Jan 24
Funding Legal 2022: A Tale of Three Totals — Legalcomplex
Funding in Legal totaled $5.38 Billion, we also have $3.43 Billion and $4 Billion. What’s the difference? Allow us to explain.
Funding Legal 2022
Funding legal is a multiverse of investments in different areas. Usually, the legal tech space is seen as a horizontal market for legal professionals. In reality, the influence on investments in legal comes from different verticals. Vertical such as Dropbox acquiring Formswift for $95 million. Before we travel through the different dimensions of funding, here are our 2022 numbers:
- Raised: $5.38 Billion — down 23%;
- Deals: 457 — down 2%;
- Investors: 1017 — up 14%;
- Average round size: $11.8 Million — down 21%;
- Average seed check: $1.7 Million — up 35%;
This is private capital funding and excludes any mergers and acquisitions. These totals tell us that in 2022, more investors invested less capital compared to 2021.
The Law.com analysis is a filtered view of the legal tech space. A closer look at the Law.com image will reveal the filters we used to achieve this view. We left out a €700 million credit raise from a Dutch conglomerate. Also excluded are Tax Tech and Consulting (aka Law Firms). Curiously, we find law firms raising private funding more often.
Law360 collects its own numbers. Their analysis, included the Topicus deal and Governance, Risk, and Compliance (GRC). GRC is a big space that we track separately. Here is a concentric circle chart of funding in GRC (yellow) and Legal (purple). You’ll notice that GRC has more-, and bigger circles. Now, are you ready to enter the multiverse?
Funding GRC 2022
The legal industry earns most of its money serving businesses. Essentially, legal helps companies get paid with contracts or avoid losing money in conflicts. Capital & Conflict analysis revealed the most lucrative work for legal professionals is generated at those extremes. However, most of the volume of legal work happens between those extremes. These are high-volume / low-value legal interactions. And the tech that supports those interactions attracts more capital.
Let’s pick one area which made our dashboards jump this year: eSignatures. While most view this as part of Sales or M&A. Electronic signatures extend way beyond legal contracts and contract management. The reality is that more areas drive investment into e-signature. You e-sign your package when it arrives or the company policies when you join. As a matter of fact: you sign freight, lease, loans, mortgage, insurance, and many documents in many areas. We sign documents to prevent conflicts.
E-sign is about prevention, and so is GRC. In 2022, Governance, Risk, and Compliance captured $36 Billion in capital and only dropped 4.5% in funding. This drop is far less than the broader tech market has experienced.
Besides prevention, we also have protection.
Let’s ignore the NFT madness for a moment. Last year we saw the copyright investment on top. This year, IP Tech alone captured $6.83 Billion and was up 32%. Yes, that is more than Legal, with Contracts, E-Sign, Tax, and Consulting combined.
… let’s pause and allow you to zoom into those numbers…we’ll wait…
To encapsulate the above in a little anecdote: Netflix’s new ad-supported tier had some hiccups after launch. A major reason is content licensing restrictions are crippling the free offering. Didn’t Netflix ask copyright cops to track down sign-off using contract tech? If your core product is copyright, these risks shouldn’t play a role (pardon the pun).
In short, Legal will rely more on GRC for growth with prevention and protection as opposed to deals and disputes.
Finding Deals 2023
One way to find deals is to follow the funding. Funding numbers and charts not only tell us the past, but they also help us project. As stated to Isha of Law.com: we do not predict, we calculate. Now, we are able to offer something no one else can: projected deals for 2023.
The 2023 deals are projected based on the last funded date and burn rate. Due to the delicate nature of this data, we’ll select a limited set of customers to share this with. We will custom craft ten (10) reports with our famous line charts, last seen on Artificial Lawyer. You pick a segment or area like Legal or Contracts. You get an export with the names and dates of all funding, plus mergers for 2022 and the projected deals for 2023. On top of that, you get to pick over 34 specific charts to generate insights on.
Need this now? Check Spark Matter, for details on pricing, data, and delivery.
Originally published at https://www.legalcomplex.com on January 24, 2023.
