Startup Review: Paladin

Paladin is a SaaS company headquartered in Chicago that recently was a part of the Techstars Chicago accelerator class of 2017. The Company’s software platform provides assistance for legal pro bono work. The Company’s founders have determined, through their own experiences as lawyers and from supporting data, that there exists a huge market inconsistency between the supply of lawyers who will perform bro bono work and the amount of people who need pro bono work. Although both the supply and demand are enormous, there is a large amount of friction making the two forces overlap. Millions of lawyers, due to the 50 hours rule (read below) are willing and able to perform pro bono work, but there exists essentially no infrastructure to discover those who need work to be done. Most pro bono work is tracked and discovered through very antiquated means.

Paladin’s software acts as a workflow management system that provides opportunities, tracks pro bono work, and reports valuable data and analytics surrounding the industry. Lawyers can find opportunities that more closely align with what their level of expertise is and thus help solve more legal issues for the underprivileged in the world. This helps save lawyers and companies valuable time and resources that would be spent on trying to fulfill the 50 hour rule. It also makes sure that attorneys are more engaged in their work.

 

Problem

The American Bar Association, which governs all lawyers and attorneys in the United States, places every attorney with a professional responsibility to  provide at least fifty hours of pro bono (FREE) legal services per year. A substantial majority of these fifty hours need to be provided to either a person of limited means or to charitable, religious, civic, community, governmental and educational organizations in matters which are designed primarily to address the needs of persons of limited means.

There are approximately 1.3 million attorneys in the U.S. It is the opinion of the Company that the pro bono ecosystem is disaggregated and inefficient and that 80 percent of those who need free legal help never receive it. This is referred to as the justice gap. Legal employers waste millions annually on pro bono programs that are time-consuming and cumbersome, and pro bono spend is on rise.

In the past year, 86% of the civil rights legal problems reported by low-income Americans received insufficient legal help. 71% of low-income households experienced at least one civil legal problem last year. These civil issues include those associated with health care, housing conditions, disability access, veterans’ benefits, and domestic violence. In 2017, low-income Americans will approach Legal Services Corporation funded legal aid organizations for support with an estimated 1.7 million problems. They will receive only limited or no legal help for more than half of these problems due to a lack of resources.

 

Market Size

There is clearly market friction between those who need pro bono help and those who can provide pro bono legal help. One significant question is whether lawyers and legal firms have a desire to utilize software of this nature. According to crunchbase, there have been over 85 legal-focused tech startups since 2010, raising nearly $400 million over that time frame. A huge chunk of this funding came from a $125 million round in Relativity, an e-discovery platform that manages large volumes of data and identifies key issues during litigation, investigations, and compliance. At this point, most of the money that has been raised in the space has been seed-stage, with only one late-stage investment accounted for. The view within the legal industry, is that law firms are seeking to make their lawyers more efficient in more critical areas. Crunchbase found that of the 85 legal tech startups, only 17% had founders that were known to be lawyers. This provides companies like Paladin a significant advantage.

In 2016, Mitratech, a provider of Enterprise Legal Management solutions, shared the results of a survey of the U.S. legal technology landscape among law firm and legal department decision makers. The survey found that the total addressable market for legal software is approximately $15.9 billion per year and that the market spends roughly $3 billion per year. Legal software includes matter management, compliance, legal analytics, and many more categories. Although it’s an imprecise practice to try and assess where this spend is going exactly, there is clearly a growing demand for software within the legal industry. It is also difficult to tell how large Paladin’s specific focus is, since they are the first to market. However, the market definitely exists and past data concludes that is fairly large.

The Company is selling its software to Fortune 500 companies with large legal teams, law firms, the public sector, and law schools across the country. Fortune 15 Company Verizon and its 448 legal staff are currently using the software. There are currently 20 Fortune 500 companies that are in Paladin’s late-stage pipeline, including Ford, Adobe, Miller Coors, and the City of Singapore.

 

Support

The Company was part of the Techstars Chicago accelerator program. Techstars is an extremely reputable organization and their Chicago accelerator has produced numerous solid startups. At this time, there is no known source of startup funding for this Company in the form of venture capital. However, as previously mentioned, Paladin already has a paying customer in Verizon and several other potential large customers in the pipeline.

 

Management

The Company’s team consists of the following:

·      Felicity Conrad, CEO – Felicity graduated from NYU Law School and went on to work for Skadden, one of the most largest and prolific law firms in the country. Conrad was the youngest litigator in her class and was a top earner.

·      Kristen Sonday, COO – Kristen worked for the Department of Justice after graduating from Princeton. Sonday also co-founded Grouper.

·      Matt Tucker, CTO – Matt has over 20 years of tech and startup experience, most recently having worked for the Hillary for America presidential campaign, charity:water, Thoughtbot, and Enernoc.

·      Phoebe Duggan, Head of Nonprofits – Phoebe is an Australian-trained lawyer who has significant experience dealing with nonprofits. For several years Duggan worked for Justice Connect.

 

Conclusion

The Company is clearly heading in the right direction and has a strong team to figure out how to solve what seems to be a massively neglected issue. There are some serious question marks surrounding the legal tech startup space and the barriers to entry for a software of this nature. However, the investment and equity case is a pretty easy one to make: get in early and even modest growth and traction will provide an early investor solid returns. This software probably wont change the world, but it can change the world for the millions in need of pro bono legal help.

Peter G Schmidt