October 16, 2019
Investment in UK’s Legaltech Sector More than Doubled to £61m in 2018
£62m invested in 2019 already – surpassing 2018 total; UK is home to 44% of European legaltech start-ups
LONDON, October 16, 2019 – Investment into UK legal technology start-ups reached £61m in 2018, more than doubling the £22m invested in the previous 12 months, shows Legaltech Startup Report 2019, a report by Thomson Reuters and Legal Geek, the UK’s largest legaltech community.
The report shows that investment in UK legaltech start-ups has risen dramatically over the last five years – less than £1.5m was invested in 2014.
Legaltech start-ups have received at least £62m so far this year*, through the first nine months of 2019, surpassing the 2018 total.
The UK is the hub of European legal technology, with UK legaltech start-ups making up 44 percent of all legaltech start-ups in the EU. This is far higher than the UK’s share of the European legal services market (23%)**.
The strength of the UK’s legaltech sector is typified by London-based Tessian, a company which uses machine learning to protect law firms from data breaches. In early 2019, Tessian raised a record $42m (£33.5m) in funding following its expansion into the U.S. market. Additionally, Luminance, which uses machine learning to help lawyers better analyse data and contracts, received $10m (£8m) in funding from businesses including Magic Circle law firm Slaughter and May.
The report suggests the rapid development of the legaltech sector in the UK is the result of an extensive network of incubator programmes and tech labs created by law firms, corporates and universities. This framework has helped start-ups test products and develop their core functions into more sophisticated and valuable solutions.
In addition, UK legaltech businesses are benefitting from access to UK law firms themselves, which are at the forefront of changing legal business models and implementing technology. This access to law firms has enabled legaltech businesses to better understand how their products can be used in practice, and tailor products accordingly.
Many successful legaltech entrepreneurs in the UK have benefited from access to expert advice from more established market constituents as well as investment opportunities. In the last two years, there has been growing interest from private equity firms such as Sequoia and Talis Capital, which already have invested in the sector.
The rise in funding for UK legaltech businesses reflects the growth of the legaltech sector in the US, which has seen a number of successful fundraisings. Examples include LegalZoom, a US company which offers document templates and legal advice, raised $500m in 2018 and valued the company at $2bn. In 2019, another US company, DISCO, which applies artificial intelligence and cloud technology to eDiscovery, raised $83m.
Thomson Reuters and Legal Geek research tracks and analyses investment into 34 of the UK’s fastest-growing start-ups in the legal technology industry where reliable investment data is available. These businesses have received more than £175m over the last five years with 70 percent, or £122.5 million, invested since the beginning of 2018.
Jim Leason, vice president, Customer Markets at Thomson Reuters, said: “The UK benefits from a unique mix of a large tech and data science talent pool and world-leading law firms as well as easy access to capital through financial markets. This has enabled the fast-growing legaltech sector to thrive.
“Legaltech is now attracting funding from a variety of sources, including law firms themselves, private equity and venture capital funds. This interest has given start-ups the crucial leg-up they needed to take their products quickly through to the next stage of development and testing.
“The speed at which the legaltech market is maturing is evidence both of demand for these products and the quality of the support infrastructure in place for start-ups. Investors from across the world have clearly spotted the growth potential.”
Investment in the UK’s legaltech sector more than doubled from 2017 to 2018 to £61m
* Through September 30 2019
** See attached report
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