Justin Kan of Atrium.

This story has been updated with comment from additional sources.

The ongoing saga of hybrid law firm and software company Atrium took another twist this week. Atrium's CEO Justin Kan confirmed to TechCrunch on Tuesday that Atrium's software startup would be shutting down. Meanwhile, the law firm will continue onward.

According to a report released by California's Employment Development Department, the first wave of layoffs is scheduled to go into effect March 9, encompassing 76 jobs. This will be followed by a second wave of 14 layoffs scheduled for March 30.

News of the shutdown comes on the heels of a busy couple of years for Atrium, which announced back in January that it would be losing much of its legal staff as part of a "restructuring" that would see the company expanding outside of legal services to concentrate on a "professional services network" that supported startup founders. Atrium's in-house attorneys were presented with the option of becoming preferred providers inside that network, while a few partners were kept in-house to work with clients on financing and mergers and acquisitions

At the time, Kan pointed to the need among startups for a broader portfolio of services "not only surrounding legal but with questions such as when to hire a sales leader, how to best announce their latest fundraising, how to handle recruiting technical talent in a job seeker's market, and so many other areas that are important to scaling a startup."

That sentiment appeared to mark a departure from the objectives Atrium held upon its launch. During a 2018 conversation with The American Lawyer, Kan said part of the company's first year had been spent turning legal documents into structured data and building "applications that produce useful outputs on top of that." Moving forward, he said that the goal was to "help attorneys spend more of their time on meaningful work and less of their time on crank-turning work."

The company's positioning as a "tech-powered platform providing flat-fee legal services" seemed to resonate with investors. Atrium raised $75.5 million in funding, including from groups such as General Catalyst, Sound Ventures, YC Continuity Fund and Andreessen Horowitz. Now, Kan has told TechCrunch that investors would be getting some of that capital back once startup operations have closed down.

So what happened? Zach Abramowitz, a consultant in the legal technology space, doesn't think Atrium's hybrid model itself is to blame. "I do not think the dual structure had anything to do with it. In fact, having a tech company plus a law firm was, in my opinion, one of the savviest moves Atrium made, as was the $75M funding round. Both gave them an opportunity to build a new kind of law firm/company from scratch," Abramowitz said.

It's possible that Atriums struggles were more in line with the same generic difficulties facing other legal tech companies in the market. To be sure, technology can still be a tough sell at law firms, where the traditional structure offers no clear point of entry for the procurement process to begin. Legal consultant Brett Burney raised the question of whether law firms are even interested in solutions that improve efficiency given their reliance on the billable hour model.

"What happens when you get work done quicker? You don't make as much money," Burney said.

In order for that to change, Burney thinks that clients will have to start demanding that firms pursue innovative, technology-driven means of providing legal services faster. Given the competition firms are encountering from entities like alternative legal service providers and the Big Four, they may be obliged to comply. Regardless, Burney expects to see future attempts at replicating Atrium's hybrid model down the line, since frustration with legal work inefficiencies is unlikely to disappear any time soon.

"There will be more people like Justin [Kan] that will just be so fed up and annoyed and exasperated with the legal world as it stands right now," Burney said

Kan had his own thoughts about what happened at Atrium. He told TechCrunch that Atrium and other companies "did not figure out how to make a dent in operational efficiency."