Zach Posner from The LegalTech Fund(TLTF) was one of the briefings lost in my botched ILTA attempt. Developments in my own startup during the delay made our conversation much more relevant. I want to start by expressing my thanks to Zach and Jon Zerden for all the investor insights.
Zach, what is the LegalTech Fund?
The LegalTech Fund is an early-stage investor, investing in companies transforming the world of law. Our focus is on investing in three different areas: 1. Software that enables law firms, 2. Software that enables clients, which includes corporate legal departments, business units and consumers / individuals, and 3. Software that enables the broader regulatory ecosystem. We currently have 34 investments and are looking for more!
With an initial round of $28.5M in capital, what is the average investment level and stage? Seed or first rounds only?
Our initial investments in companies have ranged from $25k – $1M depending on company size and stage. We are investing from inception through series A and then we reserve additional capital to follow on with companies as they grow.
When the market is consolidating, TLTF seems to be betting on startups rather than expansion of dominant players. Is this a grow and acquire strategy for short-midterm returns?
Primarily, TLTF is a minority (not majority) investor with the goal of helping entrepreneurs reach their and their companies’ full potential, so we follow our founders! That being said, historically, you have seen a lot of consolidation in the space and some of our portfolio certainly may end up being acquired by the dominant players. But we think that times are changing and we could not be more excited to see adoption of legal software at levels that have not existed prior to date. This is leading to some massive standalone companies that will turn into the acquirers of the future – those are the companies that we are most excited to back.
TLTF is funded by G100 firms and DocuSign/Carta, an interesting combination.
It is and we love our partners. Our partners represent organizations that are excited for how technology can play a role in transforming the law. These are also the institutions that can help to accelerate the next generation of companies that we are backing.
Tell me about the LegalTech Fund Portfolio.
Our portfolio is starting to cover the map when it comes to companies transforming the world of law. One that jumps out for your audience is a company called Pattern Data, which is essentially eDiscovery for medical records. They’re helping attorneys sift through thousands of PDF pages of a client’s medical records and make sense of them in litigation. Another one of our earlier investments, Qanlex recently announced a follow-on round of $3M, and they have some amazing technology being used in the litigation financing space, and really opening up the market to new geographies.
There are 32 more, that you can see on our website, legaltech.com.
I hear that you are putting on an innovation-investment event. Tell me about it and how it differs from our traditional marketing, networking and tech events.
We are hosting our inaugural TLTF Summit in December in Miami. We are bringing together the leading early-stage companies, established companies, investors (both venture and private equity), law firm leaders and corporate legal departments for a few days to celebrate innovation.
What is your wider vision for the Summit beyond brand awareness for TLTF?
Rather than brand awareness, I see the Summit as raising overall market innovation awareness. We definitely want to raise TLTF awareness to get phone calls from the entrepreneurs. But it is also reaching CEOs and the senior leadership teams of existing companies that are effectively customers of new technology offerings. And then we want to reach practitioners, whether law firms or general counsel, who need innovation awareness on what is coming down the pipe. Maybe somebody in charge of innovation at a law firm who is homing in what’s coming around the corner. What are the next technologies? What are the things they should be paying attention to?
Who is the Summit audience?
A lot of the events are carved out for very different stakeholders. Some events are designed for marketing, not for execs and decision makers. Others just focus on one company and their userbase. We realized there was nothing out there designed to showcase innovation and all of the companies that are leading the charge in innovation. Nothing to showcase innovation across our vertical. We want to bring together entrepreneurs, investors, and stakeholders to start conversations and connections. We have several public companies’ CEOs joining us along with the financing community and practitioners. Everybody will be there to learn from each other.
It sounds like you are taking the Legalweek coffee shop conversations and pitch sessions to center stage.
We want to put the early-stage entrepreneurs on that stage. They are creating awesome software and they need the spotlight. There is a discovery problem in the eDiscovery market space. A lot of people are just not aware of adjacent pockets and products that could be good partnerships.
Beyond the Summit, we talked about other community resources that TLTF provides to shine a light on new legal technology innovations. Nate’s News is a curated list of legal tech related M&A announcements and more. Those who follow Rob Robinson’s Complex Discovery M&A list should add TLTF’s Company Financing Directory to track all the smaller players that have been funded.
Beyond those resources, everybody’s always welcome to call us. We learn a lot from the roughly 50+ calls we take with companies on a monthly basis. We encourage inquiries and calls as good stewards of the industry. We probably make three times as many introductions for companies that we don’t invest in as the ones that we do. And you know, we try to be helpful to everybody; early stage, late stage, practitioners trying to solve a problem. Just because we don’t invest in a company does not mean that there’s not a spectacular opportunity to make connections and support long-term community.
I can attest to Zach and Jon’s willingness to share their knowledge of a complicated, evolving market. I’ve always done my good karma calls as time permits to give anyone 15 minutes on their technical or process questions. The TLTF team is doing that at a higher and different level for people looking to get funded, find new technologies or connect potential deals. As I know all too well, every call is a data point on the market, products or pain points that create opportunities. To wrap up, The LegalTech Fund has a very different investment model and tight focus on the eDiscovery space. I see them as a sign of maturity in eDiscovery that has been lacking from traditional investment sources.
Greg Buckles wants your feedback, questions or project inquiries at Greg@eDJGroupInc.com. Contact him directly for a free 15 minute ‘Good Karma’ call if he has availability. He solves problems and creates eDiscovery solutions for enterprise and law firm clients.
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