Mastering Legal Entrepreneurship: Creating a Winning Legal Startup

What is Legal Entrepreneurship?

Legal entrepreneurship refers to the intersection of law and business, where legal professionals develop and sell innovative products and services designed to meet market needs. Rather than exclusively focusing on delivering legal advice or representation, legal entrepreneurs adopt a more comprehensive approach that takes into account broader business strategies and client perspectives. This new breed of entrepreneur puts customer needs at the forefront of their operations, creating data-driven solutions and services that increase law firms’ efficiency, enhance their legal service delivery, and ultimately improve client sovereignty.
There are many types of law firms that have managed to modernize over the past decades, but there are still firms from older generations that do not embrace technology with the expectation that they don’t feel data-driven competition. Legal entrepreneurship creates an opportunity for every law firm to differentiate themselves from other legal service providers, with most being merely "enterprises running a side legal practice, even if they don’t know or were not aware that it could be called that."
Legal entrepreneurship breaks away from the conventional models adopted discussed by Allan Schear in his 2012 article, The Entrepreneur Lawyer. Schear observed that lawyers across the globe are driven to practice law primarily by professional commitment, economic opportunity, and/or knowledge. That’s an apt description of the traditional role of most lawyers, and many practitioners still approach its practice from this perspective . However, today’s modern legal landscape has become far more competitive, and law firms are under considerable pressure to modernize their way of thinking.
To stand out in the modern legal arena, legal entrepreneurs advocate for blending traditional values with a competitive edge, and consider the law firm as a commercial entity. It is the strong pursuit of market opportunity that sets legal entrepreneurs apart from their peers. They translate their insights about customers into product and service innovation within the legal industry. Unlike lawyers who primarily deliver legal advice, legal entrepreneurs are willing to invest in technology or practices that prove to be valuable in the firm’s marketplace.
This competitive maturity of modern entrepreneurs is believed to serve as an indicator of market success in the current legal ecosystem, thanks to their aptitude for blending both their legal expertise and business mindset to create innovative offerings. This entrepreneurial thinking minimizes the focus on the senior-most members, or originators, of the firm, and magnifies the roles of those that are focused on profitability. Legal entrepreneurs are strong believers of creating a value chain in their firms, where every employee understands how they contribute to the bottom line.
Modern law firm owners are embracing the values of legal entrepreneurship, and while some are seizing the opportunities it brings, others are still getting their feet wet in the new paradigm.

Essential Skills for Legal Entrepreneurs

As with any profession, there are core skills not only needed but expected of an effective lawyer, which are even more critical for a lawyer seeking the entrepreneurial path. They are:
Analytical Thinking:
The legal field is inherently complex and dynamic. Lawyers who think analytically are able to identify problems and formulate constructive solutions. Having a critical mind will allow you to approach every situation objectively and make a strategic decision based on facts. In the ever-changing world of legal entrepreneurship, your power to evaluate and apply the law to various business scenarios is significantly enhanced.
Business Acumen:
A legal entrepreneur must possess an inherent aptitude to operate as a sustainable business entity in order to surpass the competition. You should have an understanding of negotiation strategies, contract drafting, business law and a basic understanding of accounting. On its face, all of these competencies are used in the practice of law, but as a legal entrepreneur, they will often be used to further develop your business or to negotiate with other businesses and stakeholders to grow your client base.
Digital Literacy:
Legal entrepreneurship is not just about your ability to navigate the law, your business itself will often have a technical aspect to it, such as your company website, marketing plan, etc. You will need to be familiar with the necessary technical skills to launch your business and advertise your services. A legal entrepreneur is expected to be proficient in various programs and web-based applications frequently used in everyday work. If you find yourself unfamiliar with any software essential to your practice or business, rest assured you are not alone. There are innumerable sites filled with valuable information to assuage those concerns. You just need to be willing to learn.
Client Relationship Management:
Your ability to build rapport with existing clients and potential clientele is crucial to your business’ longevity. One would naturally assume that you know how to treat your clients with dignity and respect, this is required for a successful career as a lawyer or legal practitioner. An essential part of your business is bringing in new clients, which naturally requires you to sell your legal services to private citizens and corporations alike. It is one thing to meet a client once and provide them with flawless service, the challenge is to do it every time.

Legal Innovation in Technology

Technology plays a critical role in legal entrepreneurship and the development of successful legal startups. Innovative legal tech solutions can streamline processes, enhance client services, and improve the overall efficiency of a legal practice. One area where technology has made a significant impact is in case management software. Such software allows legal startups to manage their cases and clients more effectively. For example, Rocket Matter provides a cloud-based law practice management solution that offers time tracking and billing capabilities, document assembly, and client portal access. By using such software, lawyers can keep track of all aspects of a case in one place while offering enhanced service to their clients. Another area is in the use of data analytics to track key performance indicators (KPIs). For example, Clio, another legal practice management solution, offers a "Law Firm Performance Score" that tracks underlying trends in key performance areas such as user engagement, billing, and trust account obligations. This KPIs allow lawyers to understand how their firm is performing on essential aspects of their practice and take the necessary steps to improve service to their clients and their bottom line. Moreover, AI-based tools to assist litigators and corporate lawyers have been getting more traction. For instance, law startups like Casetext and eBrevia provide AI-powered contract analysis tools that help lawyers identify key clauses in contracts that may require renegotiation or elimination. Legal entrepreneurs can also leverage client management software to better track and engage with clients. These software tools enable law firms to store, manage, and protect client data, while offering features such as billing reminders, document sharing and instant messaging. The emergence of automated document assembly platforms to help lawyers create contracts and other legal documents also provides attorneys with a means to enhance efficiency and productivity while freeing them to handle more value-added services. Overall, innovative legal tech tools and platforms offer legal startups the means to improve upon their existing processes and significantly enhance client experience and satisfaction.

Establishing a Legal Startup

Step-by-Step to Launch a Legal Startup
Based on my experience in the past five years, launching a legal startup is no different than launching any other startup. In most cases, you will need to follow the same business planning process you would for any other startup. You will need to research the competition to test your assumptions, and based on the results of that research, have a plan forming on how you will reach and serve your primary market better than your competitors.
Furthermore, you will need to raise money somehow. You may contact investors, but often you’ll likely begin with a friends and family round of investment. If you can answer the questions outlined previously, you’ll be able to make a case for why your family, friends and potentially angels, should invest in your startup.
Finally, you’ll need to build a client base and you need to know how you’ll make money. Fortunately, you’ll be using technology to cut costs. So you’ll need to build your startup around a cost structure that is similar to a WordPress host (low overhead), rather than a lawfirm (high overhead). The results are usually that the startup is self-funded and eligible for limited legal services. That means you are working on getting paid. Lawyers tend not to be good business people, but that’s what you should strive to become.

Legal Entrepreneurship Challenges

Starting a legal tech business is not without its share of challenges. Law firms operate on set billing models and have made slow adaptations to technological changes. There may be little evident demand from practitioners for any new tool you have created. Understandably, a legal entrepreneur may feel the market is not ready for the type of solution they have developed. Financial restrictions can also be a significant challenge. Legal startups have much in common with other types of technology ventures in that they are often high-risk, high-reward investments. Most investors may be hesitant to invest in legal tech companies due to the instability of the legal market. Legal entrepreneurs will need to be ready to meet questions and doubts head on, as well as demonstrate that their product and/or service can be economically viable . Competition is yet another challenge legal tech entrepreneurs must deal with. While some market leaders have been in the game for a while, there are now a number of well-funded legal tech companies, consulting firms and other ventures that have emerged over the past several years. Competition has also increased from big law firms that have incorporated business solutions as part of their day-to-day operations. The good news is that investment in legal tech is gaining momentum, and some of the biggest firms are investing in new solutions and tools. Young or emerging legal businesses should be ready to compete with major players and try to find ways to collaborate with them rather than shying away from competition. Despite the various challenges entrepreneurs face in the legal industry, legal tech businesses continue to evolve and develop new ideas for those who work in and with the law.

Legal Entrepreneurship Success Stories

Dan Lear, the co-founder of NextChapter, is one of the top innovators in the legal industry. He had a successful career with Avvo before co-founding the legal tech company that offers a cloud-based platform for bankruptcy attorneys. Dan Ler is passionate about empowering lawyers to automate their bankruptcy processes to effectively help people filing for bankruptcy.
Henry Resor III, founder of Lampo, was one of the first legal entrepreneurs to form General Counsel of a start-up. In 2015 he started Lampo to provide in-house legal counsel in their early stages. He has provided numerous legal services that include M&A, financings, and IP. Henry ResorIII is also the founder of Tech & IP Law, a firm that specializes in technology and intellectual property law.

The Future of Legal Entrepreneurship

The landscape of legal entrepreneurship is constantly evolving, with new trends and opportunities emerging regularly. As technology continues to reshape the legal industry, a number of trends are starting to take shape that will affect legal entrepreneurs in the future.
One such trend is the rise of online dispute resolution platforms. This has the potential to revolutionize legal services, especially in areas of conflict resolution that may previously have been out of the financial reach of many clients. Legal entrepreneurs can prepare for this by keeping abreast of these developments and thinking about ways in which their practices can integrate this technology.
Another area of growth is in the development of artificial intelligence and how it can be leveraged in the legal field. From document review to predictive analytics, the potential for AI to enhance legal services and increase efficiency is vast . Legal entrepreneurs should look to familiarize themselves with the latest AI technologies and consider how they can be used to improve their service delivery.
The growth of international legal markets also presents opportunities for legal entrepreneurs. With more businesses operating globally, lawyers with an understanding of international regulations and the ability to advise on a cross-border basis will be in high demand. Legal entrepreneurs can prepare for this by looking for opportunities to develop international partnerships and relationships that can position them to take advantage of this trend.
In terms of closing thoughts, the future of legal entrepreneurship is bright and full of opportunity. By staying informed of new developments and being open to change, legal entrepreneurs can position themselves to not only survive but thrive in this changing landscape.