London is already home to 44% of Europe’s lawtech startups. The launch of a fintech sandbox at the end of 2020 is hoped to boost investment further.

Pre-pandemic, London was already on track to become a global hub for the estimated $15.9 billion “lawtech” industry.
The UK capital boasts 44% of the lawtech startups in Europe, according to financial services industry body TheCityUK, and at the end of last year, The Law Society identified it as one of ten emerging lawtech scenes, alongside San Francisco, Tel Aviv, and Madrid.
Now, the COVID-19 pandemic is increasing the pressure on the legal sector to digitize. 
“What might have been optional before is a must now,” says Tech Nation’s lawtech director Jenifer Swallow, formerly general counsel at fintech unicorn TransferWise. “This will only increase because we’re about to step into a very, very challenging time economically. So, the downward pressure on spend and budget is only going to increase, and in times like that people have to be inventive.”
While The Law Society reports that “encouraging levels” of money are being pumped into UK-based lawtech, it warned that more investment is needed to retain the city’s competitive edge.
The UK is second only to the US globally in terms of legal services fee revenue, exceeding £35 billion ($44 billion) in 2018, according to TheCityUK.   
The UK government is trying to ramp up provisions for lawtech. In November 2019, it announced a £2 million ($2.5 million) grant to fund the digital transformation of law in partnership with Tech Nation. 
The hope is that lawtech could be a thriving sector akin to the UK’s fintech scene, which attracted almost $50 billion in investment in 2019 according to KPMG.
With that in mind, Tech Nation in May launched a fintech-inspired sandbox for lawtech startups that will launch at the end of this year to provide a controlled testing ground to drive R&D. 
Beneficiaries of the earlier fintech sandbox include NatWest’s mobile business bank Mettle and HSBC-backed open banking startup Bud. 
As well as addressing the immediate need, the aim is to create long-term growth and value for businesses, says Swallow: “What we want to do is provide an environment where we can accelerate development cycles, get people who’ve got great ideas through to proof of value faster than they would do without support.”
The UK is already well-placed to become a lawtech hub, she says, with a concentration of tech, a leading legal sector, and the benefits of a more lenient regulatory system than countries like the US.
“Experimentation and development is happening in lawtech but it is a nascent market overall, with £290 million in total investment value in the UK, compared to £10 billion in tech investment,” says Swallow. “It is much less mature than fintech, for example, and has similar potential.”
CEO and founder of robot lawyer DoNotPay Josh Browder, who raised a $12 million Series A in June.
DoNotPay
Investment is picking up: in the two years to 2019 funding for UK lawtech almost tripled, according to research by Thomson Reuters and Legal Geek.
According to Swallow, most activity is still at angel and seed round, but growth-stage tech investors like Highland Europe are getting in on the action. 
In July, Highland was involved in a $25 million round for Farewill, a London-based will-writing startup, and it has previously invested $21 million in intellectual property platform Incopro. 
Partner Stan Laurent says that Highland is interested in the lawtech sector — even outside the realm of artificial intelligence, which is “in the pure legal space, still a few years out.”
“I think we’re generally more bullish on the spaces where technology is really helping to improve user experience in the end,” he says. 
Laurent believes that the current potential in lawtech is global, but sees some benefits from the sandbox initiative for the UK’s lawtech ecosystem. 
He says: “The entrepreneurial kind of momentum around fintech, which is quite developed in the UK versus other geographies has, I would think, also helped to propel some of the legal tech”
Another lawtech startup that recently raised is robot lawyer app DoNotPay. The US-based startup, which also operates in the UK, netted a $12 million Series A from investors including Andreessen Horowitz and Founders Fund in June.
Founded by Stanford dropout Joshua Browder in 2015, it markets itself as “a lawyer for the consumer”, helping people with small legal disputes like parking tickets fines using algorithms that mine data from successful appeals.
Browder believes that some of its success with investors comes down to mass-market appeal.
“I think that pure lawtech is not that attractive, like legal research tools and things like that,” says Browder. “But where lawtech combines with something else and it’s seen as a mass-market consumer product, that’s when I think it’s very hot.”
He sees huge potential in the UK market. 
“I think there’s actually a huge amount of activity in that in the UK, even more so than in the US,” says Browder. 
“It’s not even about the money,” he says, referring to the government’s £2 million grant, “it’s also about people’s attitude. In the UK, when I speak to lawyers, they’re much more forward-thinking.”