Venture capital leaders in the US and the UK are under pressure to cut legal spend as revenue from M&A and fundraising tumbles amid the coronavirus pandemic, according to a study by legal tech firm Apperio.

VC firms spent an average of $7.5m on legal fees last year, the study showed, with 55% saying they don’t trust that their law firms to provide accurate bills. About a third of respondents said they had increased scrutiny on their general external legal spend over the past five years, while more than two-thirds said they expect their legal budgets to shrink this year.

Nicholas d’Adhemar, CEO and founder of Apperio, said: “Many senior VC legal stakeholders are not adequately prepared to proactively manage the legal spend cost reductions that they are anticipating. They’re held back by reliance on Excel and its inherent limitations. Billing is antiquated, manual and asynchronous, creating unnecessary friction and wasting valuable time. Ultimately this creates barriers for in-house teams against meeting organisational objectives to manage and reduce external legal spend.”

Half of VC legal leaders said their legal spend isn’t transparent and sometimes find their bills surprising, while only 54% of VCs trust their law firms to send bills on time.

Meanwhile, more than three-quarters of VC firms still use Excel spreadsheets to manually collect data for tracking legal spend.

D’Adhemar added: “Senior legal stakeholders working in the investment community and the external advisors that support them have, until now, not had the technology or tools to improve this situation. VC firms are fully justified in demanding greater efficiency and accountability from their legal services providers, and the proper mix of human and technology resources will help.  Law firms must meet the request and make themselves indispensable to their clients to ensure their competitive standing.” 

The survey was conducted by Coleman Parkes for Apperio, and polled 100 senior in-house legal stakeholders in US and UK VC firms with an average of more than $9 billion under management. It follows a similar survey from Apperio in July focusing on legal spend in the private equity industry, which found almost eight in 10 PE firms in the US believe law firm billing is not transparent.