When I started my company, Counselytics, in 2014, I was one of just a few seemingly crazy, bright-eyed entrepreneurs ambitious enough to think people would someday trust computers to read their contracts. Turns out we weren’t so crazy. Since that time, so-called legal tech has almost unanimously been rebranded as AI, and scores of major law firms and enterprises have happily adopted it. I’m not writing this post to argue whether this fascinating technology has crossed the proverbial chasm, but I do think it will continue to gain traction with, and deliver value to, former naysayers.
Prior to Counselytics, I started another legal tech company with entrepreneur Mark Gerson. We were soon approached by a major Wall Street investment bank with an opportunity to correct a deficiency they had identified in the market: a lack of in-depth, accurate and cumulative information on public mergers and acquisitions (M&A). We seized on that opportunity and went on to build what would become the world’s most comprehensive database for terms, conditions, and clauses related to public M&A deals.
While that story ended well in that the company was eventually acquired (essentially an acqui-license) by LexisNexis, I learned an important lesson about legal tech sales during that venture: lawyers are notoriously difficult to sell to, as the “smartest people in the room” with no obvious tech-spending budgets. Typically technology laggards. Resistant to change. Almost singularly focused on billing.
So when I launched Counselytics, I knew I did not want to sell to law firms. Early on, we started focusing on companies. Initially, that was the fringes of Wall Street, like fintech companies, hedge funds, and commercial real estate outfits. But we saw an even bigger market in pure enterprise contracts (ie, the Global 2000). Whereas law firms had episodic needs to review large volumes of contracts during certain events, like M&A, contracts are the lifeblood of a company, and any competent CEO will make sure her organization is carefully managing those contracts throughout their — often long — lives. Every software entrepreneur dreams of that setup — a recurring need by a well-capitalized prospect.
The enterprise contracts opportunity
Under that line of reasoning, we decided to split with our legal tech peers and pursue the enterprise contracts market. Medium-to-large scale businesses encounter a host of problems when trying to manage contracts manually. When an organization maintains offices in two or more locations, a centralized contracts repository is of paramount importance in order to enforce contract templates, maintain an audit trail, provide change, update transparency, and so much more.
Similarly, as a company grows, it typically enters into more complicated contracts with longer lives. Managing the ebb and flow of long-lived contracts in a manual fashion is nearly impossible. Finally, regulated entities and others subject to any level of compliance rigor will likely confront substantial impediments without a robust contract management solution.
The legal tech stretch
Given the costly problems associated with enterprise contract management and the scale of the opportunity, it’s no wonder the now-crowded legal tech industry has turned its attention away from its legal roots and toward enterprise contracts. Part of my role at Conga requires my attention in certain strategic sales opportunities we pursue. In that capacity — in many RFP processes and other competitive pitches — I routinely see our products stacked up against the usual suspects of the legal tech industry.
These legal tech systems typically have the following features:
- A backward-looking perspective; built around episodic use cases like M&A, where volumes of contracts may be ingested simultaneously, producing a spreadsheet-like view of contracts that contain worrisome clauses (e.g., clauses that would prevent an acquirer from inheriting the contract, or prohibitions on the “change in control.”)
- Related to the first bullet, deep focus on legal clauses
- Very shallow ability to find start dates, end dates, renewal dates, dollar amounts
- Little-to-no focus on tables and the critical data inside of them
- No turnkey integration with contract lifecycle management systems (CLM), CRM (like Salesforce) or other robust enterprise content management systems
These features require the legal tech players to stretch into the enterprise contracts use case, which usually involves a bit of over-selling, customization and subsequently results in disappointed customers with half-baked solutions.
Features to keep on the short list
Customers in the market for an AI tool to accelerate their CLM maturity should avoid the legal tech tools and focus on systems built to power CLM. Minimum features include:
- Seamless integration to a system of record
- Key data fields (e.g., dates, monies, proper names, etc), not clauses
- The ability to analyze tables and extract key data
- Integration with Salesforce and other systems of record
The shift from legal tech to CLM-focused solutions
Legal tech was a revolutionary innovation for the legal industry. It has and will continue to drive significant and quick ROI for firms deploying it, and this writer predicts that its adoption will continue to accelerate. However, due to the episodic scenarios for which it was built, and its deep focus on legal clauses, it is not an appropriate tool for enterprise contract management. Nor does it improve the enterprise-grade CLM. Companies looking to import legacy data, manage important dates, values, people, places, and other important financial data should turn to contract analytics systems which have been custom-built for CLM.