Law firms are using new tech to cut costs. These are the startups set to benefit — and what it means for the future of legal careers.
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The coronavirus pandemic has accelerated virtually every industry's path to digitize and the notoriously old-school world of law is no exception. Legal firms are demanding more innovation in a bid to improve efficiency and as clients seek lower costs. VCs are seeing promise in the space, opening their wallets to fund legal tech startups. Last year, Bloomberg Law reported that legal tech investments hit at least $1.2 billion by the end of the third quarter, surpassing the previous year's record of $1 billion. Business Insider has been tracking the latest from startups looking to disrupt the complex and paper-dependent industry and how legacy companies are adopting new digital tools. See the latest below. Legal tech startup news Litigation funding startup Legalist is seeing a boom in demand to back lawsuits — and is hoping to attract hundreds of millions of dollars from investors to keep up with the need These are the 10 hottest legal tech startups that have raised a combined $1.4 billion in VC funding from investors like Bessemer Venture Partners and Andreessen Horowitz Meet 9 legal tech startups that top VCs say are poised to take off as law firms look to cut costs and boost productivity Trustate, a new startup launched by an ex-DLA Piper attorney, is looking to disrupt a key part of an 'inefficient' $194 billion industry by easing the pain points of estate administration Legal industry warms up to tech Meet the AI-powered recruiting company used by investment banks like Lazard and Piper Sandler that's looking to transform how legal firms hire out of law school A virtual law firm is hiring freelance lawyers to create a Netflix-style subscription legal service that could disrupt the US legal industry Top law firms are starting to share exclusive data with clients to help them win legal disputes and clinch M&A deals. Here's why they're giving it away for free. The notoriously old-school legal industry is finally warming up to tech. Here are the winners and losers as law firms turn to startups to cut costs. How top law firm Mintz is using AI to help reduce costs for clients and alleviate work for associatesJoin the conversation about this story » NOW WATCH: What makes 'Parasite' so shocking is the twist that happens in a 10-minute sequence
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Nearly 10,000 companies backed by venture capital or public equity investors got small-business loans under the PPP
Startups backed by some of the most well-heeled venture firms received loans under the Paycheck Protection...Startups backed by some of the most well-heeled venture firms received loans under the Paycheck Protection Program, a federal initiative designed to keep small businesses afloat during the coronavirus-related shut downs, according to a new analysis by CB Insights. Some 87 portfolio companies of New Enterprise Associates, which has $24 billion in assets under management, were listed in the government's report as participants in the program. Another 55 companies backed by Andreessen Horowitz, which manages a portfolio of $11.3 billion in assets, were listed as PPP loan recipients. In general, venture firms that have greater numbers of portfolio companies had higher numbers of them participating in the PPP loan program, according to CB Insights. Visit Business Insider's homepage for more stories. Startups backed by some of the most well-financed venture firms participated in the federal government's coronavirus-related small-business loan program, according to an analysis of loan data by CB Insights. New Enterprise Associates, Accel, Sequoia Capital, Andreessen Horowitz, and Lightspeed Venture Partners each have at least $10 billion in assets under management and rank in the top 11 best-funded venture firms, according to PitchBook. Each organization had at least 23 of its portfolio companies that took part in the loan program, known as the Paycheck Protection Program, or PPP, according to CB Insights, which analyzed data provided by the Small Business Administration and the US Treasury Department. Some firms had many more than that. For example, some 87 startups backed by New Enterprise Associates, which has $24 billion in assets under management, took part in the program. In terms of the number of portfolio companies participating in the PPP, NEA ranked no. 1 among traditional venture firms. Andreessen Horowitz, which manages $11.3 billion in assets, had 55 startups in its portfolio that were listed as PPP loan recipients in the government's list. That was enough to rank it third among traditional venture firms, following Alumni Ventures Group, which had 58 companies listed as participants. Representatives of NEA, Andreessen Horowitz, and Alumni Ventures did not respond to emails seeking comment. Venture-backed companies aren't necessarily "rolling in money" The rules governing the PPP were somewhat murky and the SBA modified its guidance several times, but there was nothing in the rules that prohibited venture-backed startups from taking part in the program, said Kathleen McGee, counsel in the Tech Group at the Lowenstein Sandler law firm. Such companies simply had to assess whether they needed the funds and document that need. Some startups went through that process and obviously felt they qualified for the program, regardless of having VC backing from prominent funds. Indeed, just because certain startups that received PPP funds were backed by well-heeled venture firms doesn't mean they had ready access to or any kind of claim on those firms' capital, said McGee, who helped advise companies and venture firms on whether to apply for the loans. "There is a misconception amongst the public that if you have a VC [investor] that you are automatically rolling in money," she said. "And if you talk to any startup, they will tell you that is absolutely not true." Established by the Coronavirus Aid, Relief, and Economic Security Act, the PPP was intended to keep small businesses afloat while large parts of the economy were shut down to minimize the spread of COVID-19. The program offered initially $349 billion, and then another $320 billion in loans and promised to forgive those loans if businesses used them for necessary expenses, particularly paying workers. Confusion and controversy surrounded the PPP The PPP was rife with controversy and confusion almost from the beginning, particularly when it came to whether venture-backed startups could participate. The initial guidance from the SBA and the Treasury Department seemed to indicate that many venture-backed firms would be too big to be eligible, not because they had large workforces themselves, but because they would have to include the staff at every other startup funded by the venture capital firms they had in common. After the government made clear it wouldn't apply such affiliation rules to PPP applicants, many startups looked set to participate in the program. But then the SBA and the Treasury Department issued new guidance which seemed to indicate that private equity and venture-backed companies might not qualify because the startups, in theory, had other sources of cash they could turn to. The agencies later clarified that it would deem that all applications made for less $2 million were done in good faith, seeming to give venture-backed companies yet again a green light to participate. That guidance led many companies to find other ways to stay afloat during the downturn and either withdraw their applications or return loans they had taken out. Earlier this month, with some $130 billion still available under the program, the government extended the deadline for applying for PPP loans. Nearly 10,000 investor-backed companies took out loans Despite the confusion, some 9,657 companies that are backed by venture or private equity investors took out PPP loans of at least $150,000, according to the data released by the SBA and scrutinized by CB Insights. The SBA didn't disclose the exact amount of the loans given to particular companies, instead only providing a range of, say $1 million to $2 million, or $5 million to $10 million. But combining the midpoint of those collective ranges, the estimated amount that venture and private equity-backed companies received in PPP loans was $11.1 billion, according to CB Insights. That would mean that the average amount for each company was around $1.2 million. The venture-related firms with the most companies listed as participating in PPP were all either startups accelerators or seed-stage investors. Plug and Play Tech Center led the pack. Some 149 of the companies that took part in its accelerator program were listed as receiving PPP loans, according to CB Insights. Of the companies that it has backed with its venture fund, 68 were listed as PPP recipients. Y Combinator and Techstars, both of which are also startup accelerators, each had 100 or more portfolio companies listed as taking PPP loans. 500 Startups, yet another accelerator, had 67 of its companies participate in the program. 500 Startups partner Clayton Bryan said in an email that the firm was still reviewing its data, so it couldn't confirm that number. But even if it's accurate, it would represent only a small portion of the 2,400 companies the firm has invested in, he said. As an early-stage investor, 500 Startups often gives companies one of their first checks, frequently before they're generating any revenue, Bryan said. The firm advised companies only to apply for PPP loans if they really needed the money, he said. "We believe that only the ones that truly were in dire need, in many cases our youngest companies, explored this option," said Bryan. The companies it invests in, he continued, "are the most vulnerable to exogenous macroeconomic shocks, and raising money on the private markets does not insulate them from the economic impact of a pandemic." Representatives for Plug and Play and Techstars did not respond to requests for comment. A representative for Y Combinator declined to comment other than to note that the firm is different from other venture firms in that it invests only small amounts and takes small stakes in the companies it backs. That's "something to keep in mind when comparing YC with VCs," said Lindsay Amos, a spokeswoman for Y Combinator. Venture funds with more portfolio companies had more loans In general, the number of a venture firm's portfolio companies that took part in the PPP appeared related to the total number of companies it has backed, said Anand Sanwal, CEO of CB Insights. Startup accelerators back lots of companies each year, and many have been investing over a period of many years now, so have lots of portfolio companies, he said. Even firms that invest at later stages have lots of portfolio companies both recent and historical, Sanwal said. Just in 2020 alone, Andreessen Horowitz has made 54 investments, he said. The number of backed companies that participated in the program "was generally pretty correlated with portfolio size," Sanwal said. It's unclear what portion of companies listed as taking out loans under the PPP actually participated in the program. Some Silicon Valley companies have denied getting PPP loans, despite being included in the SBA's list. Read more about the PPP: More than 4,800 startups that applied for federal PPP loans in the coronavirus-led shutdown had raised venture funding in the last 2 years Several Silicon Valley companies were listed as coronavirus paycheck loan recipients — but some say they never applied for loans in the first place The government is now giving startups a green light to participate in its $670 billion small-business loan program, but at least some advocates are urging caution Startup advocates worry venture-backed companies that got money under the $670 billion small-business loan program are going to have to give it back SEE ALSO: Silicon Valley startups may get to tap into the $350 billion coronavirus small-business loan program after all, thanks to late rule changes by regulators Join the conversation about this story » NOW WATCH: We tested a machine that brews beer at the push of a button
Hoxton Ventures, a VC which backed 3 unicorns with its first fund, has raised just under $100 million to invest in European startups
Hoxton Ventures, the UK venture capital firm that took early stakes in unicorn startups Deliveroo, Babylon...Hoxton Ventures, the UK venture capital firm that took early stakes in unicorn startups Deliveroo, Babylon Health, and Darktrace, has raised a second fund of just below $100 million. Hoxton's raise is against the backdrop of startups and venture capital investors trying to navigate a recession induced by the COVID-19 pandemic. Founding partners Rob Kniaz and Hussein Kanji say the firm plans to invest in a broad spectrum of European companies with their second fund, albeit with a greater focus on deep tech. Visit Business Insider's homepage for more stories. Early-stage tech investor Hoxton Ventures has closed just under $100 million for a second fund to back fast-growth European startups. The UK investor hopes to replicate the hit rate of its first fund, whose portfolio of 17 startups includes three unicorns valued at $1 billion or more. Hoxton was an early investor in food delivery firm Deliveroo, telemedicine firm Babylon Health, and cybersecurity company Darktrace, all of which rank among the UK's most valuable private companies. While some of Hoxton's smaller investments have exited, the big three are yet to bring in the anticipated mega return through an IPO or sale, though the first may come with Darktrace's anticipated float in 2021. Hoxton's second fund closes as both venture capital investors and startups try and navigate the economic impact of the COVID-19 pandemic, which took much of the world into lockdown from March. Hoxton's partners main goal is, however, to continue to back startups with the potential to become multibillion-dollar firms. "It's still a broad spectrum of companies, from consumer, to B2B, to deep tech," said Rob Kniaz, founding partner at Hoxton. "We've always had a very wide net ... we want to find the big outcomes no matter what shape or size they come in. We'll look at [firms] touching medical, touching health tech, quantum computing but we'll also look at very consumer-y things. It's finding the outliers." The underlying theme, he added, was a focus on the US market. Kniaz spent his early career in Silicon Valley working at Google among other places, while his other partner Hussein Kanji previously worked for Microsoft before turning investor. Raising the new fund hasn't been totally painless. Hoxton raised the bulk of its new fund in 2019, but its final close took place during the early months of 2020 as the pandemic began to bite. The VC firm was one of several UK venture capital investors affected in 2017 by a sudden funding freeze by the EU's European Investment Fund. The EIF is a major funding source for VCs in Europe, but has slowed its investment into UK firms after Brexit. The UK's British Business Bank stepped in to fill the gap through British Patient Capital, and is now an investor in Hoxton's second fund alongside its existing LPs, plus new (unnamed) British and Swiss institutional backers. Hoxton has invested in six companies from its second fund, including language marketplace Preply and quantum computing startup Universal Quantum. The VC has also hired its third partner, Robert Ludwig, who joins as chief operating officer.Join the conversation about this story » NOW WATCH: Tax Day is now July 15 — this is what it's like to do your own taxes for the very first time
Buzzy construction tech startups could see their values balloon to Silicon Valley levels. Here's where McKinsey is seeing the biggest opportunity.
A new McKinsey report says that $265 billion in new or shifting profits are at stake...A new McKinsey report says that $265 billion in new or shifting profits are at stake as the construction industry invests more in technology. This transformation, already underway, has been accelerated by the coronavirus crisis, with 50% of the construction experts surveyed by McKinsey saying they've increased their investment in technology since the virus hit. While the changes will disrupt the whole construction value chain, the biggest impacts will be on the contractor and subcontractor labor field, design and engineering, and material production and logistics. Visit Business Insider's homepage for more stories. A $265 billion pool of annual profits is up for grabs for construction companies that invest technology and digitalization, according to a new report from McKinsey Global Institute. This shift, already underway, has been accelerated by the coronavirus pandemic, and the unprecedented amount of remote work that followed. The report, published Thursday, found that 40% to 45% of construction incumbents' value added in certain segments, such as design and engineering or actual contracting, is at risk in the face of increasing tech adoption. The report estimated that players that "move fast and manage to radically outperform their competitors could grab the lion's share of the $265 billion in new and shifting profits and see valuations more akin to those of Silicon Valley start-ups than traditional construction firms." In a call with the press on Tuesday, Jan Mischke, a partner at the McKinsey Global Institute stressed just how existential this particular moment is: "Companies need to move now or be left behind." Construction's lack of digitization, compared to industries like manufacturing or logistics, had kept the industry from seeing a drastic increase in productivity, McKinsey found. But in the last few years construction technology has gone from an extremely niche industry to one of the buzziest sectors in venture capital. The latest McKinsey report said it expects the coronavirus to accelerate that growth. McKinsey surveyed around 100 experts and construction executives, half have already increased their investments in tech since the pandemic began. Read more: 7 top VC investors reveal where real-estate tech portfolios are hurting the most and what they need to stay alive through a year of crises Mischke said that some of the people they talked to said they were now squeezing their five-year plan for tech adoption into a six month period to accelerate the rate of change. As in every industry, the shift into remote work has highlighted exactly why a digital workflow is so much more efficient. Construction executives had a number of realizations during the crisis, said Maria João Ribeirinho, a McKinsey partner and global leader of the firm's engineering and construction practice, on the call. "It is not okay to get to your construction project and have to deal with a bunch of paperwork or have to do 10 phone calls to see that your materials end up on-site in time," she added. The transformation in the industry, which could lead to a 60% increase in productivity over time, will turn a localized and fragmented industry into one that is consolidated and focuses on buildings as if they were repeatable products, instead of one-off projects. It will be driven by both new entrants, like SoftBank's Katerra, and from more traditional, incumbent builders. While there are potential impacts across the construction value chain, companies in the design and engineering, materials, and general and specialist contracting fields will see the biggest potential impact. In design and engineering, new software will reduce the amount of human input necessary in building, while materials companies, powered by recent changes in logistics, will become much more efficient, and likely cheaper. Contracting and subcontracting may also see big hits, as easier offsite construction and modular building will require less labor than traditional building techniques. Read more: 5 startup founders explain how they reimagined an old-school industry to break into the buzzy construction-tech scene Mischke noted that private equity has taken a very close interest in the industry, investing in both innovative startups and in more traditional building companies that are adopting technology. In 2019, Goldman Sach's venture capital arm made an investment in Built Technologies, a construction lending platform, and in TopHat, a modular housing company. Alternatively, private equity may also seek out underperforming companies to transform by connecting them with innovative technology. The public sector, which Mischke said is the "single biggest constructor" will also be key, both in the types of buildings and infrastructure they have built and in the way they adjust regulations to accommodate technological change. Another key element to this change will be attracting Silicon Valley-type tech talent to an industry that isn't typically known for its innovativeness. In order for that to happen, firms will need to show a commitment to using new technologies. "We need a renovation of the sector to attract more diverse and more digital talent," Ribeirinho said. 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