How Clio grew from a lifestyle business into a legal tech juggernaut
From bootstrapping growth to securing a $250 million funding round, Clio is a lesson in how to scale a company without abandoning its roots.
Study the history of the world’s largest tech companies, and you’ll find that many can be traced back to a single lightbulb moment. For Google, that lightbulb moment came when Larry Page and Sergey Brin realized that the most authoritative scholarly journal articles were typically cited by thousands of other journal articles. That revelation led to the creation of the initial Pagerank algorithm that revolutionized web search. According to at least one version of Facebook’s history, Mark Zuckerberg’s lightbulb moment came when the Winklevoss twins pitched him on a social network for Harvard students.
For Jack Newton and Rian Gauvreau, the lightbulb moment that led to the creation of Clio came out of a casual conversation they had in 2007 with the director of practice standards at the Law Society of British Columbia, an organization that can be compared in function to the National Bar Association in the U.S. Both Jack and Rian had tech backgrounds and at the time were providing consulting services to the legal industry.
The three were having lunch when the director mentioned that most of the violations and ethics complaints that came across his desk were directed toward lawyers who either worked for small firms or by themselves. “Rian and I kind of pulled at the threads over lunch and we were asking why that was the case,” Jack told me recently. “And he commented that, if you peel back the onion a little bit, it’s obvious that lawyers who work for large firms have a bunch of paralegals and support staff running around them. And if they drop a ball, one of those support staff can catch that ball for them before it hits the ground.”
A “dropped ball” in the legal profession can have major consequences. If a lawyer misses a court date or forgets a filing deadline, their client may be forced to pay a heavy fine or, in the worst case, end up in jail. A missed clause in a contract can mean the difference between a healthy profit and a client losing millions of dollars. These kinds of mistakes can lead to a lawyer getting disbarred.
According to this person from the Law Society of British Columbia, solo practitioners simply didn’t have the support infrastructure to help them avoid dropping the ball, hence the higher number of ethics complaints. This led to Jack and Rian openly wondering why there wasn’t a tech solution to this problem. “His comment to us was that the software is just too expensive, too inaccessible, too hard to use and so on,” recalled Jack. Law practice management software existed, but it required on-premise service and tens of thousands of dollars in annual upkeep, which meant only the big law firms had access to it.
Again, this was 2007. Salesforce was less than a decade old and cloud computing was still considered an emerging technology. “Rian and I were astute enough to know that the cloud was going to be this transformative technology wave that was going to impact all sorts of industries,” said Jack. “We liked the idea that you can make simple, easy to use software that actually provides a massive amount of value without introducing a lot of complexity, and when we surveyed the existing legal practice management solutions, we realized they were too expensive and too hard to implement. We also just saw a lot of complexity that we thought we could eliminate with a really beautiful, well-designed product.”
At the time, Jack and Rian were well-positioned to build this product. Friends since childhood, the two had both grown up to work in tech. Jack had a background in software development and Rian was working as an IT manager at Gowling, Canada’s largest law firm. The two were looking to launch a startup together. As Jack put it to me in our phone call, “We were two hammers looking for a nail.”
The hammers find their nail
In this case, the “nail” would eventually become Clio, a cloud-based software as a service product that helps lawyers manage every aspect of their practice, from document management to client billing, all for one low monthly price that smaller firms could actually afford. Initially, the two assumed this market would comprise a very small niche within the legal community, but they soon learned that over 80 percent of law firms employ fewer than 10 lawyers, and 50 percent of all lawyers are solo practitioners. This was a massive market that wasn’t being served.
But despite the size of the potential customer base, the initial ambitions for Clio were quite small. Jack was enamored with a book by Paul Graham called Hackers and Painters. “When I graduated from university with a degree in computer science, the career trajectory that was expected of everyone was that you go work for IBM or maybe go work for Microsoft or some other big company and just be a software developer,” he recalled. “The eye-opening part of Graham’s book, for me, was that it really encouraged this idea that you can start your own business and your business doesn’t need to be that big to sustain your family, and you don’t necessarily need to build an IPO-scale-hit-the-ball-out-of-the-park kind of business.” Back then, Jack and Rian would have considered Clio a success if it “threw off a few hundred grand a year.”
Finding Clio’s initial customers
Easier said than done. Within a few months, the two had hand-coded a beta version of Clio, but almost immediately they ran up against roadblocks when trying to market it. Because the Law Society of British Columbia had been helpful in providing early input into the app, Clio’s founders had assumed that it would help them in marketing the product to their members. “They were like, ‘we don’t promote products to our membership, we can’t help you take this to market,’” Jack recalled. “And then we went to the Law Society of Ontario, which is the largest law society in Canada with thousands and thousands of members and made the same proposal. And again, we kind of got laughed out of the room.”
Jack and Rian felt like Canada had slammed the door in their faces, so they decided to try their luck in the U.S. They purchased a booth at the ABA TECHSHOW, a legal tech conference that takes place in Chicago. At $3,000, it was an expensive gambit given they had a grand total of $10,000 set aside for the business. It paid off. “We had this unbelievably positive reaction,” said Jack.
There were plenty of attendees who were interested in trying out the product, but the founders didn’t just simply allow lawyers to sign up for a trial and start using it. Instead, they would force the prospect to apply to become a beta user, and then the two sides would set up a half-hour webinar that allowed Clio’s founders to walk the potential customer through the product. Not only did this shorten the learning curve for the customer, but it allowed Jack and Rian to collect valuable, real-time feedback on product features. “What blew me away was that the half-hour webinar would evolve into a three-hour conversation where these lawyers were putting in an enormous amount of their valuable time to consult with us,” said Jack. “They would point out things like, ‘oh, you don’t have document management. That’s a deal-breaker for me.’” Their other big break came when the aforementioned Robert Ambrogi wrote a glowing blog post about Clio. The combination of the tech show and the blog post jumpstarted some organic word of mouth that delivered their first 100 or so users.
The path to funding
It didn’t take long before their original aspirations to remain a lifestyle business evolved into the realization that they had a scalable product on their hands, and that scaling Clio would require hiring staff. Up until this point, Jack and Rian had been dividing up all the tasks between them, including software development, sales, and customer service. Now they needed money to start hiring people.
There was only one problem: this was at the end of 2008. The entire global financial system was teetering on the edge of collapse just as they were seeking capital. “We were getting this really frustrating feedback where people loved the concept and thought we had a great market opportunity ahead of us, but they were literally just not writing checks,” Jack said.
What happened next was later summed up by Jack as “what I can only describe as an act of God.” “Rian, while he’s on hold with some vendor and just bored out of his mind, thinks ‘I wonder what’s in my spam box,’ which I don’t think he’s ever asked or done since, and just stumbles across this email and forwards it to me and says, ‘this looks legit,’” Jack later told an interviewer.
The email had come from a guy named Christoph Janz, and as it turned out, this had been the second email he had sent them. An entrepreneur named Reg Cheramy had decided to write a post about Clio on his blog, and Christoph, who had recently sold his company and had begun dabbling in angel investing, stumbled upon the post. “Clio reminded me of Zendesk, a company I had invested into about six months prior to then,” recalled Christoph in an interview. “It had this nice website that spoke to me as a human being and it was very easy to sign up for a free trial and give it a go. These are things which today are expected of a SaaS company, but at the time it wasn’t necessarily a no brainer.” Reading about Clio intrigued him enough that he fired off a cold email in which he broached the idea of investing in the company.
And the entire conversation almost ended right then and there, because that email went straight to the spam folder. “It came from a web.de email address, and it talked about investment opportunities, so it probably just checked all the boxes for a scam email,” Jack later said in a Q&A. This inadvertently made the founders seem like they were playing hard to get, so a few weeks later Christoph followed up with another email. That was the one Rian stumbled across while on his phone call.
Christoph would not only set off a chain of events that led to Clio’s first investment, but, according to Jack, he also helped him and Rian change their frame of thinking about where the company should fit within the marketplace. Even though they were pursuing investment, they still thought of Clio as a relatively small player within the legal tech space. “He highlighted for me and Rian this idea that building a comfortable lifestyle business in this space may not be viable if some well-funded competitor comes along and essentially just eats your lunch — that there may not be room to survive on the sidelines.”
Even though SaaS was a relatively young business model at that time, Christoph had formed this theory about the “winner take all” aspect of the industry, where a single player captures 80 to 90 percent of the market and leaves the other competitors to fight over the remaining scraps. It didn’t take too long until Jack and Rian were convinced that they needed to be much more aggressive in their expansion.
The path toward scaling Clio
And once they had the funding in hand, they did just that. Their first move was to make several crucial hires, building out their development staff and bringing in more people to head customer service. They were also finally able to perform experiments with customer acquisition. For instance, if they spent X amount on Google Adwords, did they see a high enough conversion rate to justify search advertising? (the answer: yes) They also could afford to go to more trade shows, which proved crucial to exposing their product to new users.
Because Clio was one of the early movers in the space, it was up to the company to break through the industry’s wariness of cloud technology and convince lawyers that they weren’t putting their clients’ privacy at risk. Jack found himself playing a thought leadership role, sitting down for interviews, writing blog posts, and speaking at conferences. In those early days, he was virtually the only person in the legal tech community speaking to issues of security and the cloud, and so even though he wasn’t including a hard sell for Clio in his speeches, the company established a fair amount of trust and goodwill within the industry as a result of those early efforts.
Another crucial aspect of Clio’s growth was the hiring of Catherine Hillier as the head of customer support. In order for the company to truly scale, it not only required systems to handle an increase in support tickets, but it also needed to enable customers to troubleshoot their own problems. In its early days, Jack and Rian onboarded every single customer via a webinar, but this couldn’t work at scale. “Catherine built out a knowledge base and some self-serve resources that really helped our customers address their most common questions on their own,” recalled Jack. “She crafted tutorials and step by step guides for the onboarding process. Because ultimately that’s what many customers were looking for. They’re not necessarily looking to speak to a customer support agent. They just want great documentation that lets them understand Clio on their own time and at their own convenience.”
Embracing the community
As Clio scaled, its employees started to notice a community forming around the product, users who were interacting with each other at conferences and online. So, following Graham’s startup advice to “do things that don’t scale,” Clio started hosting small meetups all around the country. Often, they consisted of just drinks and appetizers at a local restaurant, with very little formal programming. “We found that our users were so hungry to get exposure to other practitioners who had the same challenges as them,” said Jack. Clio users started launching Facebook and LinkedIn groups, and even interacted with each other on old-school email listservs.
Eventually, this community pushed Jack and his team toward a revelation: Clio had a much larger role to play within the legal industry. “We experienced a really important shift in our thinking about Clio and the kind of value we’re providing when we realized we’re not just building a product; our customers really view us as a partner to help them invent what the future of the legal practice looks like, and we needed a platform to accomplish this.”
That platform ended up evolving into the Clio Cloud Conference, launched in 2013 in Chicago. That first year, it attracted about 200 attendees, but over the course of the next half decade it would swell to over 2,000. It was through these conferences that Clio’s growing team could form a truly collaborative partnership with its user base, leveraging its collective knowledge on the various pain points in the legal industry so that every product iteration was specifically designed to address its needs.
The future of legal tech
Flash forward to 2019, and Clio just announced a new investment round of a whopping US$ 250 million. How does it plan to spend that money? The company is devoting significant resources into international expansion, having already opened an office in Dublin. “Expanding internationally is harder and takes longer and will require a larger investment than you think it will,” said Jack. “And I think for many startups, the key question is, what stage is the right stage to start investing internationally when it will definitionally distract you from your core market? I think startups should go in eyes wide open with the understanding that you need the appropriate amount of resources and investment, an investment across all of your teams — international deals, sales, marketing, and product.” What’s more, he argued, is that you have to do this with the recognition that it’ll take years for those investments to bear real fruit.
But more importantly, Clio wants to shift the paradigm on the concept of legal services and who can access them. Today, hiring a lawyer is considered to be a hugely expensive endeavor that’s only available to the few who can afford one. This is due, in large part, to all sorts of inefficiencies that make a lawyer’s job incredibly time-consuming, which then leads to larger legal bills. “There’s going to be more and more automation, where the more routine, automatable tasks of lawyers will be streamlined by products like Clio,” said Jack. “I see that as something that will fundamentally allow lawyers to deliver their services at more accessible price points and serve more customers at a higher scale, increasing access to justice overall.”
What’s more, he wants to break down the physical barriers in the legal profession that require expensive infrastructure and real estate. “I think that law is still very much something that is conducted in a physical space where lawyers invite their clients to their high end, expensive downtown office,” said Jack. “And at the end of the day, part of the transformation that I believe Clio will be driving is a world where we’re doing away with the bricks and mortar and helping more lawyers deliver legal services from a coworking space or from a home office rather than from that expensive downtown office space. We think that many clients would rather collaborate with and work with their lawyers over a secure video chat or through their smartphone instead of meeting them in person.”
More than a decade has passed since Jack and Rian arrived at the lightbulb revelation that started it all, but it’s amazing to consider how — even after hundreds of hires and tens of millions of dollars in venture capital investment — everything they’ve accomplished can be traced back to their initial insight that cloud technology would bridge the gap between small and large law firms. Listening to Jack predict what the next decade of his company would look like, it seemed clear to me that every new product development moving forward would trace its lineage back to that lightbulb insight. “It’s all about redefining how legal services are delivered,” he concluded. “We’re transforming the practice of law so that the client experience tomorrow is better than it is today.”
Simon Owens is a tech and media journalist living in Washington, DC. He’s currently an in-house journalist for Point Nine Capital, leveraging his reporting skills to provide key insights into SaaS and marketplace technologies. Follow him on Twitter, Facebook, or LinkedIn. Email him at email@example.com. For a full bio, go here.