Israeli law firms have been shaking up the way they do business, following a global trend that has seen new legal upstart companies offering alternative, technology-based options to customers who prefer to get their legal services with the click of a mouse.
The new legal tech industry, as it is called, is growing, with startups in the sector raising an estimated $306 million in 2017, up from $129 million in 2013, according to a report by New York-based data firm CB Insights.
International startups like Rocket Lawyer, Axiom, and India’s Legal Raasta, which offer online legal services, are gaining ground; others offer notarization and legal research tools. In Israel, Tel Aviv-based Ettorney has set up an online platform to help entrepreneurs and new business owners prepare legal documents, while artificial intelligence technology developed by LawGeex was proved in a study to analyze nondisclosure agreements with more accuracy and speed than 20 experienced lawyers.
Legal firms globally are in a “war for survival,” said Nimrod Vromen, a partner at Tel Aviv-based law firm Yigal Arnon & Co. The firm, which employs 176 lawyers, is ranked eighth on a list of 189 Israeli law firms compiled by Dun & Bradstreet Israel.
The traditional law firm modus operandi — expensive billing by the hour for dishing out proprietary legal knowledge from plush, hushed offices — appears now to be outdated.
Millennials and especially startup entrepreneurs are not looking for posh, but for effective, immediate and cheap. They don’t need face-to-face meetings, as they communicate mainly by email, chat or phone.
New players are entering the market to address those needs, and, as prices drop, law firms globally are sitting up and paying attention, and jumping onto the bandwagon to try and keep up with the new industry forces at play.
“Since 2008, the overall growth trend for demand for law firm services has (with certain spikes and dips) been essentially flat to negative in every year,” a Thomson Reuters 2018 Report on the State of the Legal Market says. “What this suggests, bluntly put, is that law firms have been losing market share.”
US legal spending on law firms is expected to drop from $300 billion in 2015 to $265 billion in 2015, whereas market share for new law firm players is expected to grow from $2 billion to $55 billion in that time period, according to a 2016 study by Thomson Reuters and Adam Smith Esq.
Israel’s banking industry has been facing similar challenges from financial startups nipping at their heels, threatening to nab market share. In response, banks have been closing branches, laying off workers and — notably — offering greater digital services.
Meeting the challenge with legal tech
Vromen of Yigal Arnon has set up his law firm’s new fully owned subsidiary, Ytech Runway, whose website Vromen hopes will become a “go-to site” for startup entrepreneurs, investors, and VC funds, for everything from contracts to connections, events and information.
“We have created a standalone, separate asset to build on the local tech community and online community of investors, VCs, angel investors, patent attorneys and bookkeepers,” he said.
The site offers users a variety of research reports, contract templates and instructions on how to prepare an executive summary or an investor presentation. It also hosts forums in which members can exchange information and a section in which startups can pitch their firms to investors; the site has 50 registered VC funds that entrepreneurs can reach with their pitches and executive summaries.
Interested users need to register, but all of the services are free, said Vromen, who added that in future the firm may look to monetize its services via advertisements or sponsored content.
The idea is to provide services to startups for free with the aim of keeping close tabs on developments within the industry and being available to service these companies once they need more sophisticated legal aid, he said.
The Ytech website, rolled out a few weeks ago, is one of three set up recently in Israel. In July, Shibolet & Co. Law Firm set up its JumpStart site, and Amit, Pollack, Matalon & Co. has launched its APM – Infuse website.
JumpStart offers entrepreneurs legal services for free, the firm said at the launch of the site. The service is aimed at early-stage startups that don’t want to spend money on legal advice.
These fledgling entrepreneurs often download templates that don’t perfectly match their purposes, said Vered Horesh, a partner at the High Tech & VC group at Shibolet, who set up the site.
So Shibolet, ranked fourth in Israel in Dun’s legal ranking for 2018, with 211 lawyers, set up a website that uses a series of questions — “the exact questions I’d ask in my office,” Horesh said — to generate contracts, e.g., founders’ and nondisclosure agreements, that are suited to users’s needs. “Our website generates documents at a very high level of tailoring,” she said.
Users can download any of the documents or use the information on the site without registering, she said. “This is our contribution to Israel’s tech ecosystem.”
The documents are all in English, as is accepted in the high-tech world, but specific to Israeli law.
The site also has a “legal wisdom” section, which allows users to access all kinds of information about issues that trouble entrepreneurs at the start of their journey, said Horesh, plus a glossary of terms used in the tech industry — like burn rate, dilution, over-allotment — with an explanation in Hebrew and English.
Similarly, Amit Pollak Matalon’s Infuse site, which is in Hebrew, provides online documents and simple explanations that are meant to guide startups on their journey from just a “dream” in the minds of entrepreneurs through their financing and growth stages, protection of their intellectual property and toward a final exit. The firm is ranked 13 in the D&B ranking, with 118 lawyers.
These Israeli firms are not blazing a trail, but simply catching up with what firms in the US and the UK are already doing.
US law firm Cooley, for example, with 750 lawyers operating in the US and China, set up Cooley Go in 2014. The site provides a wide range of free legal and business content for startups. Latham & Watkins LLP, a legal practice with 2,600 lawyers in 30 offices located in 14 countries, launched LathamDrive in June last year, providing guidance and a range of resources to help startups grow.
“This is happening all over the world – and the main audience is tech companies and entrepreneurs as they are early adapters and happy to work over the net,” said Ytech’s Vromen.
Israeli law firms have also started investing in tech companies. Yigal Arnon has invested consulting hours, for equity, in the startup StartOver, which has developed an automated website, with ready-made contracts, that helps founders who are liquidating their startups sell off their company’s IP assets.
Shibolet has also invested in startups, said Horesh. One of them is LitiGate, a Tel Aviv-based legal tech company that uses artificial intelligence to automate legal research.
According to data compiled by Start-Up Nation Central, which tracks the local tech industry, there are some 29 active legal tech companies operating in Israel.
“We are very tech aware,” Horesh said. “We are not threatened by the commoditization of legal services. The world is going toward that and we want to be part of it. “