Breaking America

The Department for Business and Trade (DBT) legal tech mission to North America brought together legal tech trends and scoped out potential business opportunities for UK lawtechs. A group of UK start-up and scale-up companies participated in activities and events in Toronto and New York, including attending the massive Legalweek conference.

Ewan Evans, professional business services project manager, services and skills directorate at the DBT, said: ‘The objectives of our mission were to provide a comprehensive platform for UK legal tech firms to explore, understand and successfully penetrate the North American legal tech market, fostering international collaboration and business development.’ Evans organised the mission, together with Rytas Stankunas, senior trade and investment officer, financial and professional services at the British Consulate General in New York, and Shweta Chauhan, senior trade and investment officer at the British Consulate-General in Toronto.

Canadian firsts

DBT identified Canada and the US as priority markets for UK legal tech firms. In Toronto, delegates showcased technology to law firms and corporate general counsel, and explored a few firsts.

Joshua Lenon is lawyer in residence at Clio, the world’s first legal practice management ‘unicorn’ (a start-up company valued at over $1bn). In 2022 Clio reached ‘centaur’ status, surpassing $100m in annual recurring revenue. Lenon spoke to delegates about the internationalisation of legal technology and delegates visited Toronto’s Legal Innovation Zone, the first world’s first legal technology incubator.

Chauhan reiterated that Canada is the second-fastest-growing market globally for UK legal services, most of which is legal technology – so there are massive opportunities there for UK lawtechs.

US opportunity

It was clear from the sessions at the British Consulate-General in New York that the US legal market is a massive opportunity. However, establishing a (subsidiary) business in the US is more complex than it is in Commonwealth countries such as Australia and Canada (except Quebec) where legal systems are founded on English common law.

The DBT supports UK companies interested in selling into the US. It provides appropriate resources and introductions at each of three stages– exploring, selling and expanding/growing. However, in order to benefit from this and other support, a business has to be US-market ready. Stankunas identified five features of a typical US-market-ready company.

• Proven success in the UK/Europe with at least 20 employees;
• Globally recognisable corporate clients;
• Already selling into one or two US companies;
• Revenue-generating or funding-backed; and
• Unique service-offering with known differential from competitors.

This may seem quite demanding, but although trade mission companies were at different stages in the start-up/scale-up journey, they fulfilled most or all of these.

Location, location, location

As the US legal system is based on federal and state laws, location is key. Stankunas explained that the US is in effect 50 jurisdictions, each with its own business, tax and employment regulations. Although there is no UK-US trade agreement, the UK government has signed a separate Memorandum of Understanding with seven US states – Indiana, North Carolina, South Carolina, Oklahoma, Utah, Washington and Florida. It is also actively engaging with others, including Texas, California, Colorado and Illinois. Start-up accelerators can add value for early-stage lawtechs and companies which are exploring the options – as places to work and network. The trade mission visited Barclays fintech hub Rise in Manhattan.

Another session underlined the value of legal advice when setting up US subsidiaries, because taxes and regulations are different in each state. Taking on staff and consultants means complying with US employment rules. Attorney Allan Rooney, who helps foreign firms set up corporate entities in the US, explained some of the complexities involved and answered questions about the pros and cons of different locations, as well as visas, residency and tax issues, and employment rules and requirements.

‘Americanize’ a lawtech start-up

Sessions about breaking into the US raised the question of how far to ‘Americanize’ a business. While the UK is a global leader in lawtech start-ups and AI adoption, it remains crucial that start-ups looking to sell to US firms and legal departments relate to the majority of their target market. Points were raised about US firms generally being more ‘old school’ than jurisdictions with a liberalised legal services sector. Most prestigious ‘white shoe’ firms remain committed to the billable hour, and (sometimes because of financial services clients’ requirements) their systems are not always in the cloud. Law firms and corporates have already invested heavily in enterprise systems and knowledge resources so interoperability is key – at infrastructure level (that is, systems integration) and at user level (that is, lawyers don’t have to learn yet another system).

The trade mission enabled founders to explore the possibilities for their business, find out what support was available – from the DBT and elsewhere – and meet local law firms to discover what tech they are looking to invest in, or what pain points they are looking to solve. The group included companies at different stages in the start-up, scale-up journey – from scale-ups which already have a US/Canadian presence, to early-stage founders exploring potential market fit.

Lawtech takeaways

Evans said: ‘I hope the key learnings the companies took away were around the sheer amount of opportunities in the US and Canadian markets and, more importantly, that exporting or expanding overseas is a major tool for growing your business. I believe they are all keen to continue the conversations they made on our visit and also look to explore other markets, which DBT will support them to do.’ And delegate feedback illustrated how companies at various stages of development benefited most from different sessions.

Lawtech Software Group, whose client onboarding platform Verify 365 and online identity verification software is used by law firms, estate agents, accountants and independent financial advisers, already has clients (and a server) in Canada. ‘Canada is a natural step for us because of the similarity of the Canadian and UK legal systems,’ explains founder and CEO Rudi Kesic. He says that the trade mission was a great opportunity to learn about the legal market and form connections. ‘Without DBT we wouldn’t be able to get in front of so many law firms, and we are even more determined to form strategic partnerships and set up a Canadian subsidiary.’

In the US, the challenge for Verify 365 has been that UK professional services are more sharply focused than their US counterparts on anti-money laundering compliance. However, this is likely to change due to the reporting requirements of the Corporate Transparency Act which came into force in January.

'Without the Department for Business and Trade we wouldn’t be able to get in front of so many law firms, and we are even more determined to form strategic partnerships and set up a Canadian subsidiary'

Rudi Kesic, Lawtech Software Group

Manchester-based contract lifecycle management scale-up Summize launched its Boston-based subsidiary in October 2023. Founder Tom Dunlop is looking to expand its US presence and client base.

Canveo is a digital end-to-end contract review and negotiation platform that is popular because it integrates with multiple platforms. Founder David Buser explains that the company currently operates in the UK and Switzerland and has a roadmap for international expansion. It already has US customers and is establishing a presence in the market. It is in discussion with a Canadian law firm that attended the trade mission presentation.  

Alchemy Machines, which combines natural language processing and speech and voice recognition to create intelligent, contextual meeting transcriptions, summaries and analysis, only launched its flagship product at the end of 2022. While founder and CEO Dia Thanki considers it too early for a US subsidiary, the trade mission provided insights into where the product could find market fit in the US, and connected her with potential investors, partners and clients.

Generative AI – data back in the hot seat

The hot topic of the trade mission and the conference was generative AI, which was the subject of 31 (of 89) conference sessions. The keynote interview with actor Bryan Cranston (pictured at top of page), star of Breaking Bad, touched on the use of AI-generated images in films and photoshoots. However, the themes covered were familiar. Ethical concerns included how to prevent AI misuse, and data security was rightly top of mind, along with ensuring generative AI tools were only used behind the firm’s firewalls on ring-fenced data.

A panel session on large language models in relation to knowledge management focused on the importance of well-structured datasets. In another session pertinent questions were raised about whether/when law firm billing models would need to reflect the time-savings made by generative AI.

 

The author would like to thank Ewan Evans (London), Rytas Stankunas (New York) and Shweta Chauhan (Toronto) at the Department of Business and Trade