Hey, LegalTech Startups: It’s about demand

So, my legal tech consulting career is barely two weeks old [1]. And yet I’m struck by how much of legal tech I’ve seen in the past 5+ years. I’d guess I’ve seen hundreds of startups cross my “desk,” I’ve talked in depth with dozens, and even before I’d left Avvo gotten to know a few very well. In my best judgment all of the companies that I’m talking to or that I’ve been fortunate enough to have hire me definitely seem pointed in the right direction. And I’m hopeful I can help keep that momentum going. Still, all of that experience is bringing one key theme to mind. It’s not anything all that revelatory. In fact, I’m kind of surprised that I’m bringing it up at all.[2] And yet, I’m struck both by how important it is and how hard it is.

Listen, if you don’t have something someone will buy, you’re going to have a hard time growing and scaling your business.

I haven’t spent much time in startup ecosystems outside legal, so I’m not sure if this is a problem more broadly. I’m also not steeped in startup literature, so I’m not sure whether forests of virtual trees have already been chopped down in service of this topic. I can say that it’s a problem I’ve been thinking about lately and it’s worth a blog post to quickly unpack.

First, I do think this problem is endemic to legal and particularly endemic to legal technologies or processes that endeavor to be any kind of a connector between consumers and lawyers. Regarding the latter, I’ve seen a lot of legal marketplaces, lead generation, and other types of sites come and go both during my time at Avvo and as I’ve tracked legal tech. For a variety of reasons (the founders are lawyers, regulatory concerns, lawyers are the most immediate target) many of these services focus initially on getting lawyers on the platform or convincing them to join. This doesn’t make any sense. If you can bring willing legal consumers with money in hand – what I call the “demand” – then the lawyers, the folks selling stuff – the “supply” – will almost certainly show up. In my experience it’s generally much harder to bring demand than supply in legal. Regarding legal tech more broadly, there seem to be a lot of legal folks out there who either have a technology or imagine one and say “I wish this existed for my practice” or “If I were one of my clients, I would use this all the time.” There are probably names for these fallacies or cognitive biases, but I think they’re pretty simply explained: just because you wish you had something doesn’t mean everyone does and just because you think someone should or would use something doesn’t mean they will. You must have something that people will buy or, at the very least, use.

Which leads really nicely to my next point. Customer development guru and lean startup methodology godfather, Steve Blank, wrote in The Startup Owner’s ManualNo business plan survives its first contact with customers.” In this context, I interpret this to mean that you want to get your business idea into the hands of customers as quickly as possible because it’s almost certain that they’re going to challenge some or all of your hypotheses about your product of business. Best to know where you’re wrong as quickly as possible so you can adapt and improve. For legal tech this means you need to get your idea (via prototype, test, trial balloon, or whatever) into a customer’s hands ASAP. And you need to know just as quickly how these people will use it, whether they’ll pay you, and the answers to a host of other similar questions.

Finally, focus on the market not the product. A podcast I listened to recently quoted Peter Thiel (perhaps from his recent book Zero to One) as stating that key to any successful startup is “a great product.” Now, I haven’t read Zero to One and none of the research I’ve done about Peter Thiel suggested he said this so I don’t want to throw Thiel under the bus unfairly. That said, even if Thiel didn’t say and doesn’t even believe it, I don’t think the statement contradicts the conventional wisdom about innovation. Specifically, many see innovation as some radical, technology-heavy solution that comes out of nowhere and changes our lives. Maybe. More likely, though, is incremental, iterative improvement over time with a clear and well-established value proposition for which customers are willing to pay. Don’t worry about having a “great product” tomorrow. Worry about whether someone will pay you for what you’ve got today.

People vote with their dollars. The fastest way to figure out whether you’ve got some world-changing legal technology is to get it into the hands of users and better understand if and how they’re using it, how you can improve upon it, and whether they’ll give you any money for it. Because without demand, you’re not going to get very far.

If you’re trying to build the latest demand-driven tool in your legal firm or legal tech business, I’d love to connect. Sign up for the mailing list to keep in touch.


[1] Honestly, I’m having a ball.
[2] I even hit it in a previous post when I quoted Haley Altman from Doxly, who said “If you have a product and no customers, you have a hobby. If you have customers and no product you have a business.”