Report Reveals LegalTech Sector Doubled in Size in 2018

According to the Legaltech Startup Report 2019 published by Thomson Reuters and Legal Geek in October, investment into UK legal technology startups reached £61m in 2018. This shows the market grew to twice its size to double the £22m invested in the previous 12 months, and reflects a significant increase on the less than £1.5m that was invested in 2014.

In the first nine months of 2019, LegalTech startups received at least £62m, which far surpassed the 2018 total.

The UK is the hub of European legal technology, with British startups making up 44% of all new LegalTech firms in the EU. This is far higher than the UK’s share of the European legal services market (23%).

Thomson Reuters and Legal Geek research tracks and analyses investment into 34 of the UK’s fastest-growing startups 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%, or £122.5 million, invested since the beginning of 2018.

UK LegalTech Sector to Continue Robust Growth

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 US 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.

Lawthority, a fledgling LegalTech business tipped for strong growth in 2020, focuses on automating long-winded legal processes to allow British law firms to meet heavy demand in the consumer compensation claims market. The firm provides solutions for small to medium-sized practices that allow them to more effectively serve clients within the high-volume area of consumer protection.

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.

British LegalTech Sector Maturing at Rapid Rate

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 startups 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 startups. Investors from across the world have clearly spotted the growth potential.”

An Excellent Time to Invest

As emerging markets grow and mature, they are generally buoyed by investment, both institutional and private. As everyone knows, the success of an investment depends very much on the point of entry.

This is why there’s little point following the herd when markets see strong growth. One investor may see large returns, having entered the market early whereas another may not be so lucky if their timing wasn’t right.

The LegalTech market has shown itself to be maturing rapidly, which illustrates the level of confidence investors have in future growth. However, it also signals everyone else to jump on the bandwagon and seek out LegalTech investment opportunities. Such is the law of supply and demand that as interest in an investment sector grows, value opportunities diminish. This means that the time to invest in the legaltech sector is right now.

Diversified Property is offering exciting opportunities to invest in a LegalTech firm poised for exponential growth. With entry levels from just £3,000, you can earn up to a very healthy 40% total return over a three year term. Find out how you can make a timely investment in what is sure to become the most exciting growth sector in 2020 by contacting us today.

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