Legal Tech Startup Investment Is Riding High, Thanks To AI Boost
Legal services represents an enormous industry, and one that’s well-known for repetitive and tedious work. Thus, it regularly ranks among the professions most likely to incorporate more automation.
In an oft-cited Goldman Sachs report, analysts estimated that an astounding 44% of legal work could eventually be automated. AI-enabled software will be taking on much of this workload.
Startup investors are backing this notion with their checkbooks. In recent quarters, funding to companies in the legal and legal tech sectors has surged to levels comparable to what we saw during the 2021 market peak.
To illustrate, we charted annual legal-related startup investment for the past six-plus years below.
Quarterly funding has more ups and downs, but has also mostly held strong, as charted below.
It’s an AI thing
Not surprisingly, the overwhelming majority of recent funding for the legal tech sector has gone to companies that are incorporating artificial intelligence in their offerings.
Per Crunchbase data, an estimated 79% percent of all legal-related startup investment since 2024, or nearly $2.2 billion, has gone to companies that also fit in our AI categories. That includes the two biggest fundraisers: Clio and Harvey.
Vancouver-based Clio, a legal tools platform, is by far the largest recent funding recipient in the space. It locked up a $900 million Series F last summer at a $3 billion valuation, with New Enterprise Associates as lead investor.
Clio’s software lets law firms automate processes such as client intake, accounting and document management. Its generative AI offering, Clio Duo, also helps lawyers complete routine tasks more efficiently.
San Francisco-based Harvey landed its $300 million Series D just this month. Led by Sequoia Capital, the financing sets a $3 billion valuation for the 3-year-old company, which offers an AI platform for legal and professional services.
Other large, recent rounds went to:
- EvenUp, a San Francisco-based provider of cloud and AI-based legal case management tools, secured $135 million in an October Series D led by Bain Capital Ventures.
- Luminance, a U.K. company offering an AI-enabled platform for legal contracts, closed on $75 million in a Series C this month led by Point72 Ventures.
- Justpoint, a New York-based startup, raised $45 million this month for its business model of employing AI to search for drugs that cause harm and could be the basis for lawsuits.
Saving time
Probably the most commonly touted use case for AI-enabled legal tech tools is that they allow practitioners to save time.
According to an analysis from Thomson Reuters, within a year AI could free up an additional four hours of work per week for white-collar professionals in law and other fields. Within five years, that could grow to a whopping 12 hours per week.
For now, the effect of new tools on legal employment remains to be seen. On the one hand, firms and in-house legal counsel departments may find they don’t need so many people. On the other hand, lawyers could find they are able to work more productively, serve more clients and increase incomes in the process.
Given that so many innovative startups at the intersection of AI and legal tech are in the early stages of scaling, we’ll just have to wait and see how it all plays out.
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Related reading:
- 4 Areas Where Seed Funding Is Strong, From AI Assistants To Carbon Capturers
- Legal Tech Startup Clio Raises Whopping $900M At $3B Valuation
Illustration: Dom Guzman
