The Unger Games
Carl Richard Unger, a notably minor figure in academic history (no offense intended, of course) was a Norwegian historian and philologist in the 1800s.
He studied philology but did not receive a degree as he was quite horrible at mathematics, a subject compulsory for philologists. However, in 1841 he was awarded a scholarship to continue studying Old Norse, Old English and Old German.
So he was an expert in a field in which he didn’t actually qualify.
Sounds like our industry in 2019, an industry experiencing its own Unger Games (groan. sorry.)
In LegalTech, there are far more founders new to entrepreneurship than in other verticals. The reason is simple: legal has yet to attract many seasoned entrepreneurs from other industries, who are now trying their tested, winning models in legal.
First, this is kind of odd, as there is really nothing unique or special about legal, aside from the fact that legal entrepreneurs, like most lawyers, see ourselves (publicly or privately) as special little snowflakes.
Fundamentally, much of LegalTech is straight-up SaaS. Not rocket science, really.
But a disproportionate percentage of purveyors of LegalTech didn’t come into our still new-ish startup vertical with an exit under their belt, or even the lessons learned through one or two spectacular failures as a founder. They’ve saved their first one for our industry. And here they come.
Part of why I’m writing this today is a response to the dishonest punditry in and around LegalTech not even halfway through 2019. It gives me no joy in seeing the industry unfold pretty much exactly how I anticipated it would. My views aren’t secret — I’ve written and lectured about them at painful length.
2019 and 2020 are going to be quite an exfoliation. Startups have vanished and more will follow. Founders who (excessively) celebrated early PR/faux legal “journalism” wins are now dealing with the reality of short runways and icy mountains.
This really sucks. Does not spark joy. But there’s even less joy in continuing to candy-coat an acrid reality.
As we near a notable round of posthumous blame, I’ll go first and blame the investors. Forshame. Seriously. You WAY over-invested in people who had no experience playing with other people’s money, who didn’t understand sales cycles, paths to cash, product evolution, how to swim in red oceans you both believed were kinda blue, and how hard it actually is to land a plane in wind shear.
I can’t overemphasize one of the points I just made and worded pretty intentionally: “Playing with other people’s money.” I didn’t say running a successful business. I’m simply saying that there’s a skillset and mindset that develops over time in an entrepreneur when they run and try to grow a business using the risk capital of others.
It’s really hard. I’ve done it multiple times.
This battle experience was entirely absent in the vast majority of rounds of LegalTech investment from 2013–2017. For the reasons above and many more, far too many of these investments now need follow-on cash to survive and it’s not going to happen. The illusion of strong investment in LegalTech continues to be bolstered by absurdly large tranches of funding for very few companies. Capital going into bridge rounds for startups who aren’t even close to hitting their milestones for a for-reals A round is pretty much absolute zero.
I’ll say this more clearly and restate here what I’ve been saying for around 18 months: we’ve entered a period where a bunch of LegalTech companies are either going to die or get on life-support by convincing foolish money that a bizarre pivot might work. It’s not a good look and it’s made worse by the ridiculous lack of transparency in the legal innovation industry.
The one thing we could do here to help future smaller waves of people looking to build things in legal is exactly what the legal industry is the worst at. Just being transparent, open, honest, and a little bit publicly vulnerable.
- Aron Solomon, Berlin, April 12, 2019
