The wartime CEO

The last month has seen several research reports around the impact of legal tech. These include broad studies from the biggest information and tech providers and in-depth research into the global legal tech startup dynamic. And legal tech is helping to support Ukraine’s digital economy.

M&A is still the legal tech trailblazer

Litera, which has made multiple legal tech acquisitions in the past 18 months, looked at how technology is transforming mergers and acquisitions, where widespread adoption of specific technologies is reimagining workflows and teams.

The two most popular technologies in M&A departments were task-based – contract review and digital signatures – and the next three were around organising information – project management, knowledge management and data room. Lawyers ranked the most important technologies as contract review, data room, negotiation platform, diligence automation and digital signature. Consequently, 84% of respondents expected to increase their technology spend in the next 12 months. Thomson Reuters’ State of the UK Legal Market report reflects this finding when it identifies M&A as the fastest growing legal practice area.

However, M&A may not be an indicator for legal tech adoption generally, as it is widely recognised that M&A departments are early adopters of new software and systems. Indeed, 91% of respondents anticipate that artificial intelligence (AI) tools for document review will become a standard part of M&A due diligence processes within five years, and 81% report that clients are asking them about their AI capabilities. This is unsurprising, as the first legal AI applications were developed to speed up deal due diligence. However, the report went further, setting out how technology adoption is also changing the people side of the business, introducing new roles and requiring digital skills and training.

Global startup trends for legal AI

On the vendor side, there are always trailblazers to be found in the startup community. The Global Legal Tech Report (GLTR) produced by Australian consultancy Alpha Creates analysed trends in legaltech startups, highlighting emerging directions by identifying where startups are thriving and growing, what type of technology offerings are most successful, and who are the founders and leaders. It looks at where legal tech is really a global movement and where, after the initial burst of innovation and investment, jurisdictions are moving in different directions.

The GLTR identified 35 product categories offered by legal tech startups. The most popular were document automation, legal operations and task management, closely followed by collaboration, compliance, and online legal services.

GLTR findings also point to legal AI hitting the mainstream. In 2021, in all regions except Africa, AI represented a smaller proportion of legal tech startups’ underlying technologies – supervised machine learning, information extraction, natural language processing and knowledge base expert systems – as more offerings are based on pre-programmed code. Market penetration of legal AI startups decreased in all regions except Africa and Asia, and most significantly in the UK and Australia, whose liberalised legal markets tend to be ahead of the legal tech curve. Notwithstanding this, revenue outlook at AI legal tech companies has improved, the outlook for client retention is positive and more legal AI companies indicated that an acquisition is on the horizon. This signals the same trend as Litera’s report – with AI becoming ubiquitous, it is easier for AI companies to raise funding and attract buyers, but more challenging to create an innovative new AI application.

Legal tech in Ukraine

Tech and legal tech are making a huge difference in war-torn Ukraine, where the internet is enabling many Ukrainian companies to continue to do business. They rely on internet access (which is patchy, but usually available) and the ability to work flexibly in virtual teams and continue to offer online services and work with international clients and partners.

Legal Nodes is a Ukrainian legal tech startup founded in 2018. Its core offering is an online platform which is a virtual legal department for startup founders, many of whom are digital nomads running cross-jurisdictional online businesses. Before the conflict, its main business was in Ukraine, but in the past two months it has expanded its international business, developing new offerings and clients in the Web3 (blockchain/crypto) space.

Most of its 22-strong team are dispersed around western Ukraine. They were working remotely before the conflict, and they have continued operations and launched its first Web3 product, the DAO Legal Wrapper which helps companies manage liability issues around decentralised autonomous organisations. Other Web3 services include advice around DAO registration and legal structuring.

Co-founder and CEO Margarita Sivakova (the only team member based in London) was in Kyiv meeting colleagues and visiting family when war broke out. The airport was hit by a Russian rocket and all flights were cancelled. She eventually returned to London via Hungary. Her co-founders, Nestor Dubnevych and Maksym Maliuk, are still in Ukraine, running the business and supporting Ukraine’s war effort. Head of data protection Vlad Nekrutenko joined Kyiv’s defence forces (and was recently featured in a BBC News report). Dubnevych, who co-founded Kyiv Legal Hackers in 2017, has been posting on LinkedIn describing his experience of running a startup from a war zone.

The wartime CEO

Early in her startup journey Sivakova read Ben Horowitz’s (of Silicon Valley venture capital firm Andreessen Horowitz) thought-leadership piece Peacetime CEO/Wartime CEO which outlines the management qualities that underpin successful leadership in different business/economic environments. Horowitz draws a distinction between kindly leaders, and leaders who consider their company to be at war with its competitors – and creating a balanced leadership personality. ‘It occurred to me that I am literally a wartime CEO,’ observes Sivakova. ‘I’m not fighting with our competitors. I am actually a CEO in wartime, and there’s no book that teaches you that.’

The immediate focus for Sivakova and her co-founders was logistics and communication. Maliuk, who lives in a relatively safe area, supported colleagues and their families fleeing from Kyiv.

Sivakova says: ‘During the first days of the war we were busy evacuating team members to safer areas and helping some female team members leave the country. We communicated with our international partners, clients and investors and posted news on social media. Each member of the team worked on two fronts: to protect our country and to save our company.’

As soon as everyone had relocated, Legal Nodes resumed business operations. ‘Startups always work hard, but when the war started, there was nothing to do apart from reading and working, so we went into creation mode,’ Sivakova says.

‘Before the war, we were developing one new product every three to six months. Since the Russian invasion we have launched three new products, two legal startup products and DAO Legal Wrapper, which reached top-five product of the day on Product Hunt. Because we couldn’t rely on a stable internet connection for online webinars, we focused on content creation and redesigned our website and our blog.’

Keeping in touch is a constant challenge. ‘We had set up a group chat before the war, as our team members are all over the country.’ Dubnevych wrote about the first few days of the war. ‘Sending the “How are you?” message, at this point – a usual way to start the day – was followed by thinking “I hope they answer”.’

Team morale and mental health is a key priority and Sivakova has engaged a psychologist to provide online support to team members, which has proved valuable for team members who strive to be productive, while they and their families are living in precarious conditions. They have a Friday all-hands meeting where they talk about the highs and lows of their week.

Nobody starting a business anticipates working under wartime conditions. Sivakova outlines her strategy: ‘We take things one day at a time. We are expanding internationally, and we are looking to hire more people, and contribute more to the Ukrainian economy. The better we can do and the more globally we can operate, the better it will be for our country and our company.’

Hopefully she will soon be able to go back to being a peacetime CEO.