Which is it? Investment in legal tech is booming or on a steep decline.
On Wednesday of this week, there were two reports on investment in legal tech, one reporting investment in legaltech to be booming and another reporting a steep decline.
The Financial Times’ Jane Croft reported that over $1.2B was invested in legal tech startups in the nine months preceding September, 2021.
While Steven Lerner of Law360 reported funding for legal tech dropped 40% from $3.4B in 2021 to $2B in 2022.
Bob Ambrogi, commenting over on Twitter, thinks the difference is that the Financial Times story focuses on data from 2021 and earlier, while the piece by Steven Lerner considers 2022 trends.
Plus, Ambrogi notes it depends which segment of the legal tech market you’re talking about, as Lerner’s piece discusses.
I agree with Bob. Especially as to recent data reflecting investment decline in legal tech.
As I blogged a couple months ago, 2022 is shapping up much like 2000 when it comes to legal tech startups, where startups like my first company, fueled by a huge investment in all startups, couldn’t get that next round of venture capital and needed to sell.
As interest rates rise, previous legal tech investors will have less appetite for risky startups when they can get a guaranteed return on a secure investment.
With a stock market decline, investors are going to be more selective in their investments. There will also be far fewer investors in subsequent rounds of funding, making their investment that much riskier.
Unless legaltech is immune to what our national economy is experiencing, we can expect a continuing decline in investment in legal tech.