Law Firms

Episode 10: Zach Abramowitz on Legal Tech Trends & Law Firms as Incubators

For Episode 10, we connected with Zach Abramowitz in Las Vegas during the Corporate Legal Operations Consortium (CLOC) conference. Zach is a lawyer, legal technology writer and entrepreneur. Zach handled mergers and acquisitions before he left the practice of law to launch ReplyAll.me, a tool that lets users have dynamic, live conversations (similar to a chat) and embed the conversation on a website as it unfolds.  You can check out a cool example from Bloomberg Big Law Business when Zach talked to Mary O’Carroll, head of Legal Operations at Google.

Zach also writes about legal tech for several outlets, including Above the Law. So, we talked to him about trends in legal tech (including the gaining popularity of contract analysis and automation tools) and how lessons learned by e-discovery software companies helped pave the way for other legal tech applications. We also talked to Zach about whether the next generation of legal tech companies may very well be hatched in law firms.

You can find Zach on LinkedIn, on Twitter @zachabramowitz or by email [email protected]

Legal Tech Founder Segment: Catherine Krow of Digitory Legal

We were also lucky enough to snag an interview with Catherine Krow, also an attorney and the founder of Digitory Legal, a cloud based legal budgeting and resource management platform. Digitory Legal is a great tool to help lawyers and their clients craft realistic and more accurate budgets for their legal matters.

You can learn more about Catherine and Digitory Legal on LinkedIn, Twitter (@cmkrow or @digitorylegal) or by email ([email protected]) or phone (888-811-7211).

Things We Talk About in This Episode

Max Kellerman

Reply All

Above the Law

Kira

Doxly

Y Combinator

Gravity Stack

Zach’s Article in Bloomberg Big Law Business on Law Firms Developing Software

Episode Credits

Editing and Production: Grant Blackstock

Theme Music: Home Base (Instrumental Version) by TA2MI

Background Photo Above by Markus Spisk

 

Transcript

Chad Main: In this episode of Technically Legal, we sit down with Zach Abramowitz, lawyer, entrepreneur, writer, and generally a guy very dialed into the legal tech world. We also sit down with Catherine Krow. She’s the founder of Digitory Legal, an app that helps lawyers put together realistic budgets. One of the best things about doing this podcast is that I get to meet so many of these smart and interesting people, and every time, I learn something about them totally cool and totally out of left field, like this great nugget I got from Zach.

 

Zach The Legal Intern at ESPN Radio

Zach Abramowitz: I worked at ESPN Radio when I was in law school. I used to go every day to Madison Square Garden, and I worked on the Max Kellerman Show. At the time, I really just wanted to get into sports. I went to law school wanting to become the next Billy Beane, the next GM. I looked for every opening in sports possible, and I emailed Max Kellerman, and I was like, “Listen, you need a legal intern.” He said, “Why do I need a legal intern?” I’m like, “Well, I’ve heard you a bunch of times on your show, and you’ll talk about some issues in law, and you’ll say, ‘Well, if I had a lawyer here, then we’d know the answer to this, but since I don’t, it’s not really worth talking about. Let’s move on.'” I was like, “I’m going to be that guy. Any time you have some legal issue in sports at all, anything you want researched, I’ll do that legwork, and I can put it together very quickly,” and again, I had no interest in researching legal issues for Max Kellerman, but I just wanted an in somehow, in something that made me stand out. I became Zach the legal intern for about two semesters.

 

Reply All

Chad Main: I asked Zach to come on the podcast for a bunch of reasons. One of them is that he’s a lawyer. He did M&A work for a New York law firm. Another reason I wanted him on the podcast is because he writes a lot about legal tech, and is in the know about it.

 

He writes for a bunch of websites, including Above the Law, but another big reason I wanted to get him on the podcast is because Zach is also an entrepreneur. He and a buddy created an app called ReplyAll. You can find it at ReplyAll.me. Using ReplyAll, you can have text-based conversations, and then embed those conversations on a website.

Zach Abramowitz: A good friend of mine and I just used to have these debates, and I said to him, “Wouldn’t it be great if you and I could take these conversations and publish them, and allow the rest of the world to follow along like a fly on the wall?”

He was like, “Wouldn’t it be better if actually interesting people could publish these conversations? We could follow them.”

We built a tool that websites use to host conversations with experts that they publish as dynamic content, so instead of going to the Wall Street Journal and reading an op-ed that’s written by one person, with ReplyAll, you’re reading a back and forth between multiple authors, multiple perspectives, multiple opinions, and you’re getting to see that interaction, and you get to see it unfold in real time as the conversation actually happens.

We’ve taken that tool and the first big site we worked with was Above the Law, but we’ve also worked with Sports Illustrated, and TechCrunch, and Bloomberg, and Huffington Post. That was the reason, our goal at the time. This was in the early Facebook and Twitter years. We felt that conversation online, when it involved everyone, was not as interesting.

A conversation that anyone can get into is not really a conversation. That’s a conference, and I wanted to be able to create these sort of intimate conversations, and the goal was that you’d get Warren Buffet and Bill Gates having an exchange about strategic charity or giving. That was the real impetus. The fact that we got into legal was totally an accident. I joke all the time. If you had told me that I was leaving law to start a legal tech company, I probably would have never left law in the first place.

I was working at Schulte for two years. I left because I thought I was never going to have any contact with attorneys again, which was part of my goal in starting ReplyAll. What we’ve found so far is there’s so much interesting going on inside of legal right now that we as a company have really honed in and focused on legal, and not just ways to make business in terms of advertising revenue and getting sponsors on our content, but also to help move the conversation forward, if you will, in legal. That’s a lot of the work that we’re doing right now, is helping and getting more involved, very specifically, in legal technology, because I think for the last year, year and a half, I’ve been looking around at all the interesting things going on inside of legal tech and thinking, “Listen. I’ve got the startup skills. I’ve got a really good network in legal.

I’ve been meeting more and more GCs, more and more startups. I know the scene very well. What more can we do here that’s not specifically advertising related? How else can we help companies in this space?” I think that’s what we’re focusing on right now, and I think in that respect, we’ve become very, very obsessed with legal, and other ways to sort of monetize an online asset, which is really what we’re doing.

We’re a publisher. We are just not completely dependent on advertising revenue for our business model. I think that ultimately, we are going to go back. We’ve been pitching deals to big Fortune 500 companies on being sponsors. We were very close to a deal with Sports Illustrated earlier this year, and then Sports Illustrated got acquired, so we’re having to wait out that acquisition, but we’re not specifically a legal tech company. We’ve very much accidentally become a company that is very involved in legal technology.

 

The Next Big Thing In Legal Tech

Chad Main: Because Zach has his finger on the pulse of legal tech, and talks to a lot of people in the industry, I asked him what seems to be the next type of legal tech that’s gaining some traction and notoriety. He mentioned two companies, Kira and Doxly, two companies that have developed software to analyze and automate contractual workflows. As a side note, I was lucky enough to talk to Haley Altman, the founder of Doxly, in episode six.

Zach Abramowitz: First of all, the idea of legal tech … Legal tech’s been around for a long time. No law firm could exist without SAP, Oracle, IBM, one of these huge companies coming in and building systems for them that could allow them to be a 1,500 attorney firm with offices all around the world. That does not exist without technology.

What’s changed in the last four years, since you and I have gotten into the space, I think what’s changed more than anything is that the technology that’s being built now doesn’t, let’s say prima facie, support the growth and scalability of a law firm. What it seems to say is, “Hey, listen. You don’t need lawyers for that anymore. Now we have an automated solution.” I think that’s been very threatening to attorneys over the last few years, since I’ve started writing about it anyway.

The whole question of, “Are robots here to take our jobs?” I don’t think robots are here to take our jobs, but any time there’s change, there’s uncertainty, and just because industrialization in the past has led to more business and more jobs doesn’t mean it’ll do that in the future. I think that’s my starting place for legal technology right now. The example that I give, I love two companies. Kira Systems was the first technology company I ever wrote about, and the reason I wrote about them was this is exactly what I did in the law firm. I remember talking with other lawyers and saying, “Why do we have people on this? Why can’t this be done by a monkey?” But if I had been as smart as Noah, I would have said, “Why can’t this be done by software?” Noah, that was his concept.

What Kira was doing in those days, when it was Due Diligence Engine, was reviewing an agreement, pulling out a clause, and populating a diligence memo, the templates in a diligence memo.

This was the work that I did at law firms, and I was like, “Holy cow. This is being totally automated right now. Isn’t that something?”

The other company I like to use as an example is Doxly. If you think about what Doxly does, it’s like every deal, I used to say, has two junior attorneys, a monkey and an associate. Monkey reviews documents, just reviews, reviews, reviews, reviews, but there was also an associate in every deal who was the deal babysitter.

They were the ones making sure that, “Okay, what agreements, what papers do we need as a result of our diligence? What do we need to paper this agreement so that we’re covered on all bases?”

There’s a lot of paper that comes in. There’s a lot of signatures that comes in. Consent agreements, all kinds of stuff. Who knows? Every single corporate transaction has to be papered to death, and making sure that all those agreements come in, what we used to do is, we would create a Microsoft Word checklist, which we would continue to version up and send around as new things came up, and it updated. We would check it off automatically, and every once in a while, the partner would say, “Send around the updated checklist.” This is how we really did these deals, and the agreements came in manually, and we populated them, we printed them out, we put them in folders in the closing room. This was a substantial amount of work.

This required a junior associate on every deal who was solely responsible for this. You might have an associate who was doing that who wasn’t actually doing any of the review work. All they were doing was let’s say drafting and deal babysitting. Doxly does that. Doxly’s a smart checklist, and instead of having this archaic process that’s fragmented, it’s streamlined in one place. It’s very simple. It’s very easy to use. It really negates the need to have a full-time junior associate on these deals.

The reason I mention Doxly, I mention Kira going to the trends conversation is both of those are jobs that I did manually that are now being done better with the help of software, and you might even say makes the 2012 version of me totally irrelevant on a law firm deal.

 

Silicon Valley is Noticing Legal Tech

Chad Main: Contract analysis and automation might be the next type of legal tech software gaining traction, but there are some other great apps bubbling up out there in Silicon Valley, as Zach points out, is starting to notice.

Zach Abramowitz: I like just about any company that comes out of Y Combinator. Two of the most important people who you’ll never hear mentioned are Jon and Carolynn Levy, a husband-wife tandem that are partners at Y Combinator. They were Wilson Sonsini attorneys who have basically hand-picked all the legal tech companies that you know about. ROSS Intel, YC. Casetext, YC. Ironclad, SimpleLegal. Lawyaw just came out of them. They’re a new company. Cognition IP, Atrium, Justin Kan, the founder of Twitch’s company. I’m leaving out some. They have funded a lot of really good companies.

 

Legal Tech Founder Segment: Catherine Krow of Digitory Legal

Chad Main: We’re going to step away from our talk with Zach for a few minutes, because now it’s time in the podcast for our legal tech founders segment. This is a time where we sit down and talk to a legal tech founder about the apps they’re developing.

This week we talked to a person so nice, she did this interview twice because we ran into some technical difficulties. We talked to Catherine Krow, the founder of Digitory Legal, another one of these apps that I wish would have been around when I was still practicing.

Digitory Legal permits lawyers to put together realistic budgets for their clients and pulls from real world data. It also permits clients to put together real world budgets for their lawyers. All right, Catherine. Thanks for being here today. Tell us a little bit about Digitory.

Catherine Krow: Digitory Legal is a cost management and analytics platform for law firms and clients that was built to help them succeed in the modern legal market. What I mean by that is a market that is moving more and more to alternative fee arrangements and budget based pricing, even for the most complex matters.

Chad Main: Tell me specifically, what does it do?

Catherine Krow: What Digitory Legal does is deliver a deep understanding of cost, how customers focus on resource management, and provides really clear communications, both internally and externally, around expectations. Internally, it can be used to understand costs at a task and time keeper level, set price benchmarks, create accurate budgets and well scoped alternative fee arrangements, and manage to those numbers, and it can also be used collaboratively, with law firms providing budgets, bids, and forecasts to clients through the platform.

Chad Main: You were formerly in legal practice, correct?

Catherine Krow: I practiced law for 17 years, and was a partner at Orrick Herrington for many of those.

Chad Main: What was the inspiration to create Digitory Legal and leave the practice?

Catherine Krow: A few years ago, while I was practicing law, I came to the realization that the legal profession really needed to evolve, and what was happening was law departments were and still are under enormous pressure to do more with less, and you could see that pressure in the meteoric rise of legal operations and legal procurement.

These are job descriptions that barely existed a few years ago, and now are some of the most powerful forces for change in the legal industry. What was happening is an unprecedented level of business discipline has started to be applied to the legal industry, and if you’re going to succeed in this market, I realized that law firms were going to need to examine their processes, adopt new technology, and make some significant changes to really better meet the business needs of their clients.

That was the inspiration, and it was a moment for me, a decision point where I could try something new and try to solve these business challenges in ways that would bring lawyers and clients together, or continue doing the same thing. I decided to take the leap and focus on the business of law instead of the practice of law.

Chad Main: That’s great. Who’s Digitory best suited for?

Catherine Krow: Our target market is the Global 2000 and the law firms that work with them. We focus on the Global 2000 because I feel like the movement to alternative fees for complex matters is being driven by some of these companies, and the need to respond by the law firms that work with them is very, very powerful. It can be used by anyone doing complex legal work, but we are focused on that target market.

Chad Main: Where can people find you and learn more about the product if they want to?

Catherine Krow: You’re welcome to visit us on the web at DigitoryLegal.com, and on Twitter at @digitorylegal, or follow me personally @cmkrow, and you can also reach out to us at [email protected]

 

E-Discovery Companies Paved the Way for  Legal Technology Companies

Chad Main: Let’s get back to our talk with Zach Abramowitz. Before we left, Zach was talking about trends in legal tech, and how players in Silicon Valley like Y Combinator are starting to take notice of legal technology companies. But Zach also points out something interesting, that newer legal tech companies might have e-discovery companies to thank for paving the way.

Zach Abramowitz: E-discovery, it’s true, it’s becoming a more mature space, but a lot of the people that you see now at legal tech companies, or at some of the alternative legal service providers are veterans of e-discovery.

Relativity Ventures is investing in startups. I think a lot of the players that you’ve seen come from e-discovery, they learned how to build technology and market it to law firms, and sell it to law firms, and work with law firms, and their model is not necessarily the same model that companies in the finance world use. It’s specific.

They learned how to sell into the legal industry. They learned how to design software for the legal industry, and I think they’ve now paved the way for other technology to come in. Again, e-discovery wasn’t necessarily the place you would have thought legal tech got started, but I think if you look hard, you see that a lot of the roots for legal technology are in e-discovery, even if the company is not doing anything related in e-discovery.

 

Is Legal Tech a Tough Sell to Venture Capital?

Chad Main: Despite all the advancement in legal tech, and all the new great tools that are being developed, and despite the fact that Silicon Valley players like Y Combinator are now starting to take notice, to many VCs, legal tech still may be a hard sell because, as Zach aptly points out, legal tech companies are not rocket ships like a Google, like a Facebook, like an Uber.

Zach Abramowitz: In order to get the investment that it takes to build a technology company, you’ve got to go to VCs. You’ve got to essentially go to Wall Street and tell Wall Street, because again, VCs in Silicon Valley, their boss is Wall Street. Their boss is the Illinois Pension Fund, or T. Rowe Price. That’s who’s investing in VCs, so you’ve got to go and make the case to Wall Street that you’re a billion dollar company, because the VCs, in order to give the 30% return on risky assets to their investors, they’ve got to invest in billion dollar companies.

You can do the numbers anyway you want.It doesn’t work unless a VC builds and hits on a rocket ship. If you think about the original venture capitalists, go back in time, Ferdinand and Isabella funding Columbus, or if you’ve seen The Greatest Showman recently, funding P.T. Barnum. You had to go into huge rocket ship-like ventures in order to make the returns pan out, and most solutions for legal are not billion dollar solutions. Relativity is the outlier. Most great solutions for legal are not going to be billion dollar exits, and because they’re not going to be rocket ships, VCs won’t typically invest in them.

Chad Main: If legal tech is not always an easy sell to venture capital firms, where should people with good ideas look for resources in investment?

Zach Abramowitz: I’ve got a piece up on Bloomberg now, you can go check it out, where I’m going to explain why I think that law firms have the best position, or why they have a very strong position. Before I do that, let’s just acknowledge that this is happening right now. Go downstairs right now. GravityStack, and that’s the company that we’ve worked with, GravityStack is a wholly owned subsidiary of Reed Smith, which is building and licensing technology, and they’ve got products out.

We helped them rebuild … Periscope was the technology they built in-house four years ago, but they’re down there. Orrick is showing off products. Before we get into why this makes sense, let’s just first point out that it’s happening. Luminance is an example. 5% stake of Luminance is held by Slaughter and May, the British law firm, because it was developed out of the firm, so they have a stake in it.

More and more law firms are investing in legal technology, not just in other companies, but in building their own solutions. First point is, it’s happening. Whether or not it’s the best solution, we can now debate, but I think it’s really critical to understand right now that this isn’t some pie in the sky, “Hey, what if law firms developed their own technology?”

No, it’s happening, and I can tell you, I’m talking to law departments that are talking about it too. What makes sense about it? If you’re the law firm, I feel like in some ways you can relate to this, especially from Percipient’s perspective as well, because in some ways, you were sort of like a law firm. You’re not a law firm, but sort of. And by the way, let’s add to that list, Atrium, Justin Kan’s company, Cognition IP was another one, these are essentially tech companies that are masquerading as law firms in order to build the next generation of legal technology. Again, it’s happening now.

Why is the law firm in the best position? The law firm has the best access to the pain points. They know what’s wrong. They know what doesn’t make sense. All they need to do is get in the habit of, “If you see something, say something.” “Hey, we’re doing this in a totally bogus way that’s inefficient to our client and is a terrible process internally. We need to fix this.” They’ve got the access to the pain points.

Second of all, they’ve got the trust of their clients already. You know how hard it was for some of the companies that we’ve mentioned to build a brand and gain trust with law firms and law departments? Axiom has spent 10 years getting into this space and building a brand with clients. It’s not like building trust in other verticals. Building trust with legal, where you’re talking about risk and bet the farm, and screw-ups that could cost the company even more money, building trust is a huge issue in legal, but the law firms already have the trust of their clients.

Third, what law firms have more than anything else is resources. They’ve got money. Maybe it’s tough to get the partners to part with some of that money. That’s definitely an issue, but at a very basic level, they do have resources. If a law firm builds a technology solution, right now I think GravityStack, which is again, Reed Smith’s wholly owned entity, has built a product called Periscope that I believe could easily amount to five to 10 million in annual revenue for them a year. I don’t know about more than that.

We’ll see, but the point is, if I go to a venture capitalist and I say, “We’re five to $10 million in revenue. We can build a company that has five to 10 million in annual revenue,” they’re like, “Good luck with all that. Sounds like a nice lifestyle business,” but the point is, for a VC, five to 10 million in annual revenue is really not anything that gets them excited. But if you’re a law firm, and I’ve come up with a way for you to have five to 10 million more in annual revenue, that’s like hiring three rainmakers who don’t need a corner office, and who won’t lateral.

Chad Main: And if it is truly tech driven, you don’t need the associates and the support staff.

Zach Abramowitz: And you don’t need the associates and the support staff. I think that what you’re seeing, and I’ll give the example before we wrap, I’ll give the example of Periscope and the reason that I think law firms, and again, this goes to the pain point more than the trust and the resources, it was Periscope, this product that Reed Smith and now GravityStack is releasing, was born out of an actual business use case. They were doing their own review, because they’ve got their own internal review team, the Red Team. It’s a $40 million annual business for them, but they were having an issue that reporting on data to their clients took an extraordinary amount of time in terms of inputting into spreadsheets and handling it manually.

It was taking like five days of overtime per month, and they were only able to report on it like once or twice a month, not any way that could be actionable. They would get to the end of the month, and the bill that should have been 40,000 was now 60,000, which they hadn’t caught earlier because they were not reporting on data that frequently. This was requiring partners eating bills. It was something that was causing an issue for them in terms of having their own internal review team, so they built Periscope as essentially to tie into other data sources, pull that information, and allow you to get at the end of every single business day, so that you knew you could budget. You could predict. You could see what was going on inside your review every single day. They knew this was an issue because it was their issue, and for the last four years, they’ve been using this product internally and differentiating their service.

Now they’ve effectively said, “Listen, why don’t we make this available for others to use? If it’s been such a win for us, for our clients, saving 25 to 40% off review, for us, becoming a more efficient and a more profitable group, why are we not giving this to the rest of the industry?”

I think that this is a question you’re going to see a lot of firms asking now, because I think a lot of firms, not only ones that I know about, have built something internally that they then say, like, “Are we the only firm in the world that has this issue? Couldn’t be. It couldn’t be.” Really, really long way of answering. The reason the technology has sucked in legal is that number one, it’s hard to make a business case for the billion dollar rocket ship, and on the other hand, having expensive consultancies develop this software tailor-made is not really a good solution, especially in an era where building Cloud-based technology has never been so inexpensive, so what I think that law firms getting involved may actually fix that.

Chad Main: That’s it for this installment of Technically Legal. We hope you liked it. If you want to learn more about anything we talked about with Zach or Catherine, you can go to the episode page on TLPodcast.com. If you want to subscribe, which we hope you do, you can find us on most major podcast platforms, such as Stitcher, Google, iTunes, et cetera. If you want to get a hold of me, you can email me at [email protected] That’s [email protected] Thanks for listening, and hope you’ll tune in next time.

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Episode 8: Angie Hickey on the Benefits of Business People Holding Law Firm Leadership Roles

In Episode 8, we talk to Angie Hickey, CEO of the Chicago based law firm Levenfeld Pearlstein. Angie discusses the benefits of business people holding leadership positions in law firms. Angie is well positioned to talk about this topic because she is a CPA, has an MBA and has worked most of her professional life in law firms.

Angie explains that one of the main benefits of hiring business people to help run law firms is that it permits lawyers to focus less on business and governance issues and spend more time doing what they are trained to do–practice law.

Angie also points out that when law firms implement business strategies and systems, the client experience is improved. In fact to ensure their clients’ experience is the best it can be, Levenfeld Pearlstein created the “LP Way“, a five step structure the firm follows to deliver a consistent client experience.

Angie also discusses why collecting feedback is a must for improvement and that when business minded people get involved with law firms, they might have to push for change lawyers may not always want to make.

We also talk to legal tech founder Michael Chasin about Lexicata, a CRM (customer relationship management) and client intake app designed specifically for law firms. Lexicata helps lawyers stay on top of leads, automate client intake forms and provides analytics and insight into marketing efforts and referral sources so law firms can make better business decisions.

You can find Michael on LinkedIn and Lexicata on Twitter @lexicata.

 

Things We Talk About in This Episode:

Bloomberg Big Law Business Article: Law Firms Tap Business Acumen in Competitive Legal Market

The LP Way

The McKinsey 7S Framework

 

Episode Highlights

1:07    Angie started in finance, but ultimately took the CEO position.

2:15   The LP CEO position has real decision making authority–including over compensation.

4:03    Levenfeld Pearlstein was ahead of the curve on putting business people in leadership roles.

5:47    Smart law firms provide business professionals with the right tools and get out of the way.

7:25     What business people really bring to the table are systems and structure to enhance client experience.

9:12     The LP Way

13:16    Interview with Micheal Chasin of Lexicata

18:51    How LP gets client feedback.

19:47    They also collect internal feedback from lawyers and employees.

23:11    How LP has used tech to better the client experience.

 

Episode Credits:

Editing and Production: Grant Blackstock

Theme Music: Home Base (Instrumental Version) by TA2MI1

Episode 7: Atrium’s Augie Rakow & Max Cantor on Technology First Law Firms

For episode 7 we visited the San Francisco office of legal tech start-up Atrium and talked to Augie Rakow and Max Cantor. Augie is one of Atrium’s founders and Max heads up Atrium’s artificial intelligence efforts.

Atrium is actually two companies: Atrium LLP, a law firm focused on providing legal services to start-ups, and Atrium LTS (Legal Technology Services), the company providing operational and technological support to Atrium LLP.

Augie hatched the idea to launch Atrium with Justin Kan, a serial entrepreneur, angel investor and former partner at Y Combinator (a premier Silicon Valley incubator/accelerator that helped launch a few successful businesses like Dropbox, Airbnb and Stripe). Justin’s desire to create a legal tech start-up was at least partly fueled by his experience as a “power user of legal services.”

The talk with Augie and Max is wide ranging: Augie’s studies at divinity school, Max’s hobby of flying planes, why Atrium was founded and how it differs from the conventional law firm model. Augie and Max also discuss the tech Atrium is developing and their future plans.

In this episode we also talk to Jeremiah Kelman of Everchron, a great collaborative case management platform for litigators. If you want to learn more about Everchron, you can contact Jeremiah and his team at [email protected]

 

Things we talk about in this Episode:

Nobuyoshi Ashibe the “Laurence Tribe of Japan”

Y Combinator

Twitch.tv

Article: What Should You Do With Your Crappy Little Services Business?

 

Episode Highlights:

1:14    How Atrium LLP & LTS is Structured

2:22    Augie Talks About His Experience at Divinity School

4:20    Max Discusses His Hobby – Flying Planes and His Tech Background

8:39    Augie Meets Justin Kan and Starts to Develop the Idea for Atrium

10:45  Interview With Jeremiah Kelman of Everchron

15:23   How Atrium Raised Money From Tech Investors

18:33   Augie Discusses Why it is Hard for Law Firms to Attract Professional Talent

19:54   Max Discusses the Atrium LTS Legal Tech Platform

21:47   Augie Learns Business Concepts from Atrium LTS

24:29   The Legal Products and Areas of Law on Which Atrium is Focused

25:35   Atrium’s Subscription Based Pricing Model

27:05   Max Discusses the Future of Atrium LTS Technology Development

 

Episode Credits:

Editing and Production: Grant Blackstock

Theme Music: Home Base (Instrumental Version) by TA2MI

 

Episode Transcript:

Chad Main: I’m Chad Main, and this is Technically Legal. A podcast about the intersection of technology and the practice of law. In this episode, I talk to Augie Rakow, and Max Cantor of Atrium LLP and Atrium LTS respectively.

We just heard from Augie. The Justin he’s referring to is Justin Kan, a silicon valley angel investor and serial entrepreneur. Augie founded Atrium with Justin, and Max was recently hired to head up Atrium’s artificial intelligence efforts. As you’ll hear, Atrium’s working on some pretty cool stuff and just might be on their way to building the law firm of the future.

Chad Main: Before we get to my talk with Augie and Max, some background on how Atrium is structured is important. Atrium is two business entities. Atrium LLP is a law firm, and Atrium LTS is a separate corporation.

Atrium is two companies for a couple reasons. One is for the sake of process efficiency, which is very important to the Atrium crew, but just as important to them and another reason that Atrium is two companies, is that because it is also designed to comply with the regulatory framework that governs law firms. Which, I might add, is not without detractors, and is a whole other topic for another podcast.

In short Atrium LLP provides legal services like any other law firm, but it utilizes the services of Atrium LTS for operational and technical support.

Before we get to the nitty gritty about what Atrium is up to, if you need any evidence that they’re coming at law from a different angle, you only need to talk to Augie and Max for about five minutes to figure that out. Before Augie helped launch Atrium, he was a patent lawyer and did legal work for startups for about 10 years. Most recently he was at Orrick Herrington, but most interestingly, before he began the practice of law, he went to divinity school.

 

Augie Goes to Divinity School

Augie Rakow: Yeah, so coming out of college, I ended up going to divinity school. Actually divinity school has a couple different tracks. There’s a professional track where you’re really going to become a preacher. That’s really what people think of with divinity school. You think of MLK having a Mdiv and stuff like that, that’s that track.

Also within divinity school there’s a religious studies cohort, I was in that group. I had always really been very interested in pretty rigorous, systematic, discourse about how we live and how society is set up and what’s the good life. Stuff like that.

That’s the connection between divinity and law firm for me. Those are really the two disciplines, where I think the core tools of the discipline consist of making sense of statements about how we should live.

Using fairly abstract concepts that capture human and social values about fairness, if they’re religious, things like mercy and love and forgiveness. If it’s legal stuff it’s things like is a patent obvious? Concepts of whether a patent is obvious or whether it’s a sin to do something, are these concepts that are totally made by humans, and both divinity and law, try to take these concepts and apply them systematically and rigorously, to solve day to day problems. If a couple splits up, who should get the house? To me those are really the commonality between them.

Chad Main: How do you make the jump from intellectual history to law?

Augie Rakow: To law, yeah. I was in a bookstore in Tokyo, I was just browsing through the bookstore, and I came across a law section, and I had had no interaction with law, I didn’t have any lawyers in my family, except a great-grandfather who I didn’t know.

We didn’t have it in undergraduate curriculums at the time, in the US. In Japan and most other countries, it’s a much more widely studied thing at the undergraduate level, and you have sections in bookstores about law and all that. I just picked up a book on constitutional law, written by a Japanese law professor, basically the Lawrence Tribe of Japan writing in Japanese about constitutional law issues in Japan for Japanese law students, and just totally fell in love with it.

 

Max Takes Flight

Chad Main: Not to be outdone by Augie’s cool story about going to divinity school, Max has a hobby, flies planes.

Max Cantor: So, personal hobbies, I’m also a private pilot. I got my pilot’s license in 2013. It’s always been one of my dreams. It’s tons of fun. That has probably been my greatest exposure to the law. When you start training, you get a three inch thick book on federal aviation regulations. When you say, “What do I have to read?” And the answer comes back, “All of it.”

Chad Main: What do you fly?

Max Cantor: Mostly single engine planes. Diamonds, Cessnas, Cirrus’.

Chad Main: I guess when Atrium blows up, they won’t have to look far to find a pilot to fly the company jet, but in the meantime, Max is responsible for Atrium LTS’ AI efforts.

Max’s background provides some good insight into how Atrium is approaching its legal services. Max is not a lawyer, and before Atrium, had never worked in the legal services industry. He has a computer science background and he himself, is a tech company founder. Coincidentally, he, like Augie, spent some time in Japan.

Max Cantor: Went to school originally for political science and international relations, but just became fascinated with computer science after taking a breadth requirement.

I graduated with a Bachelor’s and Master’s in Computer Science and was offered a job in Tokyo. That’s where Augie and I, like ships in the night, crossed paths, not knowing each other. I was working in Tokyo for few years, notably at Jane Street Capital, running a small trading desk.

Responsibilities as a trader but spending six hours trading, seven hours trading and then another seven or eight hours coding or writing up models and all that and I loved it. After that, I moved to Singapore, where I was running another slightly larger book on another trading desk, and then started feeling the bug of technology more.

This was around 2010, we just had the financial crisis, and some really interesting stuff was happening, so I tried my hand at a startup in Singapore, not entirely successfully. Learned a great object lesson in founder market fit, and that going off and building a consumer loyalty product for a quick service retail, when you have no experience in quick service retail, consumer loyalty or marketing, is probably not the optimal strategy for success.

I moved back to San Francisco and reconnected with a good friend of mine from college, and we launched a startup called DocMunch, whose product was focused on extracting tabular and textual data from PDF’s.

The eventual tie-in to Atrium, years later, was this focus on data extraction and processing semi-structured or unstructured data. DocMunch was acquired by a company called Nitro, that makes an Adobe Acrobat competitor. It’s PDF processing software. I was running a machine learning group at Nitro for about a year and a half before I left to pursue other options.

Actually, Mike my Co-Founder, connected me with Bebe, who was one of the company-founders of Atrium. At the time I wasn’t quite looking for a job. I had some projects going I was really excited about. What sold me, on Atrium, was the combination of what I saw … It was a pretty innovative model. They combine both, really solid legal chops. Orrick was actually our representation for DocMunch, we love them, they’re a great Silcon Valley law firm. Knowing Augie left that to come to Atrium, was a pretty significant signal to me that they were on to something real.

On the other side, they also had Justin Kan, who is pretty much about as far away from a straight laced lawyer, that you can get. He does define himself as a power user of legal services. Much like someone who flies a lot, you can probably spot a lot of things wrong with the Aviation industry, I think he had a lot of insights into law.

The combination of that founding team, their early success, and the opportunities that present themselves, from a machine learning, natural language processing perspective, would you have access to these clients, to these documents, to the legal markup on those documents, was fascinating to me. That was something I just could not say no to.

 

Augie Meets Justin Kan and the Seeds for Atrium are Planted

Chad Main: As mentioned at the beginning of the podcast, the Justin Max is referring to is Justin Kan, a Silicon Valley serial entrepreneur who’s been involved in several startups, including a live video feed website called Twitch and another called JustinTV, which was a 24/7 live video feed of his life.

Amazon ultimately acquired Twitch. Justin ultimately became a part of Y Combinator, a premiere Silicon valley incubator. Around 2017 Augie and Justin connected. It was at this time, that they started to sow the seeds to what would ultimately become Atrium.

Augie Rakow: I represented Justin’s brother’s company, in a pretty big transaction. I didn’t meet him at that point, we actually met on Facebook, asking his followers how much they pay for their financings and a woman I had hired at Atrium, I’m sorry at Orrick, to help me to stay connected to the community and people like Justin, spotted that and sent me the link.

I didn’t know Justin at the time so I wasn’t connected with him on Facebook. She sent me the link and I responded to his post, saying. “Here’s how you manage the cost and financings. Here are the main two techniques, but that’s just how you do it today. Justin if you’re interested in a more radically new way of doing things, I’d love to talk.”

We met up and talked for four hours, and met up a couple days later and talked for another four hours. Our first three meetings were four and half hours each. We just had so much to share on this. Over the course of the next few months we got to know each other better. It was one of these decisions that sort of happened. The momentum just kind of took over.

Chad Main: You and Justin keep talking and you just decide together, “Hey, I’m going to leave the practice of law, and we’re going to do this.” Is that what happened?

Augie Rakow: Yeah, there were two or three things that really … I came back from that meeting, the first weekend I met him, and I went back to the three biggest rainmakers in my group at Orrick, I said, “Hey I just met this guy, he’s a big deal. I think there’s a 50% chance he launches something that in the next two years will take 30% of our business. That’s my assessment.”

I got different responses. One said, “Oh yeah people have been trying to do this with law firms forever.” Kind of dismissive. “Investors aren’t interested in the kinds of law firms types of profits.” Another one said, “I’m jealous. That sounds cool.” Another one said, “Keep Justin close.”

 

Founder Segment – Everchron Founder Jeremiah Kelman

Chad Main: We’ll get back to my talk with the Atrium guys in just minute, but now it’s time in the podcast for the segment where I sit down with the Legal Tech founder and talk about their company. Today we’re talking to Jeremiah Kelman of Everchron. That’s a collaborative case management platform for litigators. Pretty cool product. Here’s what Jeremiah had to say about it.

Jeremiah Kelman: Everchron is essentially a collaborative litigation management analysis platform. A software that brings together all the key information on a legal case, and really meant to allow litigators and their team to collaborate effectively. Do analysis, and organize the most important documents in their case.

Chad Main: What’s the motivation? What’s the story behind Everchron? What inspired you to create the product?

Jeremiah Kelman: Sure. Both my company-founder and I were lawyers at firm, Irell & Manella in Los Angeles. We were doing a lot of large scale litigation and that sort of thing.

We were both there for about six or seven years before we left, and founded Everchron. What we were experiencing at the time was just a lot of frustration around working together as a team and being able to organize everything and understand the facts and documents in our cases. Really the way this is done, even today, often it’s just a little crazy and frustrating.

Using essentially Word documents and Excel to organize information. Then a whole host of different systems and tools where everything is all separated out. My company-founder and I, were basically just putting our heads together on what better ways could we bring together newer technologies and software to make the process of litigation a lot easier and more efficient and effective. That was the Genesis of Everchron really, to build a better collaborative way of working with litigation information.

Chad Main: Before the call today, I was checking out the website, it’s got some cool features. Tell us about a few of those.

Jeremiah Kelman: Really what Everchron does, is it gets you a centralized workspace to put together a lot of information today lives in a lit of different places.

For example, you might have all of your case filings and discovery responses and that sort of thing, organized on a file share, or in document management system, and on the other hand you might have a lot of discussion in your emails, you might have some stuff living in Word documents, you might have a whole host of documents in a large e-discovery review database.

Everchron brings in the best of these sources of information, puts it in a central space and then you can do things like, for example, very easily organize your information, your case documents, your key documents, into chronology of key facts and documents.

Our core focus is ease of use. We’ve realized that the idea is to get a whole host of different types of people in here. Could be a senior partner, could be a client, paralegal, so it’s very important to us to make it extremely easy and fast for this collaborating around this information. Very easy to search, very easy to create reports.

The other core functionality of Everchron is our master file, which is the filing system that would keep everything that would be exchanged between the parties, filed with the court. We have a unique filing system that shows relationships of documents to each other.

Finally, really in tune with our philosophy, which is, “A Little In, A Lot Out”, if you’re going to put work into the system, it better give you back a lot. We have automatically generated player profiles, or witness profiles. Just by working in the system, just by putting your documents in here, we automatically give you analysis, and pull together all that different information on a witness by witness basis.

Chad Main: Well cool. I appreciate your time today. It’s a cool product and where can people find you?

Jeremiah Kelman: Sure. You can find us online at Everchron.com or you can reach out to us by email at [email protected] and we’d be happy to help you get started in learning more about Everchron.

 

Atrium Attracts Investors Right Out of the Gate

Chad Main: Alright, lets get back to my talk with Augie Rakow and Max Cantor of Atrium. When we left off, Augie had just told us about meeting Justin Kan, and hatching the idea for Atrium. Now the next step was for them to raise money. When the Atrium team went out and raised money, they raised more than 10 million bucks, which is a nice chunk of change for any business, but it’s an especially nice sum for a legal tech business that includes a service based offering as part of its business plan.

As I can tell you from experience, venture capitalists do not get that excited about service based businesses. If you don’t believe me, Google, “What should you do with your crappy little service business”, and check out the first article that comes up.

I asked Augie what was it that they were able to do to get technology investors excited about Atrium?

Augie Rakow: I think the thing that Justin did, at that phase, the kind of thing that he is uniquely talented to do … There’s a lot of stuff where he’s uniquely positioned. He’s well known, he has access to capital-you know access to all that kind of stuff.

What he did that was so unique, I think, was to articulate in extraordinary simple terms, two or three principles that have really broad ranging effects. The two or three principles he came up are really powerful. They’re kinds of things, the more you think about them, the more things start to make sense, and it really pointed a way forward.

I think other people probably would have not hit on those principles; that would be me, or would have made them … I don’t mean to throw myself under the bus here, or would have made them too complex, which also would have been me. They were extraordinarily deep, and they were extraordinarily simple. The value of them was just undeniable.

Chad Main: What are these principles?

Augie Rakow: The most fundamental one, was the insight that explains why so many legal tech startups fail.

It really is an explanation of why law firms don’t buy legal tech. The thing about the billable hour is part of it, I think, but I think the deeper reason is that there is no vehicle to capture …

In a law firm, there’s much less economic incentive to invest in the operations and it’s in addition to the billable hour. There’s an additional factor, and that is there’s no market for your law firm equity.

If you think of McDonald’s investing in developing a new hamburger, that might get more people in the door and you have greater revenue, but it also drives up the value of the McDonald’s stock.

That second part is completely missing in law firms because there’s no market for equity. It leads to all kind of incrementalism and conservatism. It also leads to short-term planning.

Another way to put it is that, I think there are very few people who are in a position to materially influence a law firm’s investment decisions, who are you enough and early enough in their practice to benefit from those investments 10 years out. For contrast, every time I see …

Think of Bill Gates, it’s been years since he was actively involved in Microsoft. He still personally benefits I’d imagine, still personally benefits, every time Microsoft decides to invest in its longer term growth. He personally benefits, right? It drives up the value of the stock, he can take financing against it. He’s beyond needing that, but to this day, he still personally benefits from long-term investments and his kids will continue to benefit, or his foundations will continue to benefit from it. Totally absent in a law firm.

 

Atrium is Two Companies

Chad Main: Another thing Atrium pointed out to investors when they went out to raise money, was that it’s sometimes hard for law firms to hire high-level non-lawyer talent to support the business. No small part of this difficulty is regulatory.

Specifically, regulations that prevent non-lawyers from having an ownership interest in law firms. By creating LTS as a separate non law firm entity, Atrium is better suited to go out and hire talented developers. Marketers. Business development people, that might otherwise go to bigger name tech companies, rather than a law firm.

Augie Rakow: One of these other principles that I mentioned, that were Justin’s insight into how to fix what’s broken here, is that traditional law firms don’t have very differentiated staffing.

It’s really only been in the last 1- to 20 years that they even started to have marketing teams, and things like that. Our experience is that that’s the specialized professional talent, non-legal professional talent, that law firms attract … Law firms don’t even compete with the Google’s and the Facebook’s and places like that, for that sort of talent.

It’s for obvious reasons that there’s a glass ceiling in most law firms, because of the regulatory rules. They can’t become owners of their law firm. They can take administrative or executive roles within the law firm, but they can’t become owners. This creates a sort of second class citizenship within the law firms. They tend not to be … There’s not the equity upside potential in a law firm. They tend not to attract a lot of the talent.

 

Atrium’s Tech

Chad Main: As noted earlier, Atrium LTS, the business side, provides operational support to Atrium LLP, the law firm side. However, outside of and beyond operational support, another reason Atrium LTS was founded, was to develop technology that the law firm could use, that his clients could use, and ultimately that other law firms could use.

Max Cantor: Within the technology services, which I’ll assume includes the operation support that Augie mentioned, we have the technology group.

In technology, we have client facing products, which our clients can log on like a portal. They can see certain things. Internal facing products. Those would be tool that for example, our paralegals will use to load up a set of documents from a new client from prior counsel and markup, “This is a counter-party for this contract. This is the effective date for this contract, etc.”

We store that all on our custom document management system. Then we also have another layer behind all that, called the data platform. That’s really where things get interesting. With the data platform, what we’re doing is keeping track of every step in a workflow that our paralegals and attorneys undertake.

When our paralegal needs to markup a document and say this is the counter-party or this is the effective date, those actions are stored. Those actions are stored in a way that our algorithms can be trained against.

What we’re doing, while we’re building these front-end platforms for our paralegals, our attorneys, and our clients, on the backend, we’re training machine learning algorithms to make predictions based on what they’ve seen so far.

In some cases, our paralegals don’t need to manually type in counter-parties anymore. The system will automatically suggest counter-parties. They will suggest effective dates. That’s the approach that I’m trying to take. We’re not trying to replace anyone in the immediate future. We’re just trying to eliminate the manual repetitive tasks that dominate much of legal workflows.

 

Business People are Key to Atrium

Chad Main: Interestingly, a side effect of having an affiliation with a technology company that was founded by business people, run by business people, and staffed by business people, is that lawyers at Atrium LLP get to learn business concepts that aren’t always normally taught at conventional law firms. Concepts like how to manage subordinates.

Augie Rakow: One of the things I spend the most time thinking about, that I learned from LTS, or get from the LTS side, is really management coaching.Management advice.

I’ve learned a lot from Justin and Bebe in particular, about how to manage a report. It’s new thing for me. I’ve had teams. I’ve led many teams. I’ve sent out invoices to clients where there’s more than 50 … 100 timekeepers listed on the invoice. I’ve been responsible for the work of many people, but I have never been a manger to someone. In a sense of setting their goals, reviewing their goals, being responsible for their career progression, making sure that they … Never done that before.

 

Fast Growth

Chad Main: Since opening it’s doors in June of 2017, Atrium’s already landed more than 100 clients and they employ a business development team.

Augie Rakow: We just celebrated getting our 100th client. Been in business since June 1. It’s eight months or so. 100 clients or so, actually about 120 to 125 now.

Gotten them through various different ways. A pretty large influx of companies have just reached out to the website when they seen the various press releases.

We also have a fantastic growth team here. We have three or four, five members on the growth team at the moment. Any how you divide it up, they’re all folks that have built businesses or have professional sales careers where they’ve done extraordinarily well, consistent with the ethical rules. The lawyers supervise them. There’s a lot of rules around that, that are very important to follow, but we have a professional sales team, and I think that’s really the difference.

We actually think of the services that we’re providing as products, and so we don’t just do … No law firm would say that they’ll just do anything that comes in the door, but even work that I would have done at my prior firm, we may pass on it. Not because it’s not good work, not good work to do, or not good clients, but we may pass on it because we’re just not providing that service quite yet.

By constraining ourselves, we can streamline our operations and we can be more strategic about how we do try to sell the services that we do sell. It’s that combination of more specifically defining the product. We call it productizing our services and then working with an extraordinarily talented sales team and marketing team to tell the community about those services and guide the sales funnel.

 

Atrium is Focused on the Startup Community

Chad Main: Like any good Silicon Valley startup, Atrium is laser focused on product market fit. This means, in the near-term, they’re limiting the legal services they offer just to those needed by startup companies. As they refine their processes and grow, they plan to organically move into other areas like M&A and litigation.

However, as Augie points out, that doesn’t mean that Atrium’s structure and MO can’t be applied to non-business related areas of the law.

Augie Rakow: The work we’re doing now, tracks the kind of work that startups get from the leading law firms in this space right now. The Wilson Sosinis, Cooley’s, The Gunderson’s, or a handful of others. Goodwin, Fenwick.

It’s basically that same model. That’s the same menu. There’s already product market fit there, we know that clients consume those services, we know that they’ll pay well for it, and we know there’s talent out there to provide those services. Let’s not screw with something that works.

Over time, we expect to expand. We’ll most likely follow similar growth patterns to the other law firms that have done well in this space. You represent a lot of venture act startups, pretty soon you start selling them to Google. Start selling them Salesforce. Soon it becomes an M&A practice, then you may turn that M&A practice into a buy side M&A practice and gradually expand out from there. We will mostly be a business law firm. I think these principles apply to everybody in our industry.

 

Innovative Pricing

Chad Main: Not surprisingly, Atrium’s pricing structure’s a little bit different than a conventional law firm. Instead of maximizing billable hours, much of the way Atrium builds clients is subscription based.

Augie Rakow: This market segment of clients really want to use legal, and they want it to be fast, transparent, and price predictable. The fast speaks for itself.

Transparent means they want to know the status of things. They want it to be price predictable. Not necessarily cheap. A lot of times, as long as it’s predictable, they’re willing to pay well for it. Especially if they feel like they’re getting something really good for it.

The subscription really speaks to that price predictability. There’s going to be some variants. A client may need a lawyer’s time for four hours one month, then two hours another month, and ten hours the next month. If you are striving to be unit profitable at the task by task level, then you really do need to track hour by hour, or six minutes by six minutes.

If you only need to be profitable at a client by client level, or at a quarter by quarter level, that gives you a lot more freedom to absorb the variants. We really put that on ourselves to accurately price in aggregate, much like the insurance company might. What’s going to be the likely cost of this? That’s how we absorb the variants on our side.

The clients we’re taking on now … The subscription price varies a little bit. We’re rolling out new pricing in the next couple weeks. Mostly, clients are paying 11500 to 3000 a month.

 

The Future of Atrium’s Tech

Chad Main: So I closed out this great conversation with Augie and Max with a question to Max about what the future holds to the tech development at Atrium LTS.

Max Cantor: In the short-term future, our goal is to just capture more of the workflows that the LLP attorneys and paralegals are performing. The idea being, that they have to spend less time in Word, less time in Outlook, more time on our systems. That gives them higher value and it’s more holistic.

We can also report back, or give them the ability to generate better metrics. Augie can turn around and say, “This is where our bottlenecks are.” When we’re on a subscription business, in a way we’re arbitrizing that difference and it’s absolutely vital for us to know what we’re spending time on, so that we can then fix that. On the data platform side, our goal is just improving predictions, eliminating more and more tasks.

One of the distinctions that I like to think about, for machine learning, is what I call auto-complete versus Siri. Auto-complete type machine learning tools are tools that have incremental value. If I’m using Google auto-complete, and it’s wrong 75% of the time, I just keep typing. I still get 25% of the value out of that.

If I’m using Siri, and it’s wrong 75% of the time, I get no value out of it, because now I just wasted my time talking to my phone, like someone who might have some issues. Now I gotta go do whatever I was going to do myself. My interest here, has always been to build the auto-complete. To build the auto-complete tools for attorneys.

Not zero touch automation that has to be perfect, but something that helps our attorneys and paralegals 75% of the time, and that is useful 75% of the time. If our engineering team can make tech that makes the attorneys as happy as … Having Augie cover their backs makes them happy, that’s my goal.

Our goal, in a sense, is attorney retention. Make it so much more pleasant to do legal work here, because we have amazing legal tools, that if you go work at another law firm, you lose. If we have that product loyalty to our internal product then that’s a huge win for us.

Chad Main: That’s a wrap for this episode. If you want to learn more about Augie and Max, or find links and more information about anything we talked about, you can check out their page on our website, TLPodcast.com.

If you want to subscribe, you can find us on most major podcasting platforms such as iTunes, Stitcher, and GooglePlay.

If you want to get a hold of me, my email address is [email protected] That’s [email protected]

Hope you’ll tune in next time, where I talk to Angie Hickey of Chicago based Levenfeld Pearlstein. She’s the CEO of that firm and she talks about what it’s really like to run a law firm like a business. Until next time, this has been Technically Legal.

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