Our latest GCRC Interview our series about startups in the legal market, The interest in legal tech and innovation is huge at the moment as VCs look to seize the moment amid the shifting legal climate.
This interview is with Matt Faustman from UpCounsel.
To find out more about UpCounsel, you can have a look at their website:
For the sake of our readers, how do you describe what UpCounsel are trying to do?
We describe ourselves as a marketplace and distribution platform for legal services. We’ve rethought the way a law firm should work. One of the functions of a law firm is you get a lot of talented people in one building all marching in the same direction for an individual client. But, the result is that you have traditional infrastructure costs, heavy heavy infrastructure costs. There’s billable hours, for example – almost triple the value of the money paid to an attorney. So we decided to take advantage of the fact that a lot of folks are independent lawyers, so what we do is we use technology to replace the expensive infrastructure layer. I think that the way people moved from typical stores to e-commerce, the same kind of movement is happening with services and our prediction is that the same thing will happen with professional services.
I saw on your website that you seem to have some kind of formal rating system, like stars. I’ve seen a lot of directories in which people find lawyers that don’t necessarily possess that. How significant is the idea of lawyer ratings as an area for you or an area yet to be exploited on in the legal industry?
It’s really huge but at the end of the day, what is a rating? We deal in trust. Online platforms for legal services are all about creating trust. But, you have to deliver on that quality. Basically someone has used this lawyer who is somewhat useful and they like them, or this lawyer did a really good job, how do you think about how we go find lawyers like them? We go onto Google – we go search – so while we’re still searching, we’re still looking for that. I need someone to recommend a lawyer for me, I need to know that this person has been used by others so there is one way data can blend in really well. It’s a couple of things the lawyer can add to the profile. A lot of the time it’s about discovering new attorneys and directories like ours are critical for that.
Just out of interest, how did you get the first few people in your directory to have ratings?
We had to work very, very hard. We had a very small group of folks and we just did everything we could to give them a good profile, making them look good without lying obviously, and you know the attorneys we have are just all-stars. They were able to tell a few people who used to be associates and then we had our first group of ratings which was started up to show the brand of attorney we bring in: where they came from, why they were no longer there, if they used to be senior associates of a law firm – things that are especially useful for the general counsel customers that we work with. They want to know that the attorney they retain has a substantial amount of experience and the law firm where they worked is a critical piece of that.
In terms of the ambition of the ratings and directory, presumably as you get more people to be on it, you’ll want to instil some sense of relativity to how people come across on the system. Is that what you’re going for?
Within our community some will get that soon. It will ultimately be rooted in our customer and what they look for. I think one of the first attractive things about UpCounsel to the first time user is that we can help them cut 50% off their legal bills; we’ve done enough research in the market about what our lawyers are billing and they are still competitive rates – they’re charging $250 an hour – but it’s relative to what’s in the market which is almost triple that. We know quality is very important, and, as a company we have an obligation to our customers to create a really high quality product. We have a responsibility as a company to deliver really great legal services everywhere we can so, as far as ratings, ratings is one part of our overall philosophy for delivering quality. We have over 1000 attorneys attempt to register but we’ve only let in 100.
We’re constantly making sure that the community is right. So while the first layer of qualities is really built into how we let people onto UpCounsel, lawyers know that if they do a bad job, if they’re not responsive, they’re going to get low ratings – then they can be removed from the community because we do keep a cap on it and that community almost grows along with our growth in general. And its beyond just your legal skill – we use people that are responsive, that can be friendly on the phone. The last thing that we want is for a customer to come to UpCounsel and have had this terrible experience. We obsess about a great legal experience.
You talked about billing there. Is most of your work done off an hourly billing system or do you have any AFAs built in?
Where our customers first come to UpCounsel to find a lawyer relationship, you just reach out to that person and you can request a quote from them for a project or if it’s for something that’s less predictable, bill hourly. So on behalf of the client the GC will put in a job description, saying here’s what we’re looking for, the type of lawyer we need or project, and what our system does is it goes into our community and automatically pings or picks out the attorneys specialist fields that are needed so. Our platform goes to find every attorney in that platform that has the relevant experience, pings them, lets them know the description, and then typically within 6 hours three or four of our attorneys have submitted proposals to the client with just an introduction paragraph, description of the service that they can provide , something that’s really well known. They can provide a fixed fee bid so that if there’s a lot of contract reviews, contract drafting, they’ve done it a million times so they can provide a fixed fee; but if things are a little bit unknown – litigation, due diligence – they just provide their hourly rate and sometimes they provide an estimate of the number of hours, and so on. It really depends on the type of project they bill for.
Do you use only legal based skills, or are there some softer skills incorporated like project management for example?
For the skills, there are business-based legal skills, so our customers look at whatever their business would need as far as legal representations and they go into the formation. We don’t really work with super super young companies, for like complex employment, technology, green bands; we do a lot with Arissa(?), commercial real estate, landlord representation – the list is actually pretty large. We have M&A lawyers on our platform – we’re actually doing several M&As right now – there’s a huge list. We give them a granularly choice of industry your business is in and try and to key into the system at least 10-50 attorneys that have experience in that kind of industry. So if you’ve worked with technology companies in the past, our system will ping you the technology client that comes to the platform matching up to your legal skills. These are core skills but essentially they’re attributes of a particular attorney that we try to match to the attributes of the actual client.
We’ve heard from a few people we’ve interviewed that it’s a big period of upheaval in the legal industry and that for many people entails a great opportunity for innovation. How much do you agree with that kind of take?
I believe in it and then some. I think right now there is a tidal wave that’s going on in the legal industry and not a tidal wave from a destructive standpoint, just as the magnitude of it. I think that on the client’s side you’re having people who are really baulking at the traditional way of doing things – billables, transparency, people calling a lawyer and having to wait two weeks for them to get back to them. That’s actually one of the ways that wins counsels clients – we tell them it’s on demand. And on the other side you have what is seemingly a collapse of the traditional system but probably as a consequence of pressures that are being put on them by the client. You have all of these pricing structures that are coming in, loaded infrastructures that are ideal for a law firm or just general law firm structure and those structures start to buckle because law firms are refusing to adapt. When you’ve seen it happen in other industries where there’s this kind of demand for innovation and especially in the legal industry, and what’s happening is that clients are choosing to work with individuals versus the firms because we live in the age of Google, because we live in the age where invoice filing is becoming easier so it’s easier for individuals to open up shop versus just ten years ago when there was a huge hassle. General counsel especially are starting to look at those great solo practitioners and ask if they’d rather go to them versus the big law firm for the legal bill every so often.
I think there’s a legal revolution and as a consequence I think a lot of people are seeing a lot of startups, seeing a lot of innovation in this kind of space right now. I was talking with people in the legal industry and they’re saying that there are more legal startups right now than there ever where in history. The only thing that is rivalled by is the number of freelance and solo practitioners and I’m still trying to figure out the exact number but I would bet you that there is somebody looking at the numbers – the number of new/solo practitioner shops that have opened in the last two years, and it is probably is greater than it ever has been. There’s massive law firm layoffs from like fifteen years ago, there’s all of these people who are entrepreneurs as well this sort of spirit that has emerged and now it’s really powerful.
As someone who’s had some investment recently what are investors looking for from these companies that have done well and why have some other companies maybe not been able to take advantage of this opportunity as well?
For us and what really aligns our investors with what we’re doing is this idea that we are giving technology to individuals to essentially empower them to do things that typically only big companies can with lots of money. What we have done is potentially build this infrastructure layer for attorneys so that a bunch of individuals can be given the power of being part of a firm but without the infrastructure costs and what we’re building is this very available very large virtual law firm but without the firm, without the infrastructure of a firm, and I think that they really like that idea, especially if you look at what’s happening right now with labour. A lot of labour is moving towards the virtual, more and more people are working from home, so what’s going on with skilled labour is that you know the bricks and mortar law firm is going to go away. I imagine it’ll go like ecommerce did a little bit ago – only like 7% of all legal sales are done by e-commerce now and that’s low – you’d think it would be more 20/25% – but it takes a long time for brick and mortar law firms to go away. What I’ve seen and I think our investors are beginning to think that more and more people and, businesses especially, are going to look to get their services online, Skype and email and so on are going to replace having to go into brick and mortar law firms and that’s going to change a lot.
I think it’s really exciting and if they believe our take on the industry that more and more people are going to be seeking online legal services, with that coming true I think that more of these startups that pop up the more, people just get used to it just being the norm. There is money flowing into the legal system right now – in the last ten/twelve months there’s been like 60/70million in venture dollars in just legal startups – there’s a lot of key stage companies that are half-a-million to basically prove how their concepts work or to see if they can really get a great product market in what they’re doing.