Clio Earns $3 Billion Valuation In Largest Funding Raise Of Its Kind
In a sign of the continued strength of the legal technology market, Clio hauls in $900 million from investors.
Just over three years ago, legal practice management provider Clio secured unicorn status with a $1.6B valuation. This morning, the company announced that a Series F investment round worth $900 million with a $3 billion valuation.
Which, I believe places the company below maple syrup and ahead of Ryan Reynolds as driving the Canadian economy. I have not checked these numbers.
It’s the largest ever capital raise and equity value for cloud legal software. Which is a weirdly specific categorization. It also seems like an decreasingly relevant one. “Oh, look at me, I’m a law firm with a server in my closet running four-version-old WordPerfect because I haven’t gotten around to manually updating!” seems professionally passé. At this point, firms have to be in the cloud for no other reason than to have a functional mobile and remote option.
New Enterprise Associates leads the round with $500 million. Goldman Sachs Asset Management, Sixth Street Growth, CapitalG, and Tidemark also joined in on the fun. Clio CEO and Founder Jack Newton said, “This historic raise was heavily oversubscribed, further demonstrating the overwhelming demand and confidence in Clioʼs future.”
Nearly doubling in value over the span of three years seems hard to believe, but as an annual Clio Cloud Conference attendee, it tracks. The gathering of Clio users used to fit in a hotel basement. This year it’s taking over a convention center. Paper growth is intangible, but this is growth you can actually see and hear on the ground.
Clio CFO Curt Sigfstead told me last week that the origins of this investment can be traced to the last series. “Post the Series E we’d put ourselves on the map with the most significant cross-over and growth investors… and so that began a regular dialog with those folks.”
While some portion of the funding will add to liquidity and reward earlier investors, the company brought in this massive haul because it sees expansion opportunities. “We’re not pivoting, not straying from our core,” Sigfstead said. And by “core,” the company means upmarket, international, and fintech expansion.
Known for its historical focus on small firms and solo practitioners, Clio has started talking more and more about adding midsized and regional firms. Innovation in legal tends to move from the smallest firms up, as entrepreneurial smalls and solos adopt tech quicker because they live and die by that leverage. But midsized firms may finally be ready to explore what a tech-forward approach can provide.
At this point, Clio already leads the mid-market cloud legal practice management software space with over 1,000 midsized clients in the U.S. Which seems like a lot, but the U.S. Census County Business Patterns Report identified roughly 9,000 firms in that sector. “We’re the biggest mid-market cloud legal provider in the world. We can emphasize that branding further and expand more fulsomely into the mid-market,” Sigfstead explained.
Expanding internationally is a relatively straightforward idea. Clio boasts customers in 130 countries, but is fully on the ground in the U.S., Canada, Australia, Ireland, and the UK — leaving a lot of geography to build into.
Clio’s fintech offerings played a significant role in the company’s monster growth over the last few years and Sigfstead sees more ground to gain. Just last week, we noted that they released an accounting tool to pair with Clio Payments. “We started payments two years ago and now we have annualized processing in the multi-billions.” And that’s still only a slice of the available market.
And then there’s AI. There’s no escaping AI right now, right? Clio is open about integrating artificial intelligence into its products. Clio Duo helps attorneys “wear the business owner hat” taking the business information residing in Clio and packaging it quickly and easily in response to simple queries. But Clio is open about seeing more opportunities to integrate AI into attorney workflow. According to Sigfstead, beyond the money raised, its new partners expand its AI development capabilities, creating networks with other companies in the portfolio currently investing in AI.
Goldman’s involvement in this round provides an interesting bookend to its recent headline-grabbing report dismissing Generative AI as too costly for too little return. In that report, the bank cited the exponential costs required to achieve linear returns on investment. Not that this makes AI “useless,” but Goldman cautioned that the electricity and water and training data demands required to improve the underlying AI engines would keep the technology from becoming the intuitive ship’s computer that its loudest proponents hype.
But whatever risks it sees in the long-term evolution of AI, the bank sees a future in expanding applications of the technology because they’re out here investing.
Clio still sees plenty of room to grow. “While weʼre immensely proud of our growth to date, the real opportunity lies ahead of us,” Newton said Clio’s press release. “AI is ushering in an exciting and important new era for legaltech, and Clio is leading that transformation. Thereʼs much to accomplish for the success of our customers so they can thrive in an economy that embraces technology in every interaction.”
Despite eye-popping numbers, legal technology remains, if anything, underexploited. The mid-market, the international market, lawyers who just haven’t let go of the old ways yet. Covering this space can warp your sense of how thoroughly the industry has embraced change, but when you look at the numbers, there’s still a lot of room out there.
There’s a lot of room out there. For a company that just nearly doubled its value to $3 billion.
I mean… that’s over 4 billion Loonies.
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
