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Legal Tech Makes Its Case With Venture Capitalists, Tops $1B In Funding This Year

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The legal world’s sometimes glacial pace does not obviously lend the industry to being disrupted by new technologies—but venture investors seem to be betting big on exactly that.

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“When you look at the cloud and other technology, the legal industry has been resistant to it,” said Jesse Wedler, a partner at CapitalG who has been watching the legal tech space for about eight years. “Now you are seeing people have an increasing appetite for this technology. But it’s still early innings—like the first or second inning.”

Legal tech companies have already seen more than $1 billion in venture capital investments so far this calendar year, according to Crunchbase data. That number smashes the $510 million invested last year and the all-time high of $989 million in 2019.

Industry insiders say the increased investment is due to challenges brought about by the COVID-19 pandemic and what was already a plodding, but steady, change in the legal world to accept cloud and other technologies that are attempting to bring the sector into the 21st century.

While dollars are higher, deal flow is a little behind previous years, with 85 funding rounds being announced so far in 2021, well behind the pace of 129 deals last year and 147 in 2019. Some of the largest rounds in the sector this year include:

  • San Francisco-based Checkr, a platform that helps employers screen job seekers through initiating background checks, raised a $250 million Series E at a $4.6 billion valuation earlier this month;
  • San Francisco-based legal services provider Rocket Lawyer closed a $223 million venture round in April; and
  • Boston-based on-demand remote electronic notary service Notarize raised a $130 million Series D in March at a reported $760 million valuation.

“This mainly is a paper-based industry,” said Patrick Kinsel, founder and CEO at Notarize. “However, COVID exposed inefficiencies and it forced people to look at everything you do and explore new ways.”

COVID and the cloud

Just as in many industries, the cloud and other new tech had been slowly changing the legal world for more than a decade. However, after COVID caused offices to close and legal processes and documents to go virtual, adoption of those technologies skyrocketed.

With those changes, investors started to eye technologies that took many firms “in-house” processes and moved them to the cloud—many involving documentations and filings as well as tools to help better communicate with clients.

“There’s no doubt COVID provided huge tailwinds for legal tech growth,” said Jack Newton, co-founder and CEO at Vancouver-based legal tools platform Clio, which raised a $110 million Series E at a $1.6 billion valuation. “It was the forcing factor for firms that had put off their transformation.”

“Since the midpoint of last year, we’ve seen an acceleration of our business,” said Vishal Sunak, co-founder and CEO at Boston-based management tool developer LinkSquares, which used that increased interest to help raise a $40 million Series B in July.

While the legal community has traditionally been slow adopters of new technologies, Sunak said that is starting to change as general counsels are now coming from a “cloud-first” generation and know the importance of things such as data insights that can help predict outcomes. Just as data and AI has changed marketing, sales and finance, the legal community is now catching on, he added.

“They say, ‘I want that too. I don’t just want to be a cost center,” Sunak said.

Wedler, who led his firm’s investments in legal tech startups Notarize and Oakland, California-based legal discovery platform Everlaw, added that many parts of the $750 billion global legal services market revolve around issues and processes technology can make significantly better.

“There’s so many repetitive processes technology can help with,” he said. “Technology can make so many of these processes faster and more compliant.”

Sunak, whose company provides contract management tools for in-house legal teams, said advances in AI and language processing are helping drive new innovation in the staid sector.

“I just think you are seeing the changing of the guard,” he said.

Investors see the appeal

Those changes and advancements in tech are causing VCs to take note. While some investors have eyed the space in the past, Sunak said he now sees more knowledgeable VCs looking to invest.

“This raise, I see more investors have knowledge about contracts and legal tech than I anticipated,” he said, adding the company received multiple offers during its fundraise. “I didn’t have to explain the market.”

In 2019, Clio—which provides web-based tools that help law firms in practice management and client collaboration—raised one of the largest growth equity rounds in the legal tech space by securing a $250 million Series D.

“We saw a tsunami of interest after our Series D,” Newton said .

“Given some of the recent shifts in the sector, however, we believe the time is right for legal tech to take a major step forward,” said Brady Broadbent, partner at Sorenson Capital, which invested in LinkSquares.

“The environment has certainly become more competitive over time,” he added.

No Goliath

With no large incumbents in this space, how investors may see returns becomes a popular question.

Horizontal software companies like Microsoft or Salesforce1
could become interested in the space—as legal tech has data and analytics those types of companies find useful, Wedler said.

Some companies in the space also have found private equity a viable exit, with films like Providence Equity rolling up players such as HotDocs and Amicus Attorney several years ago.

However, perhaps more interesting to some startups is the legal tech space even saw an IPO this year, with Austin, Texas-based Disco going public on the New York Stock Exchange in July. The company’s market cap now sits at $2.8 billion.

One thing most seem certain about is that while the legal world’s tech revolution may have been brought on by a once-in-a-century event—there is no turning back.

“Customers said they did this because of COVID, and they are not going to go back now,” Wedler said.

Methodology

Legal tech funding numbers include pre-seed, seed and all venture rounds.

Illustration: Dom Guzman

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Source: https://news.crunchbase.com/news/legal-tech-venture-investment/

Start Ups

London-based Memgraph raises over €8 million in seed funding to provide Streaming Graph Algorithms to the masses

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Memgraph-founders

Memgraph, the streaming graph application platform, today announced Memgraph 2.0, the public launch of its source-available platform, which makes it easy for modern application developers to build streaming graph applications. Additionally, Memgraph disclosed that it raised about €8 million in seed financing led by Microsoft’s venture fund M12 with participation from Heavybit Industries, In-Q-Tel, Counterview Capital, ID4 Ventures, and Mundi Ventures.

The fresh funds will be used to grow the team (headquartered in London), further accelerate R&D, and bring key features to market along with driving further adoption among the developer community.

Memgraph was founded in 2016 to to address the following problem: As the amount of data flowing through modern tech stacks increases at an exponential rate, so too does the number of data sources. Building applications while managing such high-speed workloads is a complex problem which compounds as ever more data is introduced to the environment. Building graph applications is even harder and currently a privilege reserved for very large corporations with teams of data scientists.

Dominik Tomicevic, the CEO and co-founder of Memgraph stated: “With today’s launch, Memgraph empowers all developers – from the open source hobbyist to engineers at large enterprises – to stream, graph, and build in minutes. Memgraph 2.0 gives developers the ability to wrangle all of their data sources and build graph-based applications on top of their streaming data.”

After consulting for a number of corporate clients and becoming frustrated by the status quo of graph databases, Memgraph Co-founders Dominik Tomicevic and Marko Budiselic spent the next five years building the first of its kind, in-memory graph database from the ground up and are sharing it freely with developers today.

Memgraph 2.0, with its Memgraph Community Edition (MCE), is available under a Business Source License, meaning it’s free and open for a variety of use cases – even commercial. Instead of being unnecessarily restrictive, availability under BSL allows a path to monetization for commercial creators. MCE allows data ingestion through CSV and S3, but also directly from Kafka. Once the data is ingested, it is transformed to a graph model where the real power of the graph comes in the form of algorithms.

For larger businesses, Memgraph 2.0’s Enterprise Edition (MEE) is built for companies who develop enterprise-level streaming graph applications requiring security and support SLAs. It features role based access controls, full activity auditing, encryption and advanced password policies.

Memgraph 2.0 lets developers leverage well-worn, battle tested algorithms like PageRank, Community Detection, BFS, DFS, and more, without hiring a PhD or 10 data scientists. A developer is now able to build apps on top of those results: dashboards, visualisations, permission modelling, recommendation and fraud detection systems, and more. LSI, a globally recognized leader in chemical R&D and nano-additive product formulation,
leverages Memgraph to assist with its scheduling process; a complex, mission-critical operation that dictates the management of many contingencies such as chemical ingredients, storage capacities, a finite number of reactors and other equipment.

Matthew Goldstein, M12 Managing Director and UK Lead, explained: “Memgraph helps customers advance from data overwhelm to profitable insights. Analytics capabilities that were once exclusive to tech giants are now accessible across industries with Memgraph. We’re proud to lead their latest funding round and support the democratization of smarter business insights.”

Memgraph 2.0 is available today; developers can connect their sources and spin up a Memgraph instance to build apps for free in minutes.

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Source: https://www.eu-startups.com/2021/10/london-based-memgraph-raises-over-e8-million-in-seed-funding-to-provide-streaming-graph-algorithms-to-the-masses/

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The Briefing: China Bans Crypto Transactions, Cue Health Prices IPO, And More

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Here’s what you need to know today in startup and venture news, updated by the Crunchbase News staff throughout the day to keep you in the know.

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China bans crypto transactions

China’s central bank announced today that going forward all cryptocurrency-related transactions are illegal.

The People’s Bank of China said the decision was aimed at preventing risks around crypto trading and maintaining national security and social stability.

Cryptocurrencies fell immediately after the announcement but subsequently regained some ground, with Bitcoin around $41,376 in morning trading and Ether around $2,830.

— Joanna Glasner

Cue Health prices IPO

Cue Health, a maker of tests for detecting COVID-19, priced shares for its initial public offering at $16 each, the middle of the proposed range, raising around $200 million.

Shares are set to begin trading Friday under the ticker symbol HLTH. San Diego-based Cue develops and sells tests for COVID and has a pipeline of test kits in late-stage development for for flu, respiratory syncytial virus (RSV), fertility, pregnancy and inflammation.

— Joanna Glasner

Proptech

Ukio raises $9M to simplify apartment-hunting: Barcelona-based Ukio, a startup offering turnkey apartments with by-the-month rates, raised $9 million in a funding round led by venture firm Breega.

— Joanna Glasner

Manufacturing

General Lattice raises pre-seed round: General Lattice, a Chicago-based developer of computational design tools for digital manufacturing, announced that it has raised $1 million in pre-seed funding led by AP Ventures LLC, the strategic investment arm of All Points Logistics.

— Joanna Glasner

Illustration: Dom Guzman

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Source: https://news.crunchbase.com/news/briefing-9-24-21/

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Under The Hood: Kleiner Perkins Eyes Its Busiest Exit Year In A Decade

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Kleiner Perkins is one of the most storied venture capital firms in Silicon Valley, making early investments in companies like Genentech, Amazon and Google, and serving as home to big names over the years including John Doerr and Al Gore.

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Kleiner, which celebrates its 50th anniversary next year, has always gone through iterations in its many decades of venture investing. 

But starting around 2018, the firm made significant leadership changes following the departure of partner Mary Meeker and the hiring of a slew of new investors, including general partners Mamoon Hamid and Ilya Fushman. The following year, it announced a new investing strategy and slogan—“Back To The Future”—along with its 18th venture fund.

Kleiner Perkins
From left to right: Wen Hsieh, Bucky Moore, Ilya Fushman, Mamoon Hamid, Annie Case, Monica Desai Weiss, Josh Coyne, and Haomiao Huang. Not pictured: Ted Schlein (Photo courtesy of Kleiner Perkins).

Now, even as the firm appears to be doing fewer deals than it has in the past, it’s poised to have its best year of exits from its portfolio in at least a decade.

With Kleiner’s long history and new strategy in mind, we dove into the firm’s portfolio and spoke with Fushman about the firm’s investment approach and future.

Early-stage focus

Kleiner Perkins in recent years has been especially focused on early-stage investing. 

When Fushman, Hamid and partner Bucky Moore came in during 2017 and 2018, the firm had raised its 17th fund, KP17, but hadn’t deployed it. The team got to work investing early in companies like Loom and Figma.

Most recently, Kleiner Perkins raised a $700 million fund, KP19, which it announced in March 2020, and a $750 million fund, KP Select, which it announced in April 2021. 

Of course, the venture world’s definition of what constitutes an early-stage company—and how big the check sizes for those companies are—has been changing.

“This spectrum of what early-stage investing is has been evolving, right? We heard some pretty large seed funds being raised pretty recently,” Fushman said in an interview this week with Crunchbase News. “The way I think about it is that there are moments in time for a company where having a real hands-on partnership with a great investor can be trajectory inflecting. And that moment can happen at the seed, so the letter or the number of the round doesn’t really matter. It can happen at the A, at the B. It can happen at the C.”

The team Kleiner assembled  is made up of people dedicated to careers in VC and had operating experience, Fushman said. It’s a small team that punches above its weight and wants to partner with entrepreneurs early to build companies, he said. 

As Fushman explains it, they’re generalists with a broad range but have a “core center of excellence.” 

Kleiner likes to invest early and work with its portfolio companies across talent, go-to-market strategies, and marketing, focusing on a few core things, he said. 

“The ethos is still to keep it very tight, as lean of a team as you can, while leveraging networks, activities and capital to do more,” Fushman said.

Investment pace

Kleiner Perkins appears to be investing in fewer deals these days.

The firm has made 49 investment deals so far this year, according to Crunchbase data, with about a quarter of those deals at the seed stage. 

June was the most active month for the firm so far in 2021, in terms of deals being announced. 

Some themes when it comes to the kind of early-stage companies Kleiner has recently invested in: the metaverse (Stardust, Inworld AI, Metaverse AI), workplace collaboration and communication (Coda, Spot, Sidekick, Glean) and robotics (Rapid Robotics, Chef Robotics).

The number of investments the firm makes has been lower in recent years than it was a decade ago, when it was investing in around 100 deals a year (from 2011-2014), an analysis of Crunchbase data also shows. 

Since 2016 or so, the number of investments Kleiner makes annually has been between 50 and 70, with the peak of the past five years being 2019, when it made 67 investments. 

It also appears to be leading fewer funding rounds than it was just a few years ago—in 2018 and 2019, for example, the firm was the lead investor in 26 and 28 deals, respectively. 

Founder-firm fit is key for Kleiner Perkins, said Fushman. The firm wants to focus its resources and attention to help a company grow, he said.

“A lot of what we do is with the intent of truly supporting a company over its full life cycle, which means deploying tens of millions of dollars over the lifetime, kind of the path of the company, and that has to come with conviction,” he said. “And then what it comes down to is a small team, building a lot of conviction, going all in on a company and truly helping the entrepreneurs build that company to its fullest potential. (That’s) the kind of the model that we think works.”

While the size of the deal and the stage at which Kleiner invests may change, its model stays consistent, he said: “The fundamental of it is still the same thing, which is truly, truly connecting, believing and then building.”

Kleiner has led 13 of the 49 deals it has invested in so far this year, the majority of the fundraises its led being at the seed through Series B stage.

Among the recent funding rounds it has led are Stord’s $90 million Series D, Thrive Global‘s $80 million Series C, and Settle‘s $15 million Series A.

Exits

So far this year, 26 of Kleiner’s portfolio companies have seen exits, per Crunchbase data. Among the most notable public exits were Robinhood, UiPath, Duolingo, LegalZoom and Coursera.

According to regulatory filings, Kleiner was among the largest shareholders in companies including Duolingo, LegalZoom and Coursera at the time of their respective IPOs.

With 26 exits so far in 2021 and still a quarter of the year to go, Kleiner could have its best year in at least a decade, in terms of the number of exits (not dollar value on returns). 

The only years in the past decade in which the firm has produced more exits than 2021 so far were 2014 and 2018 (both with 28 exits) and 2019 (27 exits). 

The firm is an investor in 35 unicorn companies valued above $1 billion that haven’t exited, according to the firm, including Stripe,  Epic Games, Figma, Cameo and Brex

With so much attention on early-stage companies and traditional growth-stage firms like Tiger Global Management turning their attention to them, there’s certainly competition to get in on deals. 

From his perspective, Fushman said venture deal making is as competitive as it’s ever been, but Kleiner tries to focus on building a relationship early with founders. The brand of the nearly 50-year-old firm and its network certainly helps in that regard.

“That comes down to relationship-building first and foremost,” Fushman said. “From a high-level perspective, a 50-year-old firm, it has a lot of leverage: For entrepreneurs in terms of recruiting, in terms of customer relationships, in terms of the network. If you just think about the companies that Kleiner Perkins has helped and supported over that 50-year history, that network and the expansion of that network is all accessible to our entrepreneurs today.”

Capital will become easier for entrepreneurs to obtain in a more commoditized way than ever before, Fushman predicts. 

“At the end of the day, we’re all selling capital and money is money,” he said. “But it’s really what you get with that money that should matter most. And I think the smart entrepreneurs, the thoughtful entrepreneurs really take their time to understand what value they’re getting incremental to capital.”

Crunchbase Queries Used In This Article

Illustration: Dom Guzman

Correction: A previous version of this story incorrectly stated that Kleiner Perkins recently led funding rounds for Fin.com and Stardust. We apologize for the error.

Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.

Real estate has long been viewed as one of the last vestiges for innovation and disruption, writes Kevin Lynch, an investor at Maschmeyer Group…

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Source: https://news.crunchbase.com/news/under-the-hood-kleiner-perkins-investing-strategy-exits/

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Aucto Raises Seed For Industrial Assets Marketplace

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Most of us will never be in the market to buy or sell a moderately used welder’s cart, engine lathe, or 40-ton hydraulic jack.

If we were, however, we’d likely encounter a corner of the industrial supply chain rife with inefficiency and waste–the kind of area that could use a startup’s fresh perspective for reinvention.

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That, at least, is the impression one gets from a conversation with Jamil Rahman, founder and CEO of Aucto, a startup marketplace for buying and selling used industrial assets. The company disclosed that it has raised $3.7 million in startup funding from venture firm NFX, the largest venture stakeholder, along with Motivate Venture Capital and individual investor Jack Greco.

The company runs online auctions for portfolios of industrial assets, with a particular focus on manufacturing equipment. It markets its platform to government and private sellers looking to market to both domestic and international buyers.

“There needs to be a better way for large organizations to sell these assets that still have a lot of lifespan left,” said Rahman, who spun Aucto out of his last venture, an Ontario company called NRI Industrial, in 2018. Aucto was previously based in Buffalo, but Rahman is currently working to scale the venture from San Francisco, where he recently relocated.

Like many startups, Rahman sees his sector was impacted heavily by the pandemic, pointing to three factors in particular. First, economic disruptions caused organizations to look for ways to generate capital quickly, motivating many to turn to asset sales.

Secondly, while companies were looking to sell assets during the pandemic, a historically popular form of sales–the live auction–was increasingly not an option, creating heightened interest in online auctions.

Third, the pandemic famously precipitated all kinds of supply chain disruptions. That pushed more businesses to the used marketplace for assets that were too difficult or costly to source new.

Beyond pandemic-related impacts, Rahman sees other tailwinds impacting the industrial equipment space. One is the ongoing shift in the auto industry and elsewhere away from fossil fuels and toward electrification. Equipment from coal plants and other shrinking industrial subsectors can often be repurposed or redeployed in other areas.

To date, Aucto says it has moved around $40 million on the platform, posting roughly 5x revenue growth during the pandemic. Commonly, assets are shipped internationally.

It’s a tiny piece of a vast market. In 2019, the last full-year estimate, U.S. non-farm businesses spent around $1.15 trillion on equipment, per the U.S. Census Bureau. Eventually, much of that will wind up back on the market as used equipment.

Illustration: Li-Anne Dias

Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.

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Source: https://news.crunchbase.com/news/aucto-seed-industrial-assets-marketplace-supply-chain/

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