In this edition of The Law Firm Disrupted, we look at two legal technology startups that are banking on network effects to solve big problems in the legal market.

I'm Roy Strom, the author of this weekly column on the changing legal marketplace, and you can join the network of good people who subscribe to this column here, and email me here: [email protected].

The concept of a network effect is pretty straightforward if you can recall the allure of making friends in high school. Belonging to a group can be beneficial for people.

And for every new person that gets added to a group, there is one more possibility—for friendship, laughter or camaraderie—for every person already in the group. Voilà, network effect.

Network effects, of course, are not universally good. There are certainly bad things that can happen in high school groups. Twitter benefits from network effects, but far from everything on Twitter is good.

Two legal tech startups that rely on the power of network effects made news this week. They are important stories to highlight because if they are able to gather big enough groups, they could help solve big problems. One is in the area of pro bono work. The other has to do with helping law firms adopt new technologies.

Let's start with the pro bono story.

Paladin is a legal tech startup founded by Felicity Conrad and Kristen Sonday. The two women are also immigrants and minorities, which is to say, they are part of three groups that are disproportionately impacted by what is often called “the justice gap.”

Their solution for—admittedly, a portion of—the justice gap is to bring together big law firms, corporate legal departments and legal aid organizations on an internet portal that helps match lawyers with pro bono opportunities. It also helps track the pro bono work that lawyers are doing, which is helpful because, as the strategy gurus say, what gets measured gets managed!

Paladin knows the power of networks and that is probably why they have already partnered with Dentons—the largest law firm in the world by head count—and why their Twitter handle is “@JoinPaladin.”

On Thursday, Paladin announced their first partnership with a bar group, the Chicago Bar Foundation, which has long been connecting lawyers in the city and Illinois with legal aid organizations for pro bono work. They have done that for the past 25 years through a printed manual that many firms of the Big Law variety often hand out to associates.

“We showed [Paladin] that and they said, 'How does this work online?' and we said, 'There's a PDF. It's not great,'” said longtime CBF executive director Bob Glaves.

With Paladin's help, that PDF has been turned into a portal on this web site that with a few clicks can direct lawyers to a pro bono opportunity that appeals to them.

Sonday, Paladin's co-founder, said that between 10 and 20 percent of lawyers work in organizations that have pro bono managers or other resources to help them find pro bono opportunities. That is what Paladin can provide for the vast majority of lawyers who don't have those resources. As the company's network builds, Sonday is confident that more and more lawyers will do pro bono work.

“While we're building these individual platforms, our longer-term vision is to build this global pro bono network that is connecting each part of the legal ecosystem from legal organizations to in-house to firms and really tracking and managing the cases through one platform,” Sonday said. “We're really excited about it. The justice gap is more urgent than ever, and we as an industry are building more tech than ever before, so it is exciting for us to be able to build technology for something that's really important to us and also build something sustainable.”

In other “network effect news,” a group of 12 Big Law firms announced Thursdaythat they were partnering with a startup that is pushing legal tech companies to make their products easier and safer for law firms to deploy.

The story is a bit technical. It involves concepts like “containerization,” the “private cloud” and “on-premise servers.” But the chief information officers of some of the most elite law firms believe it could be revolutionary.

Reynen Court, the startup the firms are in partnership with, essentially wants to create a sort of “app store” for firms to easily download legal tech products that do things like contract analysis, decision-tree analysis and automated document production.

If the software companies that make those products make them compatible with Reynen Court, they will also be able to interact more seamlessly with other tech products on the platform. Paul Greenwood, the CIO at Clifford Chance, explained the possible benefits of joining up contract analysis, decision-tree reasoning and document automation.

“If you could join those things together you could conceive of a much more automated production line: Find the right clauses, figure out the logic to apply and write the new legal document,” Greenwood said. “That is where, ultimately, we'd like to get to. And the idea of the consortium is to say to the legal startup industry and the legal tech industry: We see great value in your solutions. You have great ability to really transform the way we work, but having standards is really important to us.”

The group is starting out with an impressive network of 12 top firms: Clifford Chance; Covington & Burling; Cravath, Swaine & Moore; Freshfields Bruckhaus Deringer; Gibson, Dunn & Crutcher; Latham & Watkins; Orrick, Herrington & Sutcliffe; Linklaters; Paul, Weiss, Rifkind, Wharton & Garrison; Ropes & Gray; Skadden, Arps, Slate, Meagher & Flom; and White & Case.

Tom Glocer, the former CEO of Thomson Reuters Corp. and an investor in Reynen Court, said the company's mass of Big Law firms will help attract legal tech vendors to its platform. Much the same way that Apple Inc.'s massive iPhone sales encourage developers to make apps for its product.

“If it were just one firm saying this and you're a vendor, you have to judge is this worth it?” Glocer said. “But when you look at the list of firms that [Reynen Court] has corralled, that's not only a sizeable amount of revenue, but it's big thought leadership. … This is a marketplace, and when you create a two-sided market, you need enough buyers and enough sellers. Building a two-sided market is really what Reynen Court is doing here.”

Network effects can be powerful. Kudos to Paladin and Reynen Court for recognizing that in their pursuit of solving two completely different but nonetheless vexing problems.

Come See Me Speak!

This morning, I attended an event put on by the Ark Group and chaired by Patrick McKenna, the longtime law firm business consultant. McKenna gave a presentation about managing practice groups, which I found very interesting and engaging. The man can hold a room! Which I was happy to see, because I was also attending to take some notes on how to give a good presentation to lawyers.

McKenna was crazy enough to invite me to speak at an upcoming conference he's putting on with the Ark Group. That's right. I'm bringing this column to real life! My presentation is called “Big Law Disruption: Parsing the Truth from the Tales,” which is something I'd like to think I write about weekly. Still, your thoughts, prayers and tips are welcome.

The conference is called the Law Firm Innovation Summit and it takes place in Boston at Suffolk University Law School on Nov. 7. If you want to attend, e-mail me. They gave me a discount code!

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Roy's Reading Corner

On Law Firms Actually Disrupted: I sometimes get cheeky comments about the title of this column. “Nothing is really 'disrupting' law firms,” people will tell me. And I often agree! Nevertheless, some law firms don't make it. To be clear: Law firm failures are not funny. They are sad events that can wreak financial and personal distress on real people. There are still lessons to be learned.

This week I wrote in detail about the failure of Sedgwick. As I wrote in that piece, the story of the former Am Law 200 firm's demise is one based on a broad expansion effort, practice groups that sparred with each other and an ultimately unsuccessful attempt to stabilize an institution rocked by the financial uncertainty that comes with Big Law's free agent era.

On Law Firms In the Black: Many law firms, on the other hand, are making more money today than ever before. How can that be? It's actually a very good question. And Nicholas Bruch at ALM Intelligence does a thorough job of answering it in this data-driven analysis. If you are of the mind that it's all about manipulating your equity partner ranks, Bruch may change your mind.

On the Big Four: Acritas Research Ltd. has for years ranked the brand recognition of alternative legal service providers. Never before has a Big Four accounting firm landed atop the list. Until now! Thomson Reuters, step aside. PwC took home the top brand honors, and its three big friends weren't far behind. The story by my colleague Dan Packel does a good job of explaining the recent moves those firms have made to ratchet up their brand names in the legal market.

That's it for this week! Thanks again for reading, and please feel free to reach out to me at [email protected]. Sign up here to receive The Law Firm Disrupted as a weekly email.