Blacklaws: Huge potential for economic growth
Last year saw UK lawtech companies raise £140m in funding as they attracted more investors in the UK and internationally than ever before, according to a new report.
While lawtechs focused on documents and contracts remained the biggest group, there is “growing investor appetite for solutions related to risk management and compliance”.
According to LawtechUK, a Ministry of Justice-funded initiative delivered since 2023 by CodeBase and Legal Geek, 30 lawtechs raised £140m in 2024, 10% more money than in 2023 – although globally there were 356 deals.
Nine (30%) of the companies were involved in LawtechUK programmes and responsible for £41m of the money.
Collectively, all UK-founded lawtech companies set up since 1990 have attracted £1.7bn in investment.
The LawtechUK Ecosystem Tracker showed there were 376 lawtech companies active in the UK, 270 of which were founded here, the majority in London.
Two-thirds of them were focused on the business-to-business market, 8% on business-to-consumer and the rest did both. Only one in six (17%) of UK startups has a female founder
“While there was previously some scepticism from investors about lawtech, which was considered a niche market, this perception is shifting as lawtech startups globally are seeing strong growth and returns, and there are more lawtech unicorns,” the report said.
“And 2024 also saw a sharp spike in M&A activity – UK lawtechs being acquired by larger UK and international companies. This is another indicator of investor interest in the UK lawtech sector.”
Over the past five years, 25 UK lawtech companies have been acquired, 64% by other UK-based companies.
Lawtech was also broadening its remit. While the most popular area of work remained documents and contracts, accounting for 35% of all investment deals in the tracker, 2024 saw significant interest in risks.
“This finding highlights a growing investor appetite for solutions related to risk management and compliance.”
There was “growing interest” too in using technology to improve access to justice and legal services – nearly £12m of the £140m was raised by B2C companies.
The regional picture, however, showed room for improvement, with most of the money raised last year by companies based either in London (£73m) or the East of England (£55m).
A quarter of companies have taken part in at least one of the 65 lawtech incubators and accelerators in the UK, but only six were based outside London.
With many large law firms piloting GenAI solutions and building their own internal AI chatbots, another significant challenge for the coming year was around “validating its output and managing data protection and compliance obligations”.
The report said that, while the UK lawtech ecosystem was “more advanced” than other European jurisdictions, “the investment environment is less vibrant than in the US”.
It suggested that sector-specific incentives could make lawtech more attractive to investors.
“Although some corporate venture funds invest in lawtech, there is a gap in the market for independent VC funds and accelerators specifically focused on lawtech. There may also be room for a home-grown UK lawtech fund to develop, similar to The LegalTech Fund in the US.”
The report found that, on average, it took approximately 40 months for a startup to secure a Series A round of investment, the first major funding stage.
By far the largest investor since 2010 has been the government agency InnovateUK, which has given 39 grants, followed by US investor Accel (17 deals). Venture capital fund Seedcamp was the next biggest UK investor (10).
“Leading the charge” over the past three years, however, have been UK investors Mercia Asset Management and Episode 1 Ventures, and The LegalTech Fund.
Christina Blacklaws, chair of the LawtechUK Panel, said: “What this timely report underscores is the huge potential for economic growth enabled through the lawtech sector. The government has shown its commitment to driving technological growth in the AI Opportunities Action Plan, and lawtech can play a significant role in this.”
In her introduction to the report, justice minister Sarah Sackman said: “Since 2023, LawtechUK has directly supported over 176 startups through their education programmes and attracted 1,274 attendees to 19 events to build a strong community focused on innovation.
“I am pleased to see the focus on maximising regional growth and investment, these will form key pillars of the Industrial Strategy. I’m particularly pleased to see impressive growth in investment in 2024 in the regions, notably in Scotland and the North West.”
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