The (Alleged) Uber-ification of Legal Services
The business of law continues to evolve post-Great Recession. Law firms are dealing with clients who are trimming legal budgets, shunning expensive hourly billing rates and subsidized training of associates, and opting for smaller and more cost-sensitive legal options.
These trends have had a ripple effect. The job market for lawyers — while showing signs of improvement in small pockets — remains depressed, resulting in intense critiques of legal education, downward trending law school applications, and law schools adapting or closing. Presumably, law students and new lawyers notice these trends and are strategizing accordingly, thinking commercially and entrepreneurially about their careers, and seeking the best legal experience and ROI in a rough macro legal market.
Entrepreneurs recognize these trends and a few startups —UpCounsel, Lawdingo, Priori Legal, and LawTrades — are riding a robust tech (and derivative branding) wave to disrupt the increasingly vulnerable legal industry. Each (i) strives to provide a frictionless and transparent platform for cost-conscious clients to quickly acquire legal services, and (ii) offers lawyers an alternative avenue to monetize their degrees free of typical infrastructural and administrative burdens of solo or small practice. This new crop of startups has earned the label “the Uber of law.” What is their value proposition for lawyers? Are they truly Uber-like providers of legal services (or is that just opportunistic branding)? Should lawyers care?
I. The Platforms
Distinguishing between the platforms is difficult. Simply put each provides the same basic services: (a) vetting attorneys (generally by confirming Bar admission and practice area(s) of expertise) and clients (by legal issue and intent to actually hire a lawyer), (b) deploying technology to match the two based on the stated expertise, geography, and alleged legal issue in a timely fashion, (c) encouraging communication between them, and (d) where applicable, managing the relationship. Post-mortem, they solicit feedback to bolster the bona fides of the lawyers on the platform and the platform itself. But, the devil is in the details.
A. UpCounsel — The Early Entrant
Leveraging off of biglaw experience representing marketplace-based startups (including Zipcar and RenttheRunway, among others), Matthew Faustman started SF-based UpCounsel in 2012 to serve as a B2B legal services marketplace for small and medium businesses of roughly 3–300 employees (“SMBs”) after experiencing, first-hand, SMBs shifting away from biglaw towards smaller, more affordable legal counsel. But he also recognized that smaller firms were burdened by a competitive disadvantage caused by resource constraints, administrative hassles, and project management weakness; he concluded that solo practitioners and small firms needed an “infrastructure layer” to really compete.
Via its web platform, UpCounsel attempts to help source lawyers for SMBs for one-off or ongoing legal assignments. For the lawyers, UpCounsel provides the infrastructure layer by managing the entire relationship — from communications to documentation — through the platform (including invoicing and collections). UpCounsel even processes payment. This way, attorneys can focus more on business development and lawyering and less on administration. In exchange, lawyers agree to between a 3.5–15% (yes, 15%!) cut off the top of the fees generated by the engagement. (Faustman did not respond to questions relating to the number of lawyers on board).
UpCounsel benefits from early entry into the market and has received sizable seed funding ($1.5mm per Angellist, with more purportedly in the works) to help scale via fortified sales, business-development, and marketing groups focused on GCs and HR departments within SMBs.
B. Lawdingo — All About Volume
Launched in 2012, Lawdingo is a NYC-based company started by Nikhil Nirmel (a non-lawyer). Leveraging off the benefits of (relatively) early market entry and Nirmel’s status as a solo non-technical founder in Y-Combinator (‘13), Lawdingo onboards as many lawyers onto its platform as possible with an eye towards small businesses and consumer clients.
The volume of potential opportunities lawyers derive off the platform generally depends on how much lawyers are willing to pay. For $297 or $697 a month, Lawdingo promises the opportunity to respond to up to 8 or 20 clients inquiries a month, respectively. Nirmel indicates that approximately 1500 attorneys are on Lawdingo’s platform, with 11 years of average legal experience.
To ensure that the lawyers on its platform are engaging with potential clients serious about retention, Lawdingo charges those clients $30 — a de facto enforcement mechanism — for which the client is entitled to a 15–20 minute consultation. The entire fee goes to the lawyer. From this point, the transaction goes off-platform and the parties negotiate the engagement amongst themselves.
Here’s where details really matter: Lawdingo does not have strict experience requirements. So, even an attorney fresh out of law school who passed and is admitted to the Bar can join the platform.
C. Priori Legal —Aiming for the 1%
Basha Rubin and Mirra Levitt, two non-practicing Yale Law grads, started NY-based Priori Legal with a seemingly uncharacteristic laser-focus on client “user experience.” Priori Legal emphasizes its community of (predominantly) business lawyers (focused mostly on SMBs) and purportedly applies the most robust admission requirements for lawyers to gain access to its platform.
The lawyer onboarding process is not for the faint of heart. Requirements include (i) an online application akin to an employment application, (ii) Google searches (read: resume fact-checking), (iii) writing samples, (iv) face-to-face interviews and (v) two reference checks (one from a former supervising attorney or opposing counsel and the other from a prior client). Each lawyer must have a minimum of five years of experience (with a strong preference for lawyers who have practiced for at least three years under the supervision of other attorneys). Once past these hurdles, the lawyers must agree to a 25% discount off their usual rates or exclusive flat fee packages. And, still, Priori purports to accept only 20% of the lawyers who apply (and, thereafter, those lawyers must maintain a 95% approval rating).
Once accepted, however, lawyers pay no monthly fee; rather, clients pay Priori a fixed percentage (10%) of the task’s billings as a management fee which covers Priori, among other things, facilitating the connections between the lawyers and clients and handling billing, invoicing and collections. Rubin declined to state how many lawyers have been accepted and are active on the platform.
D. LawTrades — the New Kid on the Block
CEO Raad Ahmed, a lawyer, launched LawTrades, a NYC-based company, five months ago with a focus on startups.
The requirements and fees to onboard on to the LawTrades platform differ from the others in the following ways: first, all lawyers must have at least two years of legal experience (Raad notes that the average experience level is 9 years); second, clients pay nothing to engage the platform; third, the lawyers must pay a monthly subscription fee of $99/month (though they are now also testing a flat fee service pursuant to which LawTrades effectively manages the transaction). For the $99/month fee, LawTrades promises up to 8–12 potential clients will reach out to a lawyer per month, especially in larger markets and particularly when lawyers list multiple practice area specialties. All of the lawyers’ rates are clearly delineated and clients can use the platform to schedule appointments (think ZocDoc). To date, approximately 300 lawyers have signed up.
II. The Uber of Legal Services?
Derivative branding is the reliance of startups on the branding of bigger better-established companies (e.g., Uber, AirBnB, or Warby Parker). And it is pervasive these days. Whether this is attributable to 140-character or byline limitations, VC-pitch dynamics, limited self-awareness, or sheer laziness is debatable. Whatever the reason, seemingly every new startup is now the “Uber of” something — whether they deliver pizza, marijuana, or, well, hot dudes (no joke).
Each of the above companies, however, is circumspect about the comparison — even if others continue to make it for them (notably, someone recently listed LawTrades on ProductHunt as the “Uber for Lawyers”). Ahmed notes, “we don’t openly go around telling people that…but when people see it, they make that connection on their own…[and] if that’s how you view us we’re not going to fight it…” (Query whether this is openly going around making the comparison.). Nirmel adds, “It’s cool to say you’re the ‘Uber of X’ but we don’t drive the lawyers to your house in the sense of the immediacy of demand services,” and “we don’t employ lawyers.” Indeed, Rubin publicly distances Priori from the Uber analogies: “I think it’s a little bit of an overused analogy…comparing yourself to something successful is a good thing but I worry that some of the value we’re providing gets lost…like providing personalized service.” Indeed, it seems that the off-platform startups (i.e., Lawdingo and LawTrades) are really more the “Tinder of Law” than the “Uber of Law” — making an introduction but not necessarily delivering anything beyond that. The platforms aren’t exactly “on-demand” and none of the platforms are mobile (yet). So, Uber of? Not really.
Which is not to say that they don’t derive benefits from the comparisons. In fact, it may help deflect headwinds arising out of such a highly regulated, slowly-adapting industry (e.g., including issues pertaining to, among other things, fee-splitting, control of client funds, and the dissemination of legal advice), and doubts emanating out of the the VC world. The latter is particularly alarming: if funding for legal startups dries up, it will be difficult for these businesses to scale in a way that addresses the myriad issues confronting them and grow to, say, a valuation of $500mm. It may also help mask challenges baked into their business models, including:
- Inherent Scaling Issues: Whether to enhance the end-user client experience or promote community, each platform has, in its own way, self-imposed barriers to scale. Lawdingo accepts any lawyer who is duly admitted to practice; it, however, charges a (relatively) expensive $297/month fee (though many users appear to be on extended trial periods). The others, however, impose experience requirements. Priori Legal’s stated competitive advantage — exclusiveness via intense vetting — clearly limits revenue.
- Data Compilation: LawDingo and LawTrades, from the outside looking in, appear to have big data compilation problems. In both cases, once potential matches are introduced, all attorney and (potential) client communications and engagement is managed off-platform. Lawdingo, for instance, doesn’t know (a) how many clients stick and pay beyond the initial $30 fee, (b) whether lawyers actually even reach out to the proposed client (at least until the client requests a refund), or (c) what the best-case ROI is for its lawyers. Because they manage relationships on-platform, UpCounsel and Priori seemingly don’t have these issues (in fact, Priori claims that users have generated $100k via its platform).
- User Experience (Issue Spotting): From a user experience perspective, each company must tread lightly around potential “disseminate legal advice” hazards. This promotes some degree of margin of error in the client onboarding process in that an issue directed to practice area A may actually be an issue related to practice area B — perhaps causing some of the very friction that these platforms seek to eliminate.
- Lack of User Reviews: All of the companies struggle, to some degree, to obtain user reviews and, frankly, the usefulness of generic unrelated reviews, generally, has been a subject of much debate. In the end, clients must take a leap of faith.
- Quality Control: All of companies will need to devote tremendous time and resources to quality control — especially Lawdingo, given its liberal acceptance requirements.
- Free riding “clients”: Each platform must hone the front-end of the matching process to weed out clients seeking free legal advice. To some degree, Lawdingo addresses this by requiring potential clients to have skin in the game ($30).
- Leverage: Given the competition, lawyers have all of the leverage right now as each of these companies — except Priori, it seems — play the numbers game. Currently, Lawdingo and LawTrades are onboarding some lawyers for free.
And then there is this.
Despite these challenges, however, each company claims that, for now, the lawyers on their platforms have been patient, that clients have been generally satisfied, and that the entire dynamic has led to meaningful ROI for lawyers…
III. An Opportunity for Lawyers
It is hard to predict which, if any, of these platforms will exist in, say, 5 years. While there is concept validation by saturation, there are also inherent truisms that generally govern lawyer retentions: people like to have a personal connection to the lawyer they’re hiring and like to sit down with them face-to-face before coming to terms (hence pitches).
Another player in the space, Lawkick, learned this by experience and now matches lawyers and clients for free. A prior entrant, Shpoonkle, tried to start a legal marketplace back in 2011 and failed. Maybe Shpoonkle was ahead of its time; perhaps a mere 3–4 years ago there wasn’t enough technological marketplace adoption to challenge such a highly regulated industry.
The bottom line is that, despite their faults and what are sure to be ongoing growing pains, these platforms currently represent a viable low-cost avenue for lawyers to potentially gain critical experience and generate revenue in a very tough macro environment. So, who cares how they’re branded, really? If all of this also means easier and less painful access to critical legal advice for potential clients, that could be…well…an uber improvement to the status quo.
Thank you so much for reading. It would mean a lot to me if you scrolled down and recommended this article and followed me on Twitter at @robertjordan33.
Note: abovethelaw.com published a slightly different version of this article on 9/5/14.