Lawyers “need outside help” to maximise lawtech start-ups

Sako: Coders and funders help rapid scale-up

Lawtech start-ups set up solely by lawyers grow more slowly than those that with coders among the founders, research by Oxford University has found.

Mari Sako, professor of management studies at its Said Business School, said founders of start-ups should also consider locating where they had social ties to other founders and potential investors.

Oxford University was awarded a government grant of £213,000 this time last year to research the people behind the lawtech boom. One of the aims was to identify the mixture of different backgrounds that made up a start-up’s founders.

Professor Sako said her team had carried out dozens of interviews with entrepreneurs, investors, clients and law firms since then, as well as creating a database of around 300 start-ups in London, San Francisco and New York.

Speaking at Legal Geek’s recent virtual conference, Professor Sako said San Francisco had the highest proportion of lawtech founders with coding skills – around 40%.

Where coders were among the founders, start-ups grew faster in every location.

Start-ups where the founders were all lawyers grew more slowly, creating an average of 13 jobs. If a coder was added to the mix, that figure grew to 37. If the founders were all coders, the start-up grew even faster, creating an average of 57 jobs.

Professor Sako said lawtech founders’ skills varied across the three cities, and the nature of the mix was important.

London was the second most likely location to have lawtech start-ups which included coders, followed by New York.

New York was the most likely to have founders who were all lawyers, making up 44% of the total, compared to around a third in London and around a quarter in San Francisco.

London had the most lawtech founders with finance skills, followed by New York and San Francisco.

Professor Sako said the founders of start-ups in San Francisco had “denser social ties” than in London or New York, and “start-ups with founders whose social ties are denser grow faster”.

A much smaller percentage of lawtech start-ups raised external funding than their fintech counterparts – 30-50%, compared to 60-70%.

Professor Sako said this might be because lawtech businesses were relying on their own capital.

“If you are a lawyer founder, consider including founders with coding or finance skills if scaling up is what you want to do,” she advised.

“Also consider locating in places where you have social ties to other founders and probable investors, as location matters.”

She added: “It goes without saying that a great funding team, a great product and a novel business model matter a lot.”

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