Shubham Datta of legal software company Clio's VC arm, says technologies like AI are creating a supercycle of innovation in the legal sector.
Generative artificial intelligence is a game changer for the legal sector and will help to level out the playing field for smaller legal practices, according to Shubham Datta, vice-president of corporate development and ventures for legal software provider Clio.
“I don’t think it will be a matter of if artificial intelligence will be helpful in the legal profession, it’s a matter of when and how,” Datta (pictured) tells Global Corporate Venturing. “The ‘when’ is already starting to happen, the ‘how’ is being figured out.”
Earlier this month, Clio invested in a $50.5m round for EvenUp, the developer of a legal assistant that uses AI to sift through raw medical records, summarise the information and present documents tailored for personal injury cases. But the technology could potentially go much further.
Although the large language models used for products like AI chatbot ChatGPT are being configured for a range of areas from coding to advertising, Datta believes they present “an amazing use case” for the legal sector because, like law, the technology is predominantly text-based and it relies heavily on precedent. He compares it to big step changes in technology like the internet or mobile.
“You can feed these models a lot of publicly available or proprietary data that you have as a law firm, and in return they can help you draft documents, memos and briefs in the same tone and language that your law firm or legal professionals tend to use, based on the precedents, memos and briefs that have already been drafted at your firm,” he says.
That isn’t to say there aren’t issues with the technology – a judge fined a law firm $5,000 last week after false citations and legal precedents created by ChatGPT were used in an injury claim. But it does cut down heavily on the paperwork required for a case. Instead of taking an hour to write up a brief from scratch, a lawyer could use generative AI to generate a draft in a few minutes and then enhance it manually, putting more time into research.
“It’s an equaliser for the smaller firms,” Datta says. “In the past, you could have a scenario where you lawyer up with a larger firm, and that firm has way more resources, both from a talent perspective as well as just capital. So, they can bury a smaller firm in things like paperwork and litigation, and the smaller firm is left to comb through boxes of paperwork.
“Today, both firms – large and small – have access to document summarisation technology through innovations in AI, so it’s a levelling of the playing field.”
Why now is the right time to be a legaltech investor
The company launched corporate VC arm Clio Ventures at the end of 2021, and it remains a small operation, one Datta runs with Clio’s corporate development manager alongside its M&A activities.
Clio’s cloud-based platform lets smaller legal practices access software tools that help them organise everything from onboarding clients to managing cases and tasks, through to invoicing and billing. The fund was formed partly to carry on growing an ecosystem of partner services around the platform, and it’s part of a new wave of CVC units with very specific focus areas.
“We’re very selective,” Datta says. “We are mostly focused on opportunities that help improve law firm efficiency and productivity, which is the sweet spot of where our customers are and where we feel we can add the most value.”
That sweet spot translates to portfolio companies like Proof, which offers on-demand process serving through an app that allows lawyers to keep an eye on documents through a system Datta compares to the Domino’s Pizza Tracker. The company has also invested in Steno, which provides bespoke court reporting services and litigation financing support for small firms. It can all be accessed through Clio.
“I often tell founders that if you’re just looking at Clio as a way to round out your investment round and for dollars, Clio is likely not a good fit,” Datta says.
“I think where Clio makes a lot of sense is where we can add strategic value from the customer base, the distribution that we have. Clio is used by over 150,000 legal professionals in 100 countries so if, as a company, you are looking to target small and medium-sized law firms across the globe, there is no better place on the planet to do so than on Clio.”
Clio Ventures also has an advantageous position because the legal sector as a whole is relatively insulated from economic downturns, Datta says, even if some areas of it might do well in bull or bear markets. That factor, combined with the technology breakthroughs it is seeing, means Clio has no plans to slow down.
“We’re not shy about investing and doubling down, even in this macroclimate”
“We’re seeing a lot of innovation happen now, and with a programme like Clio Ventures we are taking a hard look at many of these opportunities and seeing use cases coming into our customer segment, and we’re not shy about investing and doubling down, even in this macroclimate,” Datta says.
There is, however, one way in which the down market is helping.
“In times of economic distress, technology has an even more meaningful role to play because it can help increase efficiencies and productivity,” Datta says. “When you’re thinking about how you can do more with what you have, technology can enable that. I think that’s why a lot of these vectors are combining to create a supercycle of innovation in legal.”
