NAIROBI, Kenya, Jul 22 – Legal Tech funding investments have dropped to 2018 levels in the second quarter of 2022.
This is according to new data from Legal Complex whose report indicates that the number of funding rounds for legal tech companies in the period under review hit 78 with a total value of $1.33 billion, down from Q1 2022 figures of total value $1.75 billion with 115 funding rounds.
“The drop aligns with what is happening in the broader venture financing ecosystem. Inflation has dampened the growth perspective of most software companies. This has caused the value of companies to drop. One tell-tale sign for lower valuations is when the latest round is either the same, or less than the previous round of funding,” said Raymond Blijd, founder of Legal Complex.
Blijd says a similar pattern is also being seen in Mergers and Acquisition activity in the same period.
“We registered 22 acquisitions announcements for the 2nd Quarter of 2022. That is half of what we registered in the first Quarter of 2022. The amount disclosed in total was $134m, which is – 87% less than the previous period in 2021. And in 2021, we recorded the most acquisitions ever,” he explained.
However, According to the report, the long-term story for legal tech remains the same: the legal sector is evolving and it is bringing in more and more tech to support the changes it needs to make.
“Along the way, the market – as with all markets – will experience ups and downs, but the overall trend is clear: legal tech is growing as a sector and will do so for a very long time to come. Investors should keep looking at the wider macro-picture, so too legal tech founders and customers, because that trend points in one direction: upwards over the long-term,” reports, Artificial Lawyer.
Legal Tech in Africa
In the State of the Legal Tech Sector in Africa report by Lawyers Hub, Legal tech in Africa is happening primarily towards two general directions: access to justice for low income legal services consumers who cannot afford legal services as priced; and legal operations tech for firms to offer their services faster and more efficiently with the advantage of reduced cost.
“The current startup ecosystem is very high risk for legaltech due to low demand from high value consumers and low investor attractiveness. There is a need for specialized incubation by firms and judiciaries,” the report reads.
Presently, there are over 50 legal tech startups in Africa whose primary objects can be grouped into either E-discovery, Online Legal Services,
“Although there is a vibrant startup funding landscape for Africa, the legal Lawyers Marketplaces, Legal Documentation and Legal Practice Management tech sector is not recording successful partnerships compared to other sectors like fintech, logistics and energy,” the report states.
The legal tech industry now occupies over 3 percent of the legal market share, with thousands of legal tech startups being established worldwide on a yearly basis.
Not only is the yearly investment in legal technology increasing but also is the regular day to day use of technology in legal offices.
Over 20 percent of lawyers nowadays use cloud services and document management tools and this is tipped to be on the rise.