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The Evolving Corporate Law Ecosystem

The corporate law ecosystem continues to evolve. Twenty years ago, it was just Big Law, a few boutiques, and law departments. Today, new players offer far more choice. I discuss here Crowd & Co, a recent Australian legal market entrant, as an illustration of the ecosystem evolution.

Founder Jarred Hardman told me in late December that the company serves lawyers, law firms, and law departments. Lawyers can grow their practices; law firms better manage peaks and valleys in demand; and corporations access specialist legal skills as needed.

Four Business Models for Contracting with Lawyers in Corporate Law

How does Crowd & Co fit in the corporate law ecosystem? Law departments and law firms can procure the services of lawyers in two ways: first, hire lawyers as full-time employees or second, contract with lawyers for specific time periods.

Contracting includes at least four business models:

  1. Staffing agencies provide lawyers for specified time periods. Customers pay the staffing agency and the agency pays the lawyers. The agency profits from the difference between the fee the client pays and what it pays the lawyers. (AdventBalance in Australia and Axiom Law in multiple jurisdictions offer staffing models.)
  2. Marketplaces offer a pool of lawyers that customers can screen, evaluate, and select, then hire and pay lawyer(s) directly for a specified time. The marketplace provider profits from transaction fees. Jarred explained that staffing agencies offer “labor for hire” and market-makers are brokers.
  3. Large law firms arguably are a specialized contracting model that bundle multiple lawyers and other professionals primarily for law departments. The fit of firms in this taxonomy is a topic for another day.
  4. Captive agencies or marketplaces are law-firm or -department built, owned, and operated for the own use. This may be a small set. Jarred rightly notes that building and operating either is expensive. (That DLA Piper UK turned to Lawyers on Demand for contract lawyers supports this point; see “Brave” DLA Piper teams up with LOD for flexible resourcing ventureThe Lawyer, 11 Nov 2015.)

 

More about Crowd & Co

Jarred’s goal is to create a marketplace like UpWork (formerly Elance and ODesk). In the U.S., UpCounsel appears to operate a marketplace model. Jarred believes that UpCounsel predominantly targets start-ups, SME, and consumers more than large law firms or law departments, as Crowd & Co is doing. Moreover, he views UpCounsel as bypassing law firms. In contrast, Crowd & Co works with law firms by providing them access to labor.

I suggested that the agency versus broker distinction may matter little to buyers. He agrees but pointed to what he says are the advantages of Crowd & Co’s broker model: lower price, transparency, and the ability to select any available lawyer in the market. Also, Crowd & Co offers law departments and law firms the ability to set up standing teams (virtual legal teams).

Crowd & Co soft-launched at the end of November 2015. Jarred expects that by mid-February’s formal launch, 5 to 10 law firms, including a couple among the Australian Top 10, will use his marketplace.

Crowd & Co has not yet targeted corporations but has been contacted by a number of majors who are interested in an independent marketplace. He plans to target law departments in the near future.

On the supply side of individual lawyers, Crowd & Co seeks only experienced lawyers. Jarred reports that 80 have expressed interest so far and he hopes to have 60 on board for the February formal launch. Before putting a lawyer on the marketplace, Crowd & Co pre-screens and checks two references. Lawyers in the market are predominantly independent contractors, with their own malpractice insurance.

Crowd & Co offers technology, community and services to attract lawyers to its market. Its tech platform includes video chat with candidates, messaging, file sharing, and the ability for lawyers to post their substantive content. The company also offers shared work space and will be looking at offering other community building services in the near future.

Crowd & Co intends to open in the UK in 2016 and eventually in the US. In the US, a brokerage model likely faces some conflicts clearance challenges. Jarred thinks these can be surmounted.

The company is self-funded now and plans a capital raise in Q1 or Q2 2016. Currently Crowd & Co’s revenue model is based on a brokerage fee for transactions completed.

Closing Note: Is Corporate Law in Evolution, Disruption, or Disarray?

To me, the corporate law ecosystem looks quite similar year to year. The creation of legal marketplaces is an example of that slow evolution. For a framing of legal market changes, see George Beaton‘s 1 Jan 2016 post, What law firms and taxis have in common. He applies the December 2015 Clayton Christensen article in the Harvard Business Review, What Is Disruptive Innovation?. Beaton and Christensen discuss disarray (what Uber has caused in the taxi industry) versus disruption (what Netflix did to Blockbuster).

I agree with Dr. Beaton that Big Law needs to remake itself but believe firms have years to do so. Of course, inaction now may mean declining profits and dissolution risk.To maintain profitability and market share, law firms should find ways to improve service delivery and client value. As the ecosystem evolves – for example, new marketplaces arise – large firms would be wise to consider how to take advantage of them.

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[Disclaimer: I wrote this based on information from Jarred and my general legal market knowledge. I have not researched other potential legal marketplaces. My intent here is to illustrate evolution in the corporate law market; not a review. I have no financial interest in Crowd & Co. Many legal market players contact me; I engage with ones I find interesting.]

MarketPlace courtesy Pixabay - seattle-839652_1920