Mergers and Acquisitions, Technology

Making Corporate Law Great Again: Intelligize Sold, alt.legal Entrepreneurs Cheer

The alt.legal industry is a booming, vibrant, and viable part of the legal ecosystem.

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Celebrating with Gary Sangha.

Celebrating with Gary Sangha.

We started the alt.legal column by asking all you young lawyers to “stop what you are doing” and take a walk on the alternative side of the legal business. We promised you, dear readers, that “entrepreneurs and innovators are changing the legal profession for the better, having fun, and making real money in the process.” But are they?

Over the past few years we have interviewed over a dozen top-flight lawyers building alt.legal companies alongside the startup wizards at Y Combinator, bootstrapping their business formation from friends and colleagues, and recreating pro bono from the ground up with technology to help more people access their rights. But, until now, we have not covered any legal startups who have seen a successful exit on our watch. You know, that moment when all that paper wealth and value turns into actual money you can spend? That moment when all the hard work pays off. Until today!

A few months back, I interviewed my friend and fellow Penn Law alumni Gary Sangha, dubbing him “the first serial legal-tech entrepreneur.” Well, he has finally done it. Just a few weeks ago, he sold his first alt.legal company, Intelligize, in a transaction — I’m told from many sources — that everyone is very, very happy about.

After working through the hangover from his epic sale party this weekend, I sat down with Gary one more time to get his thoughts. Was it all worth it? Would he do it again? Enjoy our conversation below.

Joe Borstein: Gary, you started Intelligize in 2006. What have you learned in this decade-long journey?

Gary Sangha: The first thing to realize about legal tech is that it really is a marathon, not a sprint.

I can’t think of any legal-tech startup that had a compelling exit within 36 months of its existence, like you often see in other sectors. From talking to the bankers and the people that handle legal acquisitions at the big legal vendors, it seems that the typical legal-tech startup is at least 7-10 years old when it gets acquired. What that means is, you better be passionate about the solution you are building and confident it will work!

JB: But why? Why can’t companies in this sector flip quickly for huge money? Where are the Instagrams, bought after two years by Facebook for $1 billion?

GS: In my view, it’s because the big legal vendors don’t have to do defensive acquisitions like that. New legal-tech companies just cannot reliably get access to new clients and build compelling market share that quickly. This means, first, you have to build a proper business that has real revenue. Second, your company probably has to turn a profit. In contrast, in other sectors, significant user growth or URL (ubiquity first, revenue later) is good enough. Not in legal. Third, even if you created the most beautiful, useful product in the world, there is just so much friction in getting adoption in legal. No one will use it, even for free, if you don’t make your case for your new way of practicing law, door to door, lawyer by lawyer. Making a wonderful product only gets you 10 percent of the way there. Sales and marketing is the challenging part.

JB: So it sounds like a really tough market. Are there any upsides over entrepreneurship in other sectors of the economy?

GS: There are several upsides.

First, you simply don’t have the ferocious competition that you have in other sectors. Second, to create a terrific solution and get the idea out there, you really need to have worked in legal services. This is a serious barrier to entry. You’re not going to have some undergrad at Harvard, working in his dorm room, coming in and in short order killing your business. Third, when you do acquire customers in legal, they are incredibly loyal and sticky, meaning they will not simply abandon your company for the next shiny thing. Finally, the big legal services vendors have a history of growth by acquisitions, so if you make something of yourself, you don’t have to worry too much about being a zombie company who no one wants (meaning you have to run it forever).

JB: So how does it feel to have completed the startup lifecycle in legal?

GS: Initially it didn’t hit me. It only really hit me when I got to tell my family and friends and see the joy on their faces.

JB: What about telling your investors?

GS: It’s a fantastic experience to be able to call someone out of the blue and tell them that they made a ton of money! The angels need these wins in order to have the confidence to back future legal-tech companies. And the legal ecosystem needs those angel investors!

JB: So what do you think about the new crop of companies?

GS: I’m just glad I wasn’t competing with these people when I started Intelligize. These people are very tech-savvy and know their marketplace inside out.

JB: How do you get past the key trap in selling to law firms, whereby any innovation that improves efficiency also reduces billables?

GS: Simply put, you don’t pitch efficiency. You pitch risk mitigation, pain avoidance, and FOMO (i.e., others are using this and getting value and therefore so should you). If tech can help make lawyers make fewer mistakes and produce better-quality work, that’s ultimately going to be compelling to lawyers.

JB: Last question. What’s next for you?

GS: I think there is so much room for innovation in Legal. I’m working on my new venture, Lit IQ, while continuing to teach at Penn Law. I’m also looking to invest in, or advise, the next generation of legal-tech startups.

JB: Thanks Gary! Can’t wait until the next exit!

So a final note today to all you alt.legal entrepreneurs — we know you are out there! Many of you are the best and brightest lawyers in the world, and you just want another way to use your law degree to enhance access to justice. Another way to help your clients. Another way to make great money. Another way to work at the cutting edge of the global economy. The answer is right in front of your eyes. The alt.legal industry is a booming, vibrant, and viable part of the legal ecosystem, and it is getting stronger every day.

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Joe Borstein Joseph BorsteinJoe Borstein is a Global Director with Thomson Reuters Legal Managed Services, delivering Pangea3 award-winning legal outsourcing services and employing over 1800 full-time legal, compliance, and technology professionals across the globe. He and his co-author Ed Sohn each spent over half a decade as associates in BigLaw and were classmates at Penn Law. (The views expressed in their columns are their own.)

Joe manages a global team dedicated to counseling law firm and corporate clients on how to best leverage Thomson Reuters legal professionals to improve legal results, cut costs, raise profits, and have a social life. He is a frequent speaker on global trends in the legal industry and, specifically, how law firms are leveraging those trends to become more profitable. If you are interested in entrepreneurship and the delivery of legal services, please reach out to Joe directly at joe.borstein@tr.com.

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