Career Alternatives, Technology

alt.legal: When Starting A Legal Tech Company Is The Right Risk

Going from Biglaw into a startup carries a lot of risk; how can you tell if it's the right choice for you?

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We spend a lot of time thinking about the ways that prestige and resources and belonging to elite institutions make us better off. We don’t spend enough time thinking about the ways in which those kinds of material advantages limit our options.

— Malcolm Gladwell, David and Goliath (2013)

Starting your own practice or legal tech business is rightly viewed as revolutionary, adventurous, and requiring high risk tolerance. Basically, crazy. We’ve even put it that way ourselves. There’s also a school of thought, however, that views starting your own shop as the reasonable next step in life, a rational risk worth taking even against (conventionally) huge odds. It’s a different assessment of what is traditionally considered risk.

My conversation with Erik Dykema smacked of this sensibility, a highly rational existence according to a completely different system of logic. Erik, an engineer/patent lawyer of Carnegie Mellon, Brooklyn Law and King & Spalding pedigree, co-founded a legal tech startup called CaseRails (for now, according to Ars Technica) that provides document automation. Unlike some startup founders we’ve met, he came off as eminently sensible, very intelligent, and in no way a crazy or risky person – even when he addressed the slight insanity required to undertake something like this.

If this je ne sais quoi is something you jive with, get to the end of this post, as Erik has some actionable advice for you.

The Product and Its Market

Ed Sohn: What does CaseRails do? What is this thing?

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Erik Dykema: CaseRails is a web-based document automation system for lawyers. We save lawyers time and help them prevent mistakes. All lawyers know that they deal with a lot of repetitive documents. Whether transactional or for litigation, there’s always a few things that are authored every week where most of what you do is change a few items: engagement lawyers, NDAs, litigation documents. CaseRails takes those repetitive documents that you’re already writing and moves the workflow into a form. It helps you churn out that document in 30 seconds, without errors.

Sohn: It seems kind of Google-like, in the sense that a core product works effectively and scales to an endless variety of use cases. Do you have a big picture for CaseRails going into the future?

Dykema: I can’t give away our total master plan, which we invested into very heavily, but in two broad strokes: (1) we’re interested in working with attorneys in steps before and after the document automation, and (2) we want to find ways to introduce more customization into the automation environment.

Sohn: How do you get lawyers to use this? What’s your angle?

Dykema: I don’t think we totally know yet; if we did, we’d be on our way to being really rich! My approach is always an educational one. I’m a bit of a teacher – I teach a course at NYU – and I always take this angle of educating our clients. After that, we’ll figure out together whether it’s a good fit for you or not. For who attorneys who are always interacting and on the phone and on their feet, this might not be a great fit. For other attorneys that are doing fairly standard work for a large number of clients, this is probably something you’d really like.

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The hardest sell is for attorneys who don’t know that they need this yet. They view all those steps that we’re automating as the areas where they add value. We’re getting them to understand that we can cut those steps out and move them forward to where they really can add true value.

Sohn: This sounds familiar. I work in legal tech and managed services, and it’s really hard to help lawyers save time and effort when they get PAID on expending time and effort.

Dykema: Yeah, it’s tough. People really get into a routine, and why would they change how they make money? For us in legal technology, the point is that we save you time and effort so you can do other things with your time. What other things? Probably going out and getting more clients. But some attorneys don’t love the selling part of the business, they’d rather just make enough money on their existing clients.

Sohn: Do you ever see that light bulb go off as you’re presenting the product? When attorneys suddenly realize, “Crap, you’re making me obsolete?”

Dykema: Yeah, and this is where I’m a rookie and have made some mistakes. Early on, I was having all these uncomfortable conversations where I tell the attorney, “This is going to save you tons of time, you won’t have to do all this work anymore!” I started getting attorneys pushing back, defensively, saying, “This may make sense for someone else, but in my practice, everything is custom.”

Suddenly they think I’m insinuating that their practice is just templates, not custom. You can really make some people mad when they think you’re criticizing their practice when you’re really just trying to help.

Oh and by the way, attorneys that mostly work on a fixed fee get it immediately, as soon as I start talking. More efficiency is more profitability for them. It’s the billable people where I’m putting my foot in my mouth all the time.

The Journey

Sohn: Going from Biglaw into a startup carries a lot of risk. How did you deal with this?

Dykema: There are two answers to that.

First, for me personally, my career has been sort of an exercise of trial and error, of mastery and advancement. I was an engineer, figured it out, then went to law school. Got a job at a firm as a patent lawyer, did that for three years, then I had a solid enough base for the next thing. Yes, this next thing is a big risk, an enormous super-long-shot gamble, but I felt I had the experience and knowledge to bring a lot to the table.

The second answer is that yes, it’s an insane risk no matter how you look at it, and you have to be a little bit crazy — 98-99 percent of startups fail, and those that don’t fail right away may fail later. You must have a somewhat irrational belief that you’re in the 1 percent, or if not, that it’s just fun and you’re in it for the ride.

Sohn: So HOW do you do this? Do you have to show up with a wad of money and a stable of advisors? Or is there a marketplace for investors and people who provide guidance?

Dykema: [Co-founder] Kyle [Zeller] and I had the idea at K&S. I had some of the original ideas and I talked Kyle into it. He got on board, we tried to get some meetings, and then we put a plan together. That was step one.

Now, there’s all these business-plan competitions and startup accelerators, so we decided to pitch our idea and get into one of those, called NYC Seed Start. The people reviewing the pitches were seriously Dream Team, the advisors and mentors you’d want. Venture and B2B investors, product people from big businesses (for instance, the product manager of Google Drive), huge tech companies like Amazon and Verizon. Somehow we won our first pitch and they invested into us.

This was all while we were still working at K&S. The investors told us we had to quit our jobs and work 80 hours a week on this startup for, like, three months. So we reached out to our personal networks (i.e., we called our moms and our friends), and we raised a first round of real capital with them to get us our first year of runway.

Sohn: Now you’re up and running, getting this thing released and trying to gain some momentum. Running a startup like this, are you constantly keeping getting bought out as part of the calculus?

Dykema: Yes, totally. We are not Twitter or Facebook or Pied Piper from Silicon Valley. The best road forward for this company is to prove to the world – or at least a few customers – that we can make this product and that it’s a real thing. Our hope is definitely to get noticed and then maybe acquired by a bigger company that knows how to do this stuff better than we do, like your company [Thomson Reuters].

Concluding Wisdom

Sohn: Any words of advice?

Dykema: If I could go back and give advice to the know-it-all me from three years ago, I’d tell him to still go for it. My number one piece of advice is to do tons of research, get lots of facts. Don’t sit in your office all day hypothesizing and handicapping the odds of all your possibilities. Go into the field, learn it, and do it.

In New York, there are tons of incubators and startup accelerators. CaseRails is literally located in the middle of an NYU poly-incubator. It’s great to be here, shake a lot of hands, and maybe reach out to help out someone else, maybe give some pro bono legal advice. Do a workshop on something useful to startups and people will show up and ask questions. You’ll learn a ton from them.

There’s even one attorney who networks with startups, does weekly office hours, and gets a ton of business development potential for his practice. One of these startups is going to make it huge one day, and he’ll be the lawyer they trust. You can do something like that, even as an associate — just be proactive and show up, even if a partner or the firm isn’t sponsoring this type of activity.

Sohn: Final thoughts for the Above the Law community?

Dykema: We have a free demo available on our site. Our competitors are big companies and can be really expensive, but we’re a super-hungry startup. If we can figure out a way to help you with your practice, we’ll do it. We love working with attorneys, we’ll come to your office, so give us a look and see if we can help you!

CaseRails [official website]
David and Goliath: Underdogs, Misfits, and the Art of Battling Giants
[Amazon (affiliate link)]

Ed Sohn is a Global Director at Thomson Reuters’ award-winning legal outsourcing company, Pangea3, which employs approximately 1,000 full-time attorneys globally. After five and a half years as a Biglaw litigation associate, Ed spent over two years in New Delhi, India, managing hundreds of Indian attorneys and professionals in delivering high-value managed legal services. He now focuses on developing integrated technology and outsourced legal solutions. You can contact Ed about e-discovery, managed legal services, theology, chess, Star Trek The Next Generation, or the Chicago Bulls at [email protected].

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