Abstract
What do FinTech, DefenseTech, Procurement and Cybersecurity have in common? 🤔
I’d argue that these are some of the areas which can be considered as part of a wider view of the LegalTech universe.
Here’s why:
✅ Typical corporate legal teams will likely interact with departments as varied as IT, marketing, procurement, HR, finance more.
✅ Cross-functional collaboration which is only becoming more essential amid today’s rapidly changing and increasingly challenging regulatory environment.
✅ As the need to collaborate only increases, the adoption of technology to streamline workflows greatly increases, too – representing a host of spaces ripe for innovation and disruption.
➡️ Viewed from this lens, AI technology is disrupting and streamlining workflows across departments intertwined with LegalTech.
In the latest edition of my newsletter, “Venture Legal: Where Capital Meets Legal Innovation,” I take a close look deep dive at:
🌐 The momentum in LegalTech in Q1;
🌐 What’s happening in some adjacent areas that should be considered within the LegalTech context, such as Cybersecurity, Compliance and Procurement; plus
🌐 What this all means for investors ➕ more.
Full Article
Within the investor community, there can be a perception that LegalTech is a niche sector, however, I believe this a misconception.
First, the momentum in the LegalTech sector specifically is strong, and secondly, when taking into consideration all the different areas that intersect with legal functions, LegalTech represents vast investor opportunities.
First, a look at the momentum in the LegalTech space:
VC-backed LegalTech innovation has continued its strong momentum with a dynamic first quarter.
In February, CrunchBase reported, “...funding to companies in the legal and legal tech sectors has surged to levels comparable to what we saw during the 2021 market peak,” noting, “Legal services represents an enormous industry…”
The growth is anticipated to continue. Last year, Gartner wrote, “The global legal technology market has grown significantly in recent years and generative AI (GenAI) will accelerate this growth, meaning the market will reach $50 billion in value by 2027…”
Just this week, Law360 reported on record-setting funding for LegalTech in Q1 (see “In the News” section below for more on this!
📰 Here are just some of the headlines from VC-backed LegalTech startups in Q1:
San Francisco-based Harvey secured $300 million in Series D led by Sequoia Capital in Q1, setting a $3 billion valuation for the company, which offers an AI platform for legal and professional services.
Vancouver-based Clio, which provides cloud-based legal technology, announced the strategic acquisition of adaptive work management platform ShareDo, an acquisition which followed Clio’s $900 million Series F in July, at a $3 billion valuation, with New Enterprise Associates as lead investor.
Palo Alto-based Eudia, which provides “agentic capabilities that augment human expertise, optimize risk, and unlock significant business value,” announced the close of its Series A funding round for up to $105 million, led by General Catalyst.
San Francisco-based Patlytics, an AI-powered patent workflow platform, announced a $14 million Series A round led by Next47.
Stockholm-based Legora launched its U.S. headquarters, an announcement which follows having raised $35 million in funding from investors, including Benchmark, Redpoint, SV Angel, and Y Combinator.
San Francisco-based EvenUp introduced AI-powered documents generator Express Demands, an announcement which followed raising $135 million in an October Series D led by Bain Capital Ventures.
U.K-based Luminance, which offers an AI-enabled platform for legal contracts, announced $75 million in a Series C led by Point72 Private Investments.
These are just some of the LegalTech headlines from Q1 alone – and I’d say they represent just the tip of the LegalTech iceberg.
Expanding the Definition of “LegalTech”
While VC-funded startup innovation in the strictly “LegalTech” sector is strong in itself – as evidenced by the Q1 headlines above – I believe the opportunity for investors is even bigger still.
The reason is that, for me, LegalTech is actually very broad, and should be redefined to include everything with which the legal function touches and interacts.
In today’s corporate landscape, interaction with the legal department and teams is essential for success. In a typical corporation, the legal team will likely interact with departments as varied as IT, marketing, procurement, HR, finance more – a necessary cross-functional collaboration which is only becoming more essential amid today’s rapidly changing and increasingly challenging regulatory environment.
As Wolters Kluwer wrote, “Legal departments are under more pressure than ever before and are constantly fighting fires on a number of fronts. Regulatory and legislative changes, political instability, changing market needs, and growing competition all contribute to a growing deal of complexity for legal departments. And with it, the need to interface with a growing number of stakeholders across the business who demand quick answers immediately.”
As the need for various departments and professionals to collaborate with legal only increases, the adoption of technology to streamline workflows and optimize processes greatly increases, too – representing a host of spaces ripe for innovation and disruption.
Viewed from this lens, a lot of the AI technology being created to disrupt and streamline workflows across departments, are, I believe, intertwined with LegalTech.
Some examples:
✅ Cybersecurity. A corporation may have contracts that require security measures be in place, or there may be regulation that requires the same, making cybersecurity an issue that connects with legal as well – and thus making investments in the cybersecurity realm relevant to LegalTech. Take note that venture funding in cybersecurity grew 43% year-over-year to $11.6 billion in 2024, according to Crunchbase. It’s pertinent to note that a cybersecurity breach can often result in a compliance challenge for any corporate organization, in addition to the risk of class action lawsuits along with regulatory fines and penalties.
✅ Compliance. Compliance spans a lot of areas across many parts of the organization, and it’s a huge area that is particularly critical for public companies or companies operating in highly regulated sectors such as banking, healthcare and education. The compliance function is deeply linked with legal and is ripe for technological disruption. Infosecurity Magazine reported, “Venture capital (VC) funds flowed in their billions to cybersecurity startups in the last three months of 2024,” and as an example, just last month, compliance startup Norm Ai raised $48 million in startup funding from Coatue Management LLC.
✅ Procurement. Any functions where corporations are buying products and services will need to intersect heavily with legal, to ensure supply chain integrity around sustainability, labor standards, ethical sourcing and more. According to Crunchbase, “Procurement falls under the broader umbrella of enterprise resource planning — software systems that help enterprises run processes in departments such as finance, human resources and supply chain…” with one of the biggest raises last year by procurement startup Zip, which raised $190 million in a Series D led by Bond.
✅ IP and Creative Protection. Consider, too, IP protection and enforcement, as well as helping artists protect their creative works – highly critical areas that are also related to LegalTech. To meet these evolving challenges, San Francisco-based Solve Intelligence Inc., which has developed an AI-powered platform for IP law, secured a $12 million Series A funding round this week with new funding from Microsoft, 20VC, Thomson Reuters and Y Combinator.
I could go on! These are just some of the areas that can be considered as subsumed within the larger umbrella of LegalTech.
Similarly, there are opportunities to focus on specific verticals such as FinTech or DefenseTech which necessarily intersect with the legal function.
✅ FinTech As FinTech disrupts the highly regulated financial sector, Pitchbook last week noted that enterprise fintech startups like Stripe and Ramp have multibillion dollar valuations, and while consumer startups Klarna, Chime and GCash have IPOs in the works Just this week, French accounting software firm Pennylane doubled its valuation to $2.16 billion in a new funding round, co-led by Sequoia Capital, Alphabet’s CapitalG and Meritech.
✅ DefenseTech Crunchbase this week reported on DefenseTech’s U.S. surge, while last week, Pitchbook reported that Lux Capital, an early investor in Anduril, is seeking $200 million for a fund focused on DefenseTech, noting, “Lux Capital isn’t alone: VC firms have been pouring cash into defense-tech startups as the sector recently entered the mainstream. In the first two months of 2025, VCs put $1.5 billion into defense and aerospace technology.”
Clearly, taken within this broader holistic context, a much wider lens of LegalTech emerges.
For investors: When looking at LegalTech, or LegalTech adjacent companies, consider enlisting a domain expert to help you assess. Whenever the technology you are considering is relevant to legal, it’s wise to have a legal tech adviser who has real-world experience and attest to use case relevancy. And, by the way, if you are looking for recommendations, I may be able to make some good ones! 😉
➡️ Watch this space as I continue to examine LegalTech within this broader context!
📰 In the news
Thanks to Law360 for featuring my perspectives in their analysis of legal tech funding in the first quarter of the year.
Their reporting found LegalTech companies raised about $1.83 billion in Q1 2025 - the most funding for any quarter in the past five years.
In addition to detailing the quarter’s big funding moments, the report details the 150+ investors who backed LegalTech companies, including five investors which backed multiple companies in this time period: Y Combinator, General Catalyst, Fuel Ventures, Sequoia Capital and The LegalTech Fund.
Read the full story here.
🗳️ And the survey says…
“AI is transforming the legal industry and legal leaders want it, but adoption still faces hurdles. What do you see as the biggest challenge?”
In my discussions with GCs, law firm CIOs and LegalTech founders, this is a common topic that resurfaces time and again, and so I surveyed the LinkedIn community to ask what they see as the biggest challenges and the community was split between citing regulatory/ethical concerns and change management/cultural issues.
I agree that both areas are key for overcoming hurdles in AI adoption, and I’ll continue to explore these topics in detail here.
💬 Let’s Connect!
What are your thoughts on AI’s impact on the legal industry? Are you investing in LegalTech, or does regulatory uncertainty hold you back? Drop a comment, share your insights, or suggest a topic for our next issue!
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