A record number of start-ups targeting the legal market received funding around the world last year, new research has found.
It comes as City giant Allen & Overy is to nurture lawtech start-ups with the creation of an incubator.
According to figures published by CB Insights, a tech market intelligence platform, there were 67 investment deals in 2016, up from 60 the year before, although the actual amount invested plummeted by 46% to $155m (£125m).
More than half of the investment was at the initial seed/angel funding stage.
CB Insights said notable deals in 2016 included an $18.6m series C financing to CS Disco, a US-based e-disclosure company, a $22m private equity round to another US company, File & ServeXpress, which aims to simplify litigation workflow, and Wusong Technology, an online legal services platform based in Beijing, raising both a $4m series A and $17m series B round.
Last week, US company Casetext, which provides artificial intelligence-based legal research technology for lawyers, announced that it had closed a $12m series B funding round.
Allen & Overy’s Fuse is an incubator where “lawyers, technologists and their clients will collaborate to explore, develop and test legal, regulatory and deal-related solutions”.
It will next month open its doors to applications from early-stage and more mature tech companies to work in a specially-designed area for 60 individuals housed within Allen & Overy’s offices.
In a statement, the firm said: “Once in residence, companies will have access to the expertise of Allen & Overy lawyers, technologists and clients to co-create practical solutions to some of the challenges faced by companies, financial institutions and law firms today.”
Allen & Overy has been active in creating its own tech solutions, such as aosphere, its online subscription business, and MarginMatrix, a digital derivatives compliance system.
Wim Dejonghe, Allen & Overy’s senior partner, said: “Developments in tech are rapidly transforming our industry and we are determined to play a lead role in harnessing the power of new solutions for the benefit of our clients.
“Fuse offers us a fantastic opportunity to collaborate with both our clients and some of the brightest minds in the tech sector, particularly those who have synergies with our business. I’m convinced this will not only put us at the forefront of developments in this field but will also be a key differentiator for Allen & Overy in the years to come.”
Separately, a survey of 164 non-legal start-up companies by UK Innovation Hub and Tech City UK found that what start-ups really want from their investors is trust, an understanding of their vision, and access to a large network of further investors.
New board members, free office space and support when hiring, were the least important factors when looking at early-stage investment options.
The survey also found that legal information was the topic with the least interest for founders.
Meanwhile, away from tech, Pinsent Masons has acquired a 20% stake in ‘new law’ start-up Yuzu in return for providing seed funding and strategic support.
Yuzu claims to offer “a refreshingly new approach to delivering managed legal services that helps in-house counsel to manage cost while maintaining continuity and improving quality”.
Its website explains: “We take over all or part of your in-house legal work, together with the team who currently do it. The retained part of your team is free to focus on strategic legal matters that need to be owned and kept in-house.
“We take on the costs, headcount and investment required to deliver the service. We leverage the skills and acumen of your existing legal team through our systems, management and process. We invest to enhance their knowledge, efficiency and engagement and to optimise their productivity.”
The company says that its service costs “no more than employing your team direct. Over time, it will cost less. Most importantly, the cost will be predictable”.
Yuzu is the brainchild of Robin Saphra, who until last year was general counsel of Colt Group SA, together with his co-founder Reinhard Schu, former legal director of Colt.
Alastair Morrison, head of client strategy at Pinsent Masons, said: “We think deeply, expansively and radically about responding to the challenges our clients face, so see a role for us in helping to bring solutions like Yuzu to market.”