Technology

A BREAKING alt.legal Report: Unprecedented $65 Million Investment Shows Atrium Is On To Something Big 

This announcement will be remembered as an important moment in legal innovation for years to come.

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The Atrium Announcement

Alt.legal has covered legal innovation in depth for over four years, and we believe this announcement will be remembered as an important moment in legal innovation for years to come.

Today, Atrium is announcing that it has raised a $65 million round of funding, almost exactly one year after announcing its $10.5m seed investment. This investment round is led by the preeminent venture fund Andreessen Horowitz (“a16z”), with YC Continuity, Sound Ventures (Ashton Kutcher’s fund), and General Catalyst as co-investors.

Atrium is the startup law firm + tech company (Atrium LLP + Atrium LTS, together referred to as “Atrium”) founded by Twitch founder Justin Kan, former Orrick partner Augie Rakow and Nick Cortes. We reported a year ago (Parts I and II for your recollection) on the launch of their quest to change how law is practiced by starting a unique law firm + tech company parallel model. Since then, Atrium has helped more than 250 clients raise a total of over $500 million in primary financing, with a slate of clients to be envied including Alto, Bird, MessageBird, and Sift Science.

Atrium also acquired the technology and team from Tetra, a YC company with AI that supports Atrium’s mission to transform legal documents into structured data.

Tech heavyweights Marc Andreessen (the living legend), Andrew Chen (former Uber senior executive and now with a16z) and Michael Seibel (CEO of Y Combinator accelerator) will be joining Atrium’s board.

More details can be found in the press release here.

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The Interview With Justin Kan

Any fraction of this announcement would be viewed as game-changing news in legal tech, but taken together, it crosses into uncharted territory. Although the legal technology ecosystem of investors and startups is growing and becoming more complete, high-profile venture investments from Silicon Valley’s top names are extremely rare. We find the sequence and timing of this announcement, merely one year after Atrium’s launch, particularly compelling. And the sum of the cash infusion, $76.5M over a 12-month period, is astounding for any industry and simply unheard of in legal. This is why we feel we are witnessing a historic moment for legal innovation.

Justin reached out to us for this news, and we are the first and only legal publication contacted at the time this story is going live (there will be coverage in tech outlets, which underscores how this is bigger than legal tech). We could not resist an interview with him to get more of his insights and reflections.

Ed Sohn and Joe Borstein: Justin, congratulations on this investment. What are your plans for the funding?

Justin Kan: The core of our platform is machine learning that parses legal documents to turn them into structured data, then to build applications on top of that data, applications that help attorneys, legal professionals, and their clients with legal work.

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One of the first use cases was pro forma cap tables for startups raising a round of funding. Traditionally, a lawyer would read through all previous convertible securities, then try to make an Excel model. It is tedious work and often subject to human error — this isn’t a skill they teach in law school.

But from a programmer’s perspective, these are documents with similar structure, over and over. So we built a model that takes in these convertible securities, then make a schema for the data expected in these docs. Take a SAFE, Justin Kan through XYZ trust, investing this amount with this valuation with this cap in future equity. We can extract that data from the document, put it in a structured database, and the first program we built rendered that data into a pro forma cap table.

Our plans are to continue to invest into this extensible technology where you can turn docs into structured data and build out the team.

ES: What have you learned from the Atrium experiment?

JK: It’s going really well, the combined offering is really resonating with clients well. We’ve been able to attract the type of attorney that wants to work on innovating in this area, some very entrepreneurial lawyers. I’ve come to respect how hard corporate attorneys work — maybe the highest work ethic in a profession I’ve worked with. So that’s been pretty fun.

Our attorneys also appreciate the opportunity to innovate on the technology side, getting involved in different ways ranging from a subject matter expert to a full-blown product manager. They have also been innovating on process, the operational process of how the firm might handle some piece of work. That’s definitely something different and new.

JB: How big has Atrium grown?

JK: Between the two companies, we are now at 110 people, and the law firm is about 50% of that, comprised of attorneys and legal staff.

We’ve hired an amazingly talented, entrepreneurial team. That’s probably our number one accomplishment.

ES: You must be thrilled to have Marc Andreessen getting on board.

JK: Very excited to work with Marc. I couldn’t get him to invest into any of my previous companies, so this is really exciting for me. The opportunity to do this with him was one of the top reasons to get this round led by a16z, and I really like the way he thought about this. He saw a lot of similarity, a lot of parallels, to what they are doing as a venture fund. The idea behind a16z is to provide Venture as a Service, to scale and differentiate from the competition. Marc sees a lot of the same first principles with Atrium.

ES: Now that you’ve been in the legal tech arena for a year, what’s your view of our industry as a whole?

JK: Yeah, there’s a lot of legal tech out there, but it seems like there’s a similar problem with what I think is happening more broadly with enterprise apps. Enterprise apps have gotten crazy bold for the last few years, but the interesting thing is that people want solutions — not just software or services.

There’s a lot of innovation in legal, but what I think is resonating in the market for us is combining this expert advising with the SaaS/software solutions that they use on a daily basis as an end user or client or attorney. You have to build these things together. One example: contract review. Cool pieces of software out there, but the enterprises that have thousands of contracts, they don’t just want the first pass of the review done by the software. They want human beings to review the output and deliver what they need.

JB: You’re preaching to the choir here. This is an important reason why we wanted to write about you in the first place, last year.

JK: We’re always, always about humans + software.

ES: What’s the reception been from the tech community at large?

JK: They think the same way I did when we started Atrium — really unclear why legal has had these problems and no one has solved it yet. I explain to them the innovator’s paradox, it makes sense to them, so there’s been a lot of support for us giving this a try. So overall, the reception has been really good.

One of the core questions from the startup perspective: would people trust a startup law firm like this? Legal has traditionally been something that people don’t want to take risks with. But I think we’re proving that the answer to that question is yes. We’re proving to the market that this is real, it’s not going away, and it’s a great opportunity for everyone. This round of investment validates that as well.

ES + JB: Thanks, Justin! It’s all unbelievable and we’re really excited for what’s ahead.

JK: Thanks guys!

Ed Sohn is VP, Product Management and Partnerships, for Thomson Reuters Legal Managed Services. After more than five years as a Biglaw litigation associate, Ed spent two years in New Delhi, India, overseeing and innovating legal process outsourcing services in litigation. Ed now focuses on delivering new e-discovery solutions with technology managed services. You can contact Ed about ediscovery, legal managed services, expat living in India, theology, chess, ST:TNG, or the Chicago Bulls at edward.sohn@thomsonreuters.com or via Twitter (@edsohn80). (The views expressed in his columns are his own and do not reflect those of his employer, Thomson Reuters.)

Joe 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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