When to Pursue Your Legal Tech ‘Great Idea’: Advice from A Founder

ByJohn ShimPublished inAnalyses & TrendsApril 3rd, 2023

So you have a great Idea for a legal technology startup – what do you do?

Sometimes, the right answer is, "Nothing." Why? Your unique idea may not be that unique. Face it. It is entirely possible that people with more experience, more resources, and more vision have already explored and abandoned the concept.

Of course, that may also be your opportunity. If your idea solves a frustration for many, then your iteration just may be the one that ends up the winner. At least we all hope for that.

The legal tech industry has many bright ideas. But the decision to pursue a bright idea is not without risk, frustration, and loss. The fact is, the legal market can be a tough nut to crack.

Why Is Selling to Legal So Hard?

It may be about the powers-that-be in law firms who decide when, and if, they will direct their team to adopt new technology. I know this from experience. As an old school orthopedic spine surgeon, I have at times been skeptical of adopting new technologies into my practice.

The decisionmakers must see the needs and the advantages. Frankly, that can be hard to show. Remember, most law firm executives or managing partners are removed from the day-to-day grind that is ripe for technological advances.

Thoughtful law firm leaders may also be concerned about the silent technological insecurity felt by some of their best team members. In this era of AI and ChatGPT, many lawyers fear replacement by a technology that, in current form, really does not exist. Leaders may fear that any new technology may cause unwanted anxiety.

Law firm leaders may conclude it is easier to use what they know than take on a new and potentially costly technology. As long as status quo maintains, why take the risk?

For these reasons and others, a legal technology startup will always be a long shot. Bootstrapping may show a founder’s dedication and commitment, but, after a while, the pursuit of customers will necessitate investments into a sales team. A strong partner may be needed both for gaining access to decisionmakers as well as for capital for that sales and marketing team.

As a founder, you are the new kid on the block with little or no reputation. While partnership with a strong VC may cost you significant equity, a reputable VC could have the needed relationships that will positively change the trajectory of your legal technology company.

The VC relationship does not guarantee success. While you have passion, the VC will have set parameters and goals that must be met to continue funding your startup. Without results, effort may not matter. If your company cannot achieve those goals, there could be significant ramifications to your ownership or viability.

I say all of this not to discourage you. But I do want you to go into this process knowing some of the potential challenges. I am by no means an expert in any of this. I am sharing what I have learned so far.

Then Why Create Something?

If starting a company and selling to law firms is so challenging, then why create something in the first place?

Because you know that you have tried the other products that are out there and you have the experience to know that the current solutions are not keeping up with the changing needs of the legal market.

This is my rationale for our legal technology startup.

Even after years in the trenches, my grey hairs do not give me a superpower to overcome the explosive onslaught of data in my profession.

I can give you some real-world examples. In 1992, as an orthopaedic surgical resident, my daily notes on most of my patient medical charts consisted of 15 handwritten syllables: VSS Afeb -CT H/H 30. That stood for Vital signs stable, Afebrile (no fever), No Calf Tenderness (low probability of a blood clot) and Hematocrit of 30 (blood value). It was more than enough data to show that the patient was stable, without any concerns.

Fast forward to 2023, that same note is now computer generated, and will be at least 5-6 pages long with a minimum of 400-500 words, not syllables. Now, because of regulatory demands, disclosures, acknowledgement of normals, and checked parameters of well-being must be populated. While there may be some benefits to all this documentation, it demonstrates the explosion of data for just one aspect of life.

In litigation, this data explosion presents a challenge, and thus an opportunity for technology.

Wait, Aren’t You A Doctor?

But wait, how come a doctor is writing about legal technology? The answer should not seem so random.

As an orthopaedic surgeon, I was the person who set the broken bones, operated on the bad ones, and managed the injuries that affected the livelihoods of many folks. When I was training, I did not realize how many of these folks would be in litigation. It made sense. Many sustained injuries through a traumatic event. Some became disabled. Somebody was responsible for the cost of care, time off, disability, and pain and suffering. Others developed problems as they aged. Could those problems of aging be blamed on their injuries? Attorneys would ask me to write letters and opinions on behalf of their clients.

Over my 30-year career as an orthopaedic surgeon, I developed a medical-legal consultation service, leading me to personally experience this medical record data explosion. Twenty years ago, a big file review may have been a few hundred pages. Now, a file that small only comes pre-suit. Most files have more than 800 pages, and records may include data such as social media posts, work time sheets, and membership attendance information. The more complicated the case, the more types of records.

What used to take a few hours to review became a long night and weekend endeavor. I started to have sympathy for my attorney friends. I realized my side gig as a medical-legal consultant was their full-time existence.

For the trial attorneys, I realized more than 90 percent of their time was spent preparing for a trial that would never happen. Bankers boxes of data and records are processed, for that less than 4% chance of ever presenting that information to a jury.

Over time, I identified different strategies for how attorneys reviewed the boxes. I realized the best knew how to balance between total record review versus selective sampling and presentation of the records. The invisible hand of cost and reimbursement changes the nature of the balance. The needs of the client shape the strategy. Experience and reputation of the attorneys and judges mattered.

I came to identify a set of questions typically asked by each lead attorney on each case:

  • How much of the records do we review?
  • When do we sample and present which record?
  • What are our odds of a better than predicted outcome?
  • Will spending for additional resources improve the outcome?
  • What does the “Baseball Card” say about Attorney Y or Judge X?
  • How many other cases are we juggling right now or have scheduled for trial near the date of this case?

Having the ability to understand these questions presented me with opportunities to help answer them..

So, before you start developing a legal technology, ask yourself:

  • Do you understand the question lawyers are asking themselves?
  • Does the question already have a good solution?
  • Will your solution become obsolete in the near future?
  • Will your solution have the ability to cause law firm leaders to initiate adoption?
  • Will your solution be seen as an advantage for all levels of the organization?
  • Will your solution have the ability to scale?
  • Will your solution have data collection or aggregation capabilities that will attract interest
  • Will you be able to resist the urge to call your early stage, minimal data set platform “AI”?
  • Do you have a team that will persevere through the ups and downs of invention?
  • Will your family have enough patience to see this through?

The answers to these questions will change as you develop and grow your company.

Pitfalls and Setbacks

Since 2019, we have been on this journey of developing a legal technology product. With our experience of trying to analyze the ever-growing number of medical records, we have created a platform for processing and selective presentation. I realized that solving my pain of reviewing medical records would also help my attorney friends.

Still, there were many pitfalls and setbacks in development. I struggled to understand the workflow in reviewing records. Frankly, many legal groups did not know their own process. I needed to flesh out the true goals inherent in reviewing the records.

I tasked our software team to provide feedback on the ability to create the platform at a justifiable cost. I underestimated the challenge of describing end-user needs to our world-class programmers. Fortunately, we embedded our lead programmer and partner with our medical-legal staff during all stages of the development.

I asked our long-time medical-legal consulting staff to change, adapt, and work through the multiple iterations. I sensed the staff frustration during the initial two-year development phase. Not all staff, who were expert at organizing bankers boxes of records, made the transition to an evolving paperless process.

I remain passionate about the platform, but will confess that I had my moments of screaming at the computer. Since January 2022, we have slowed our pace of development, and have onboarded a pilot study, as well as new clients on a regular basis.

I am confident and passionate about our technology. Afterall, legal tech companies should believe they are changing the world. But we must also be introspective, and expect difficulty in showing the advantages of change. We must be honest in assessing the pros and cons of our platform and expect weekly, if not daily, highs and lows.

Grit without Guarantees

Starting a new technology takes passion, hands-on experience, and grit. Still, there are no guarantees.

You must assemble a team of trustworthy, complementary partners. Each should provide a skill set for advancement of the technology. There will be risks associated with each being a “key man or woman.” You need to grow to have redundancy of skill in case a key partner goes incognito.

You need legal advice to structure the company. Advice should include mechanisms of growing the company, selling off parts of the company, etc.

You must ask open-ended questions to your future clients and customers to understand their goals. You must understand the demographics of the technology users. In law offices, you must consider that the Lead attorney may view one part of the technology, while the data entry and processing may be done by another of legal provider.

You must consider the user experience. Your world’s greatest technology will be worthless if not intuitive during use.

As a legal technology, consider exploring ways to interface with the established legal practice management platforms via API. Customers deserve a platform that integrates all their tools, not silo away from another. The overarching goal should be to improve the outcome for the customer, and reduce the hassles associated with working with different platforms.

After proof of concept, pilot your technology and track results. Hopefully the results will be favorable enough to approach law firm managers with compelling reasons for them to engage with you in dialogue.

Engage with the community of your future customers, and network with like-minded vendors. Be the first to offer assistance. Goodwill is a rare quality and should be nurtured.

Find a mentor in a similar but different technology arena. Shared experiences can be beneficial, fun, and consoling.

I feel gratitude for having the opportunity to develop a solution to a growing problem. I know our technology is better iteration of solving the record review and analysis problem. As in all startups, I am confident ours will be a winner.

To all who know they have a solution to a growing problem, consider your options. If you have the passion, experience, and fortitude, find your partners and start creating your technology. Every action has a risk. Not every action has a benefit. Be creative. Change the world. Yes, strive to be the cliche.

Featured image Image by Colin Behrens from Pixabay.

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