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Justin Kan Raises $10M for New Legal Startup (techcrunch.com)
161 points by imjk on June 16, 2017 | hide | past | web | favorite | 98 comments

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

Good to hear of this fine effort. For the most part, if law were a person, you would say it is incorrigible when it comes to being tamed for efficiencies. It remains a guild system, which severely limits who can perform legal services and how they can be performed. It also remains an apprenticeship system by which personalized and customized services by highly-trained specialists remains the norm and is perennially tied to the billable hour, which can sometimes inject perverse incentives for law firms to stay with technologically outmoded systems that nonetheless yield higher billings. It embraces vast and amorphous technical areas that can bewilder all concerned with their complexity and, even in simpler areas, it can set unsuspecting clients up for being blindsided when they (at times) ignorantly assume that something is standard or routine when it is not. So quality lawyers can and do earn their keep but often at a stiff cost to the client. That part of the system is intractable and, in my view, there is little any technological provider can do to effect systemic changes to limit costs relating to that core aspect of the legal business. That said, the means by which lawyers (and other timekeepers) work can be vastly improved from the stone-age systems one can all too easily encounter in today's legal field. I note that Atrium LTS is (from its website) "dedicated to providing exceptional tools and processes to transform the delivery of corporate legal services" (italics are mine). That mission statement is spot on. Work around the incorrigible and intractable areas, focus on mechanisms and process, and limit the substantive field to those in which you can take regular and recurring transactions and inject massive efficiencies into the doddering or sclerotic systems now in place. Doing this is not easy. Indeed, it is a massively difficult undertaking. But, put together top people who know the problems, add seasoned technologists who can develop the right systems, and give it the backing of serious investors who have the wherewithal to fund a disruption of major industries, and you have the makings of a great opportunity. Good lawyers will not resist this. They will welcome it because it enhances the value of the customized work that is in reality what they sell. Moreover, it is definitely an idea whose time has come. Others who are highly credible are trying to do this as well, from different angles (e.g., Clerky) and, from the standpoint of one who has long labored in this field, it is exciting to envision what will come of such efforts. Very exciting to see it happening.

Last year I sold my interest in a startup with a patent application for SLAP (Statutory Litigation Automated Pricing) we partnered with law firms and were consumer facing automating law firm fee calculation and hiring online. After that I worked with Walmart to develop a "self serve legal kiosk" for use in Walmart stores with another vendor.

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.

I'm a workhorse, having ran 27 half marathons last month.

Sorry for the off topic question, but... whoa. Can you talk briefly about how this works?

Just a random goal I gave myself (to do 31 consecutive actually) pretty cool experience because for the most part I ran with "Raven", a streak runner who has run 8 miles on south beach every day for 42+ years. [1] Obviously a guy who has run 124,000 miles (nearly 5x around earth or to the moon and back), through pain, through hurricanes, etc... is pretty inspirational. I ran 5-6 miles on the boardwalk on my own before the Raven Run usually having a peanut or almond butter sandwich and water between. I run for fun but that mileage is 3x the month before, all attributable to the somewhat arbitrary goal I gave myself.

I have a friend who runs marathons and practice runs are generally 10-20 miles a day, most days of the week. So a 13 mile run is just a regular workout but with friends.

Hi Justin,

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.

I don't think the point of the site is to sell the product.

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.

> I read everything

And the truth is you shouldn't have even had to 'read everything'.

This is exciting...godspeed. In almost every big company I have either worked at or done business with, the legal team (in-house and external) was a bottleneck when trying to get something significant done in a reasonable time frame.

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.

Are you still working on Whale? Also, what's going on with Zero-F?

https://zero-f.co/ https://techcrunch.com/2017/03/06/just-kan-zero-f/

My cofounder Ranidu runs Whale and we have a great team there.

I was originally intending to incubate more companies but have decided to focus on Atrium LTS as I think it is a huge opportunity.

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?

It's market/opportunity validation when you can convince others to share the risk.

Probably because he expects people who are financing to become customers and help tell other friends in the industry how amazing the company is.

"It’s not just about the capital, but about getting a funnel of companies and individuals that could be potential customers as Atrium"

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.

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

What I say is: 'I'd rather have your connections than your money'.

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'.

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!

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).

> 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.

There's great value in showing that people other than yourself — people who have found other market-validated successes — have enough confidence to put skin in your game.

Congrats, Augie is a great guy so a huge win there as you already know.

Just wanted to second close to the top that Augie is not only a great lawyer, but a fantastic human being and committed to helping the startup community.

If you're needing help with infosec, I highly braintrace.com They specialize in law firm information​ security.

Are you targeting corporate transactional practices, litigation, or a mix? What size of firm are you going after?

At first building tools for corporate transactional practices, but we have big plans for other practice areas.

That's the right starting point. I was in-house counsel at a large tech company and worked in biglaw before that. Most companies let law firms specify how work is done. But most lawyers will accommodate if a client says "this is the tool that we require all of our lawyers to use for [project management] [billing/invoice management] [contract generation/status tracking] [etc]".

Quick question: Are you hiring senior rails developers for remote positions?

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?

> 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.

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.

> "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.

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)_/¯

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.

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.

Law firms are now internally tracking the number of hours spent on units of work (e.g. motion to dismiss, MSJ, etc) so that they can provide much more accurate pitches and estimates of cost.

On the latter point: https://www.judicata.com/ understands legal research and has built a legal research tool in the right way.

I get the feeling Big Law firms are reaching the point where they can no longer rely on increasing hourly rates as a primary source of growth. And I think for the first time in the the history of Big Law, the incentives are such that efficiency might finally be valuable. It might be the only way these law firms can continue to grow revenue. Rates can only go so much higher and there aren't that many more hours in the day.

Revenue per lawyer among the 100 largest law firms is flat in current dollars over the last decade. Rates have gone up a lot, but realization has gone from over 90% to around 80%. There is a lot of pressure to write off time in excess of budget targets, which creates an incentive for achieving efficiencies.

> > "spend less time [billing] on research"

> 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.

The legal services industry is not a free market. There, I said it. First, the value (i.e. "provide better value") is opaque. That's why the legal industry relies so much on the proxy of prestige, because it's really hard to know if you are getting good representation, and then it's even harder to know if the cost is "fair" or whatever. The pricing structure is obfuscated and hidden, comparison shopping is hindered by ethical conflicts, and the billing practices (the dreaded billable hour) are asinine. The industry relies much more on personal relationships and perceived prestige than "value for the cost." And the demand in many areas of law is inelastic, and supply is...well, it's complicated by the whole obsession with 'prestige' and student loan debt.

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.

The legal industry is tremendously competitive. Even if you limit yourself to the most "prestigious" firms, there's dozens of potential choices. Even the largest firms have only a couple of percent market share. How many other industries can you say that about? The information asymmetry issues you mention may be true to the extent you're a small company that needs counsel for one matter. But the vast majority of corporate work is done for big corps who are repeat players. They have extremely detailed data at their fingertips about how much their dozens of previous representations cost, outcomes, etc.

> The legal industry is tremendously competitive.

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.

The existence of dozens of competitors is the #1 marker of a highly competitive market. I'm not sure what basis you have for raising "the possibility of price fixing on an industry wide scale" (other than that is theoretically possible in any market). In my experience pitching big companies for legal matters, the process is quite formalized. When presented with a new matter, a company will interview several firms to give presentations on how they would handle the matter and how they would price the engagement. That is just how the process works even at the largest, most reputable corporate firms. (A partner I used to work for at one of the big New York firms told me that when he started at the firm, "business development" meant a partner checking his voice mails when he got back from lunch. That's not how the industry works anymore.)

Even the worst lawyers still charge 100's of $/E per hour and to get certain services performed you have to go through a lawyer.

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).

The 'inelastic' fees aren't the result of overt price fixing, but the professional rules imposed by the bars. At some point, lawyers don't take on the duties for less than $x00.

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.

> but the professional rules imposed by the bars.

Which are made of lawyers. So price fixing.

Yes. More like a minimum wage, but that's a government intervention into price, too.

In the U.S. at least, Department of Justice antitrust litigation has prevented law schools from artificially limiting the supply of lawyers. There are about twice as many law graduates each year as job openings. If you just need someone with a law license, you can hire them for $20/hour on craigslist.

Ah just saw this! So

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.

Lots of these comments ended up focusing on research, which applies heavily in litigation but hardly at all in transactional work. Justin confirmed in response to my other comment that their initial market is transactional, so perhaps what they have in mind is somewhat different (related to managing various transactional flows, like fundraising, M/A, etc.)

> Windows has not improved in any way that is relevant to lawyers since Windows 2000. What is the point of upgrading?

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.

I've done a few interviews with junior lawyers for my newsletter OppsDaily. I've encountered several individuals who want better technology but don't have the pull at their firms to actually get it implemented.

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."

Considering the list of investors, maybe the idea is to drive change from the client side. Basically, "if you don't do business this way, I will take my business elsewhere." Law seems like one of the last hold out professions where business practices are not driven by customer demand or expectations

Yeah, this was my suspicion. I wish them well — especially now that I see that one of their co-founders was a summer associate with me back in 2006! I'm guessing they have his former firm (Orrick) as a committed beta customer. This would help jump-start demand at other firms, for sure.

This article is written for a particular audience. The people selling it to law firms are going to pitch efficiency.

Yes, but the audience it's written for generally cares about questions like "what is the pain point you are solving for your customer?" That is one of the first questions a funder asks — and given how many funders they have lined up, presumably there is an answer.

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.

And lawyers are still ethically expected (by many state bars) to measure and log hours worked, even under fixed fees. Same with contingency fees. So let's say that a client is paying a fixed fee for work, then discovers that it's now taking half the time to do the same work. They're going to demand a lowering of their fixed fee in proportion. So even under alternative fees, there's still an incentive to keep high "hours" on the bill

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.

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.

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.

I'm actually working on this! Would love to hear your thougts

I worked on this for a while as well! I talked with a lot of people who deal with contracts regularly (both lawyers and laypeople, in-house and in private practice) and all of them acknowledge there are inefficiencies in the way they work. The desire for better tools exists out there, it's just a matter of figuring out the best way to deliver it.

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.

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.

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.

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.

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.

In many other industries, yes. In law, not as much as you'd think.

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.

> They charge for every 10th minute that they're doing something

Every 10 minutes? Every large law firm I'm aware of bills by the sixes.

He means every 1/10th of an hour. Thought plenty of firms try pushing for 1/4th hour billing.

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.

"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....

"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.

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...

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

Do lawyers usually send very detailed itemized bills?


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.

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

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

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.

How much of that do they spend on software?

As little as possible. Software is a cost center to law firms.

> 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"...

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.

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

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.

>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?

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.

Still up and running :) just watched his latest snap, where he'd basically confirmed the story above.

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.

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.

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

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

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.

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?

Hi Justin,

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

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

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