Emerging Technology — a segment of the tech industry that increasingly is being targeted by law firms for new business — exists in a very different market than that to which most corporate law firms are accustom
In a recent Thomson Reuters Market Insights study surveying legal buyers from the growing Emerging Tech sector, we found that this group of decision-makers — typically CEOs and founders, rather than in-house lawyers — use different criteria to select which law firms to hire for their external counsel, resulting in a very different landscape from what we see in the larger legal market.
In exploring the differences between Emerging Tech decision-makers and those from the broader legal market, we can evaluate how law firms can first capture the attention of Emerging Tech, and then how they can maintain a connection to these companies as they grow, go public, or get acquired, gaining through their corporate lifespan their own more-sophisticated in-house legal teams.
Differences in buyers’ role
One of the primary distinctions between Emerging Tech and the overall corporate legal markets is the decision-maker. In general, founders and CEOs make outside legal hiring decisions for Emerging Tech companies, while that responsibility falls to in-house council for larger corporations. The contrast of making legal hiring decisions as a lawyer rather than as someone on the business side has a meaningful impact on what factors the buyer is paying attention to.
In both sectors, recent contact is the strongest driver of awareness — meaning that to stay top-of-mind for buyers in Emerging Tech, as with buyers in the wider legal market, law firms need to establish regular, personalized outreach. Reputation, by contrast, has a much bigger influence on awareness for emerging tech buyers than it does for larger companies.
In fact, those founders and CEOs surveyed cited the variety of awareness drivers at a higher rate across the board — using the connections they have in the market to ensure that their external counsel has experience working with companies similar to theirs. A law firm’s reputation and past experience is therefore key to standing out in the Emerging Tech sector.
We see similar trends in favorability. In both segments, the main driver is expertise — but Emerging Tech buyers are significantly more likely to call out reputation as a reason to favor a particular law firm. Without a legal background, Emerging Tech buyers are ill-equipped to evaluate firms on quality, and therefore rely more on reputation as a proxy.
It’s no surprise that with different criteria driving both awareness and favorability, we’d see dramatically different landscapes when comparing the two sectors.
Latham & Watkins is the most mentioned law firm among general counsel from companies that have more than $50 million in revenue. When we shift to the Emerging Tech landscape, however, Latham & Watkins remains strong, but we also see Cooley and Wilson Sonsini Goodrich & Rosati, two tech-focused law firms headquartered in Palo Alto, California, emerge as leaders, even though they both have much smaller footprints in the wider legal market.
These two smaller firms also generate stronger awareness among larger tech buyers than they do in the broader market, a position that certainly serves to boost their reputation among technology buyers across all company sizes.
The success that these top law firms see among Emerging Tech buyers in part stems from their reputation as having strong knowledge of the tech sector more broadly, including among legal services buyers from larger companies. Law firms that have been identified as sector specialists by legal buyers can capture a higher proportion of their clients’ external legal spend — a useful lesson for any firm considering a sector-focused strategy.
“I think Cooley does a really good job of being ahead and aware of all the things that are happening in the technology space. And I think one thing I really enjoy is that their client alerts are very clean and clear and include a lot of the substance of information that you really need.”
– a legal buyer, speaking about Cooley
Growing with Emerging Tech
For an entry point into Emerging Tech companies, law firms should look to expand existing relationships with larger tech companies as a way to support a market reputation as a sector specialist. Participating in events like roundtables that bring together industry leaders, on both the legal side and the business side, can help a firm grow its sector specialist reputation and can become a learning touchpoint for the firm.
As Emerging Tech companies get larger and more complex, they will naturally look to bring in an in-house legal department. This can be a challenge for law firms that have already established a relationship with business leaders. A new general counsel or law department leader inevitably will come in and often bring in the firms with whom they’ve worked in the past.
That means that no matter what stage your firm is at with a company, it should look to build a presence with GCs across the board so that when they come in, your firm is a known entity that has spent time developing that relationship and maintaining regular contact, thereby staying top-of-mind.
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