the 'under served.' Large student loans require law school
grads to seek the highest paying work possible, thought, so lawyers can't
represent poor people.

~~~
neom
Then why does Cooley or WSGR employe near 1,000 lawyers?

------
frakkingcylons
Is there a story behind the team photo on the home page where everyone is
wearing white tops?

~~~
HillaryBriss
It looks like someone (Mr. Kan?) stole the shirts right off everyone's backs.

I believe it's a subtle message to people who work in the law industry.

------
jonbarker
Will this be aimed at bootstrapped startups who are trying to get to ramen
cash flow positive without the overhead of legal paperwork that still seems
somewhat risky for folks who want to test ideas?

------
OoTheNigerian
Hi Justin,

Welcome back to the game. What happens to the other products in your
incubator?

------
seibelj
I have no idea about the existing legal tech space, but this sounds like a
really good idea if it doesn't already exist. I hope it works out

