I have read more than once this week that the sentiment of many at the CodeEx Stanford FutureLaw Conference last week is that insufficient capital is an impediment to developing technology and innovation in the law.
Insufficient capital? Here’s some data for the year 2015 on the 100 largest law firms in the country.
- Total revenue: $83.1 billion, up by 2.7 percent (a new record).
- Total net income: $32.8 billion, up by 3.3 percent.
- Average revenue per lawyer: $894,253, up by 2.6 percent.
- Average profits per partner: $1.61 million, up by 4 percent.
This represents a ton of capital.
Firms as a whole may be unlikely to invest in a startup. Not everyone in a firm will be in agreement on making an investment in technology. But let’s take individual lawyers.
10 partners could go to the bank and borrow $5 million in startup capital at an interest rate of 3.5% and lend it to the new entity at 6%. The partners personal assets are more than sufficient to secure $500k each. This gets them to producing revenue, if not a profit. Plenty of capital will follow on if they need it from their connections in the angel and/or venture capital community.
Getting technology developed and to market is much easier and less expensive today than years ago. It is much easier to get things to producing revenue and a profit.
I may be missing the boat, but every time I hear we can’t raise capital what I hear is that I am not willing to put any skin (money or work for free) in the game. Money has never been cheaper, technology has never been more open, development has never moved faster and third party resources/services (think integration partners or the cloud ala AWS/other cloud services) have never been more available.