Whether you call them ALSPs, LPOs, or simply law companies, money keeps flowing in. This week, Elevate banked $25 million in private equity funding, and founder Liam Brown offers a look behind the curtain. Want to weigh in? Email me here. Want this dispatch in your inbox every Thursday? Sign up here.

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'Less Law,' or Just Fewer Lawyers?

Elevate Services, the legal technology and business consulting firm founded by serial entrepreneur Liam Brown, attracted some attention this week with the news that it had brought in an additional $25 million in private equity funding. Now that the company has rounded up a total of $60 million in capital, it seemed worth taking some time to hear what Brown has to say about his latest brainchild.

Our conversation served to reinforce to me, just over one month into this exercise, the breadth of players out there who say they're not competing with traditional law firms, but are instead looking to sell their services directly to firms with innovation-minded leadership.

Brown himself helped me connect the dots. He mentioned, in passing, the subject of last week's briefing: Greenberg Traurig's new subsidiary Recurve. Both presume that law firms and corporate law departments will struggle, on their own, to add the technical capabilities critical to operating in a more streamlined fashion.

“Law departments exist to help the rest of the company function,” he explained. “Law firms provide expertise to the company to navigate high-stakes or bet-the-company matters.

And “law companies,” as Brown described Elevate and his previous business Integreon, provide “business of law capabilities” to both.

“When you call Elevate an alternate legal services provider or a legal process outsourcing company, you're buying into the idea that law is just the people who graduate from Oxford, Stanford, or Harvard,” he said.

(It's worth musing whether even leaders of global elite firms actually believe this, let alone those piloting mid-sized firms, county prosecutors, or the guys with their ads up in the subway.)

Regardless of the nomenclature, the market for these business is—for now— tiny: $10.7 billion in 2017, according to a Thomson Reuters report from earlier this year. That's nothing compared to some estimates that have put the size of the total global legal market at $850 billion.

But in that space, Brown singles out competitors like the legal arms of Big Four firms EY, KPMG and Deloitte, fellow upstart UnitedLex and Integron, which Brown exited in 2011 following a falling out with a private equity backer.

And there's room for growth. The same Thomson Reuters report anticipates 25 percent annualized growth rate “over the next few years.”

If internal trends continue, Elevate will be fueling some of that growth. Brown says the company currently has roughly 100 law department customers and 20 law firm customers. It's grown at 65 percent per annum for the past five years, and 2019 sales are forecasted to exceed $75 million. The $25 million investment from Los Angeles-based private equity fund Kayne Partners, on top of $25 million in financing from Morgan Staney and $10 million of Elevate's own funding, will be critical.

On the demand side, Brown points to the intersection between greater demand for legal services, combined with price pressure on legal departments and a flat number of law school graduates. (Although the ebbs and flows in that category aren't the result of enrollments at the law schools that Brown mentioned earlier, but rather from those on the margins.)

“There's limits to how much work law departments can bring in house,” he said.

Brown has a slogan for the solution that Elevate offers: “Do less law.” Of the company's over 1,200 employees, roughly half are lawyers—from junior attorneys to former general counsel and law firm partners—and the other half have supporting roles—consultants, engineers, data scientists.

The goal is always to figure out if a problem has to be handled by a lawyer, or whether a business person can step in, and if the latter, whether it has to be a senior lawyer or a junior lawyer.

“We look at it as a checkerboard,” Brown said. “On the checkerboard, there might be a process expert or data managers. Or some squares might have lawyers.”

The metaphor raises an interesting question. Lawyers prize their autonomy. But on a checkerboard, the pieces are manipulated from above—and the point of the game is to steal an opponent's pieces. Should the lawyers on the board be worried?

In the News

➤➤ We've talked about how the Big Four are ahead of law firms when it comes to innovation. Joe Patrice at Above the Law has the story of a firm trying out a platform first explored by Deloitte, KPMG, and Grant Thornton. White & Case is the latest entity to join Inside Sherpa, which allows potential recruits—here law students—to try out virtual work assignments: anonymized “day in the life” scenarios that let them test what it would be like to work in a particular field. Law students, steeped in litigation, can get a sense of what goes on in M&A or project finance work, for example.

➤➤ Another thing the Big Four seem to do with regularity is get in trouble with regulators. This time, per Kiran Stacey of the FT, it's right here in the U.S. KPMG is paying the SEC a $50 million penalty after being charged with “ethical failures” over altered audits. Something for leaders of task forces in California and elsewhere to consider as they weigh changes to bar ethics rules—intended to expand access to legal services—that could open the door to the Big Four?

➤➤ Demand for litigation financing is on the rise globally, but particularly in Canada and Asia. That's what Bentham IMF's Australia-based managing partner and CEO Andrew Saker said in an announcement of the company's newest fund, a $500 million vehicle to underwrite disputes outside of the U.S. My colleague John Kang reports that the fund is Bentham's second non-U.S. fund, coming two years after an $115 million effort focused on investments in Australia, Asia, Canada and Europe. I suspect that Hong Kong and Singapore opening up the doors to third party financing for international arbitration is making a difference.

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