Decoding Digital

How Vertical SaaS is Unlocking the Legal Industry with Jack Newton

By Ideas @ AppDirect / July 20, 2021

CEO and Founder of Clio, Jack Newton, is a legal-tech expert, an author, and a cloud visionary. He recognized the potential of vertical SaaS 14 years ago and set out to revolutionize an industry with cloud technology. Today, Clio leads the legal-tech sector.

In April 2021, Clio achieved unicorn status with a valuation of $1.6 billion – adding yet another string to Jack’s bow of successes. He’s previously been named EY's Software-as-a-Service Entrepreneur of the Year, one of Canada’s most admired CEOs, and published one of Amazon’s top 20 legal services books, “The Client-Centered Law Firm.”

In this episode of Decoding Digital, Jack sits down with Daniel Saks to discuss the challenges of building a software company and driving SaaS adoption in an industry tied to tradition.

Hit play to hear the podcast episode or read on to find out more.

Jack’s founder story starts back in 2007, in the very early days of SaaS technology. Jack and his future co-founder, Rian Gauvreau, predicted that the developing cloud technology would one day radically transform almost every industry.

They knew that if they acted quickly, they could catch “a wave of digital transformation” that comes around “once or maybe twice in a lifetime.” So they started looking for an industry where they could get in on the ground floor and make a transformative, profound impact.

“We were looking for an industry that was not just a great business opportunity, but that we thought there would be potentially a great mission-driven opportunity to help drive transformation in that industry.”

The opportunities for vertical SaaS in the legal industry

With that in mind, Jack and Rian settled on the legal industry. A sector deeply tied to tradition and incredibly slow to embrace change. While other industries embraced technology adoption and advanced their ways of doing things since the rise of the internet, lawyers were still mostly practicing law the same way in 2007 as they did in 1980. Something that’s still true today.

“The legal industry is one of the last major industries to be fundamentally transformed by technology.”

Clio was built with the conviction that it could unlock the tech opportunities in the legal industry. Jack and Rian hypothesized that the low barrier to entry meant that cloud-based technology would take hold in the legal sector where other technologies had failed.

Their thesis proved to be true. In 13 years, Clio has grown from a two-man operation to a 600-person organization operating out of five offices in various locations across the globe. Their extremely rapid growth has helped them become a billion-dollar company with unicorn status and even more investors joining them for their next phase.

The challenge with building a vertical SaaS company

But funding wasn’t always so easy to come by. Initially, investors were turned-off by vertical SaaS opportunities that seemed too niche. Rian and Jack had to convince them that there was potential to build a meaningful market with vertical SaaS and that, if they could provide true value to that vertical, you could categorically “win” it.

“When you go deep on a vertical, there is huge opportunity to expand wallet share and expand your average revenue per customer over time. And furthermore, I think what's become really clear over the years is that you can drive much more efficient customer acquisition economics in a vertical play versus a horizontal play.”

There are clear examples in all industries—Clio is just one—where customers prefer to have a unified experience, working with a single vendor for all their technology and services. Although integrations between different software and products are becoming increasingly available, people want a more cohesive experience, which is where vertical SaaS companies come in.

How Clio unlocked the legal market

The other major challenge that Clio faced was convincing the legal industry to get onboard with technology adoption. Many law firms relied on time-consuming processes involving pen and paper or software not purpose-built for the legal industry. They were also hesitant about whether cloud-based technology was secure enough for storing sensitive data.

The first priority was to get in front of those firms to let them know there was a better option, and secondly, to encourage them to embrace new technologies.

Jack and Rian decided they had to lead the conversation so they could help the legal industry reach the conclusion that “storing your data in the cloud is actually more secure than storing it on premise.” They wrote white papers, gave talks at industry conferences, and became thought leaders on the topic.

“Now, we're referred to as the people in the company that helped drive this transformation in legal and the adoption of cloud technology.”

How Jack continues to cultivate a mindset shift in the legal industry

In 2020, Jack put his hard-earned knowledge about the technology and legal industries into “The Client-Centered Law Firm.” He packed the book with examples of best practices and practical strategies that would set law firms apart from their peers.

One of the motivations behind writing the book, Jack says, was this:

“Lawyers go through law school and learn how to become amazing lawyers. But over the course of their three years of law school, they learn virtually nothing about building a business or being an entrepreneur. So this key insight for me was: lawyers need a bit of a handbook on how to thrive as a lawyer and how to be a successful entrepreneur.”

Fifty percent of all lawyers either form their own law firm as a solo operator or with a handful of other colleagues, but they’re often completely unprepared for what this means outside of practicing law. For Jack, this meant a huge opportunity to share the knowledge he’d gained from his years in the industry, but also to propose a “radical shift in how lawyers think about delivering legal services”.

The book challenges how things have traditionally been done in the legal sector, from the billable hour model, through to unlocking the “latent legal market” with more entrepreneurial thinking.

“I believe to unlock that latent legal market and to achieve our mission of transforming the legal experience for all, we really need technology adoption to be table stakes in the legal industry. But we also need—and this is a much harder problem and much more audacious problem to try to solve—we need the mindset of the legal industry to shift to this client-centered way of thinking.”

Jack stated that around 77 percent of consumers with legal issues do not get these resolved by a lawyer. He believes that there’s potential to close this access to justice gap by designing, pricing, and packaging legal services in a way that appeals to the client first.

This is Jack’s vision for the future, that the vast majority of legal services will be delivered via cloud-based applications. Innovations will continue to move law firms away from the traditional brick-and-mortar way of doing things and into a more normalized, client-centered way of thinking.

To listen to the full conversation with Jack and find out more about instigating and implementing vertical digital transformation.

Check out more episodes of the Decoding Digital podcast series for more insights from inspirational thought leaders and digital innovators. You can listen to the podcast on your favorite podcast app, including Apple Podcasts and Spotify.