Israel reaches for new tech horizons

The business environment for legal tech has broadened. Public services, including courts and institutions like the Land Registry, digitise their services. And global tech giants like Microsoft look at what they can offer legal and professional services that are already using their enterprise software. More venture capital funds are looking at legal tech start-ups and scale ups; the Big Four consultancies are investing tech resources into their legal offerings; and large firms inspired by start-ups are investing in intrapreneurs from outside the sector to drive innovation.

Legal innovation is filtering down to smaller firms. Public sector services shift online and no-code/low-code software platforms and Web3 technology enable smaller firms with few if any in-house tech resources to develop integrated services and create new business models.

Israel’s legal tech scene

Israel is an interesting place to uncover tech trends because ‘the start-up nation’ is where many game-changing technologies originated. For this reason it attracts entrepreneurs, investors and big tech companies looking to acquire ‘the next big thing’. And legal tech/law tech is no exception.

The Israeli Embassy’s LegalTech Innovation Tour met investors, tech companies, start-ups and law firms. Deloitte Catalyst, which was launched in Israel to connect Deloitte’s corporate clients and Israel’s tech and innovation ecosystem, hosted a roundtable which included a panel discussion on the crossovers of legal tech.

Noa Mayer, legal marketing consultant and lecturer in legal tech and innovation at Reichman University in Tel Aviv, opened the discussion, observing that the nascent legal tech scene in Israel lacked the strategic direction that was apparent in the more mature markets in the UK and the US.

Josh Rosenzweig, senior director of digital transformation and user experience at Morgan Lewis, has built a team of UX (user experience) designers and product operations professionals, with the remit of sourcing and building tech tools that improve attorney productivity and clients’ experience. He emphasised the importance of delivering a strategy that fits the firm and its culture. ‘Different firms have different tech requirements and just because another firm is using it doesn’t mean it will work for us,’ he said. However, the dichotomy is that innovation cannot be too prescriptive. ‘Deliberately not introducing a feedback mechanism enables a “fail fast” tech developer approach and this allows us to experiment with new tools – and when they don’t work for us, or attorneys don’t use them, we move on to the next project,’ he explained.

Law firm innovators like Rosenzweig are changing the conversation between attorneys and clients: team members attend client meetings to explain the firm’s tech resources and highlight new solutions as they become available.

'Different firms have different tech requirements and just because another firm is using it doesn’t mean it will work for us'

Josh Rosenzweig,  Morgan Lewis

As Zohar Fisher, founder of Robus Legal Marketing, Tech&Law, Israel’s first legal tech platform, and co-founder of the LawFlex legal outsourcing platform, observed, legal tech represents a branding opportunity for law firms, enhancing services and client relationships. He believes tech adoption is generational. ‘Younger partners are providing more commoditised services and younger general counsel are more accepting of replacing human effort with tech to save time – for example, using artificial intelligence (AI) e-discovery engines.’

Despite being a global leader in tech innovation and the country with the highest number of lawyers per 100,000 population, Israel’s legal tech market lags behind the UK and the US. A contributing factor is that the vast majority of Israeli firms have fewer than 500 lawyers. But this does not prevent them from innovating, argued the panel, who advised starting small and identifying potential quick wins. Fisher suggested cultivating an appetite for change by establishing a community (including partners) to talk about day-to-day problems that might be solved by technology. And then work with external developers to create bespoke tools or partner with vendors to customise off-the-shelf products.

The panel looked forward to the legal tech market shifting from a multitude of point solutions to a more integrated approach that takes inspiration from other industries and big tech companies. The evolution of the legal tech market to a more integrated approach is supported by government investment in initiatives. These include Lawtech UK and, in Israel, the work going into Hebrew NLP (neuro-linguistic programming) for AI models. There are also new university courses that blend law and technology, such as the MA in law, technology and business innovation, (which includes coding) run by Professor Dov Greenbaum, director of the Zvi Meitar Institute for Legal Implications of Emerging Technologies at the Harry Radzyner Law School at Reichman University.

The panel was followed by a pitching session from start-ups broadly equivalent to those in the UK and US: AI document assistant Firstread, document automation tool LegalUp, and legal workflow platform ModuLegal. There were presentations from scale-ups LawFlex, a legal outsourcing platform that matches interim lawyers with assignments in Israel and internationally, and Lightkey, an AI-powered predictive typing and punctuation tool. This helps lawyers speed up document production. Separately, we visited Darrow, a justice intelligence platform, which uses public data to detect legal violations. It has dramatically expanded its operations in the past year.

A new wave of innovation?

The tour visited Microsoft’s new offices and Check Point, the American-Israeli multinational cyber security company that invented the firewall, and includes law firms (which are common targets for cybercrime) among its international clients. These systems and applications (and point solutions like DocuSign and Lightkey) were not developed for legal services but they have the capability to transform them, and potentially limit market opportunities for entrepreneurs and investors.

Vintage Investment Partners’ value-added services, led by Orit Shilo, helps start-ups, funds and corporates to innovate and scale. Like Deloitte Catalyst, they match solutions to corporate needs, making introductions that regularly lead to partnership agreements. Unlike fintech, where there have been category-defining companies, legal tech has not yet produced a true game-changer. But once a couple of (probably US) scale-ups make it big, analyst Noa Bloch envisages a whole new wave of innovation.

Consolidate or pivot?

However, rather than making it big, legal tech start-ups and scale-ups are either acquired by incumbent vendors or split/spinoff rather than aim for an initial public offering (IPO).

Last year, Canadian AI contract review and automation pioneer Kira Systems was sold to Litera, and the co-founders launched a new spinoff, Zuva. Last week, Israeli contract review company Lawgeex – whose AI-powered software automatically reviews incoming contracts – announced a similar pivot. This retains the existing brand for the enterprise business, and launches a new company, Superlegal.ai, targeting SMEs. However, Lawgeex has not (yet) divested the original brand and is laying off a third of its staff.

Israeli legal tech commentator Zach Abramowitz reported that CLM (contract lifecycle management) company SirionLabs was set to acquire Lawgeex, and the layoffs were announced after the deal fell through.

Lawgeex founder Noory Bechor explained the rationale for splitting the business. ‘We are fortunate to have a mature product and a large book of business of enterprise customers. These allowed us to move the enterprise business into profitability so it will no longer be dependent on external capital fundraising. As opposed to the enterprise business unit, Superlegal is a young start-up, and we definitely expect to raise additional capital for it, and we are already seeing strong demand from investors. In the meantime, we need to operate it in a capital efficient way as investors pay special attention to financial metrics, even from an early stage in the company’s lifecycle.’

Splitting the business enables Superlegal.ai to raise funds independently (as Zuva has), but also reduces the chance of a category defining ‘killer app’ for legal.

On-chain on the high street

Here in the UK, cutting-edge tech hit the high street with Inspire Legal, which claims to be the UK’s first on-chain high street law firm. Inspire Legal operates a virtual consultancy model whereby lawyers are self-employed and work online. From the outset, all documents and business processes were managed in the cloud, using Clio’s CMS. Inspire Legal is about to launch a blockchain model for smart legal contracts, which will shift the firm from Web2 to Web3 to become the UK’s first on-chain law firm. ‘Our blockchain case management software, Vleppo UK, [a joint venture between blockchain technology company Vleppo and Inspire Legal Group] is an end-to-end platform that will enable any legal transaction to be completed using smart contracts – asset values are exchanged using [non-fungible tokens],’ explains founder and CEO Natalie Foster.

 

Thanks to Cameron Crowley, Trade Officer, Economic and Trade Mission to the UK at the Embassy of Israel and all participants and contributors to the LegalTech Innovation Tour.