Incubators put UK legaltech investment into overdrive
Investment in UK legal technology startups reached £61m in 2018, more than doubling the £22m invested in the previous 12 months.
In the Startup Report 2019, a report by Thomson Reuters and Legal Geek, the UK legaltech community, results reveal that investment in UK legaltech startups has risen dramatically over the last five years, up from less than £1.5m invested in 2014.
Legaltech startups have received at least £62m so far this year, through the first nine months of 2019, surpassing the 2018 total. The UK is a major hub of European legal technology, with UK legaltech startups making up 44 percent of all legaltech startups in the EU. This is far higher than the UK’s share of the European legal services market (23 percent). The report suggests the rapid development of the legaltech sector in the UK is the result of an extensive network of incubator programmes and tech labs created by law firms, corporates and universities. This framework has helped startups test products and develop their core functions into more sophisticated and valuable solutions. In addition, UK legaltech businesses are benefitting from access to UK law firms themselves, which the report says are at the forefront of changing legal business models and implementing technology. This access to law firms has enabled legaltech businesses to better understand how their products can be used in practice, and tailor products accordingly.
The rise in funding for UK legaltech businesses reflects the growth of the legaltech sector in the US, which has seen a number of successful fundraisings. Thomson Reuters and Legal Geek research tracks and analyses investment into 34 of the UK’s fastest-growing startups in the legal technology industry where reliable investment data is available. These businesses have received more than £175m over the last five years with 70 percent, or £122.5 million, invested since the beginning of 2018. Jim Leason, vice president, customer markets at Thomson Reuters, said “The UK benefits from a unique mix of a large tech and data science talent pool and world-leading law firms as well as easy access to capital through financial markets. This has enabled the fast-growing legaltech sector to thrive.” Mr Leason explained, “Legaltech is now attracting funding from a variety of sources, including law firms themselves, private equity and venture capital funds. This interest has given startups the crucial leg-up they needed to take their products quickly through to the next stage of development and testing.”