Investment into UK legal technology startups reached £61m in 2018, more than doubling the £22m invested in the previous 12 months, shows Legaltech Startup Report 2019, a report by Thomson Reuters and Legal Geek.
The report shows that investment in UK legaltech startups has risen dramatically over the last five years – less than £1.5m was invested in 2014.
Legaltech startups have received at least £62m so far this year, through the first nine months of 2019, surpassing the 2018 total.
The UK is the hub of European legal technology, with UK legaltech startups making up 44 percent of all legaltech startups in the EU. This is far higher than the UK’s share of the European legal services market (23%). Thomson Reuters and Legal Geek research tracks and analyses investment into 34 of the UK’s fastest-growing startups in the legal technology industry where reliable investment data is available. These businesses have received more than £175m over the last five years with 70 percent, or £122.5 million, invested since the beginning of 2018.
The strength of the UK’s legaltech sector is typified by London-based Tessian, a company which uses machine learning to protect law firms from data breaches. In early 2019, Tessian raised a record $42m (£33.5m) in funding following its expansion into the U.S. market. Additionally, Luminance, which uses machine learning to help lawyers better analyse data and contracts, received $10m (£8m) in funding from businesses including Magic Circle law firm Slaughter and May.
Many successful legaltech entrepreneurs in the UK have benefited from access to expert advice from more established market constituents as well as investment opportunities. In the last two years, there has been growing interest from private equity firms such as Sequoia and Talis Capital, which already have invested in the sector.
Jim Leason, vice president, Customer Markets at Thomson Reuters, said: “The UK benefits from a unique mix of a large tech and data science talent pool and world-leading law firms as well as easy access to capital through financial markets. This has enabled the fast-growing legaltech sector to thrive.
“Legaltech is now attracting funding from a variety of sources, including law firms themselves, private equity and venture capital funds. This interest has given startups the crucial leg-up they needed to take their products quickly through to the next stage of development and testing.
“The speed at which the legaltech market is maturing is evidence both of demand for these products and the quality of the support infrastructure in place for startups. Investors from across the world have clearly spotted the growth potential.”