I believe that Silver Lake’s reported $3.6B pre-IPO minority investment in Relativity means that every analyst firm sizing of the core eDiscovery market is and always has been dead wrong. My friend Rob Robinson conveniently publishes an annual eDiscovery Market Size Mashup averaging all the published analyst numbers together. These wise and trained market analyst projections average just $3.76B for 2021 eDiscovery software and $7.63B in services. Really? Maybe if you are basing that number on a very narrow definition of eDiscovery and legal technology. A quick Owler check estimates Relativity’s revenue at $231.3M while its top 10 competitors estimated revenue totals around $1.23B. Before the waves of eDiscovery consolidation hit, I was tracking 800+ public and private companies tied to the eDiscovery lifecyle. This is why Barry Murphy and I refused to publish an eDJ Group eDiscovery market size number. It seemed obvious that the existing market size numbers were simply growth projections based on the original 2003 Socha-Gelbmann Electronic Discovery Survey. eDiscovery was a much smaller and simpler American market vertical in those days. It now touches global customers on every facet of data management. If Relativity can take a potential 15x multiplier for a MINORITY investment, then some very wealthy people believe that the eDiscovery market is worth a lot more than $10B today. Whatever the market size, Silver Lake obviously believes that they have picked a winner with the Relativity ecosystem.
Stepping past an ex-analyst’s glee, what does this mean for Relativity customers and partners?
I went straight to the source and had a frank interview with some of my favorite Relativity folks; Nick Robertson, Mike Gilhooly and fellow recovering market analyst David Horrigan. While they carefully declined to confirm or deny the Wall Street rumored amount or terms, they were clear about their commitment to their existing business model and partner ecosystem. I raised classic customer concerns that such a large investment could pull product development out of the eDiscovery space or tempt a company to ditch the channel partners that had pushed it to lead the market.
“We believe that the eDiscovery market has huge runway. Silver Lake, along with ICONIQ, will allow us to rapidly scale the business and deliver our customers and channel partners the tools to win. Silver Lake liked the Relativity business model, in part because of the wide array of diverse expertise exhibited by our channel partners. They’re a differentiator. Their experience enables Relativity to build the best solutions.”
There you go. I agree that the eDiscovery market still has tremendous growth potential instead of just being absorbed by Information Governance platforms. Those ECM platforms have failed to deliver mature innovative eDiscovery functionality to customers. The majority of those corporate customers need managed service providers to support their burst capacity matter requirements. I am finally seeing RFP responses with practical managed service proposals not based on $/GB pricing from some providers. I have also recently seen old school itemized service pricing lists that make me wonder if some consumers have ever done a formal RFP.
Relativity is still recognizing the importance of its partners’ managed services, focusing on co-selling its partners’ managed services and professional offerings in addition to direct sales. This massive capital injection should accelerate their global expansion into APAC/EMEA markets and the broadening of their platform. Prior investments in Relativity Trace, Redact and the new enterprise connectors from the VerQu acquisition demonstrate their intent to round out the end-to-end platform story.
Relativity’s messaging should ease some of the normal FUD around a large investment. Relativity hasn’t given any indication it is planning for an IPO, but it is very possible that Silver Lake just wanted a pre-IPO stake with the expectation of a nice profit when Relativity eventually goes public. That appeared to be Macquarie’s strategy with Nuix, even if they had to run over former CEO Eddie Sheehy in the process. For now, Silver Lake has left Relativity’s management alone and seems to be content with some board seats. I will be watching closely to see any evidence of activist investors meddling with the Relativity go to market strategy.
Greg Buckles wants your feedback, questions or project inquiries at Greg@eDJGroupInc.com. Contact him directly for a free 15 minute ‘Good Karma’ call. He solves problems and creates eDiscovery solutions for enterprise and law firm clients.
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