It’s been 80 years since Konrad Zuse built the world’s first programmable computer in his parent’s basement. Fifty years after that, the World Wide Web was born. We have now been living in the internet age for close to 30 years, and, in that time, computation and technology have continued to evolve at an exponential rate.
Paul Graham, founder of the world’s most prestigious startup incubator Y-Combinator, has described technology as “something that’s spreading like a sort of fractal stain, [and] every moving point on the edge represents an interesting problem”. It has only been over the past few years that the full momentum of the fractal technological revolution has made inroads into the patch of social fabric that we call law. Like most revolutions, this one has unexpected beginnings.
This article will explore the work that entrepreneur Justin Kan has done to build a new kind of law firm, Atrium, sparking a legal revolution. To further explore the context of Kan’s firm, it will also briefly analyse two factors that have hindered change in the legal industry to date.
Welcome to the Eclectic World of Justin Kan
Justin founded Kiko in 2005, joining the first ever cohort of Y-Combinator alongside companies such as Reddit. Kiko was a calendar app with only moderate success, since Google Calendar came soon after. Kan sold his company on eBay for a surprising (to him) USD$258,100.
In 2007, Kan put his mind to media and spent eight months live-streaming his life 24/7 to the world. Whether it was taking trapeze lessons, being invited into a local Scientology center by a sidewalk recruiter or simply sleeping, every detail of Justin’s life was laid bare online at www.justin.tv.
Justin.tv was growing quickly in the video streaming space. However, the live streaming conducted by online gamers far exceeded the rest in popularity. By pivoting the company’s resources around a small group of ‘power users’ (professional gamers), the website evolved into what is now Twitch.tv, one of the world’s biggest gaming live streaming sites. Twitch.tv sold to Amazon in 2014 for almost USD$1 billion.
So what do Justin’s entrepreneurial pursuits have to do with the law?
Justin Kan represents a new ethos of business spreading through the world. Like any good startup founder, he pivots his company’s trajectory to fulfil the greatest need he sees. He stays lean, is constantly gauging the temperature and trends of the market, and delivers products or services that his customers love.
Justin has no background in the law. He studied physics and philosophy at Yale. But he knew his customers and decided to start a legal company called Atrium. After a decade in the startup world, Justin had navigated his share of legal hurdles and was a veritable ‘power user’ of legal services. He understood what worked and what didn’t in the legal industry. Let’s explore Atrium’s points of differentiation.
Incentivising Atrium’s Community
First, it focused on incentivising the actions of the community that would most ensure Atrium’s success. In 2017, Atrium raised USD$10.5 million in an incredibly unorthodox manner, through almost 100 separate individuals and groups. The lengthy list of investors includes heavyweights such as Reid Hoffman (founder of LinkedIn and Greylock), Peter Thiel (founder of PayPal and Founders Fund) and Sam Altman (President of Y-Combinator).
This capital raise would have been far simpler to undertake if Atrium had followed a more conventional method of raising funding from one or just a handful of groups. The reason it undertook such a strange fundraising round was primarily to create buy-in from industry key players. If Atrium does well, so do they.
Within 12 months of its first raise, Atrium raised another USD$65 million in a comparatively conventional manner. In this most recent raise, Andreessen Horowitz led the round with only three other funds joining in. This funding from one of the most prestigious funds suggests that the previous fundraising method was wildly successful.
Finding it’s ‘1,000 True Fans’
Secondly, Atrium found its ‘1,000 true fans’. This concept refers to users of a product or service that absolutely love it and will spread the word to everybody they know. These ‘fans’ are a more powerful group than ‘early adopters’ or a ‘niche market’; there is strong emotional buy-in and word-of-mouth propagation. In Atrium’s case, its true fans were startups. Atrium sits alongside other fast-growing companies like Sydney-based LegalVision in its very clear mission to transform the legal industry through technology, the same mission as LegalVision. Atrium has found a group of users that highly values effectiveness, disruptive thinking and the capabilities of technology: Silicon Valley.
“We’re building software to improve the delivery of legal work for these people … As a result, it makes sense to get a certain amount of buy-in from the industry,” said Kan.
“It’s not just about the capital, but about getting a funnel of companies and individuals that could be potential customers.”
Thirdly, Atrium is ‘stacking functionality’. This is a gardening term that refers to an element in a given system that performs more than one function. When you can design one element to have six or seven beneficial functions, you are amplifying and exponentially accelerating the impact of the entire system.
In Atrium’s case, it’s stacking a fundraising event to serve four functions, including a way:
- to raise necessary capital;
- to create ‘buy-in’ from the startup industry (by having key players personally invested in the company);
- of demonstrating its technology to the world by using it to raise capital from a host of investors; and
- of marketing the law firm through a highly unusual fundraising mechanism.
You’ll notice that each of these elements is interconnected because an increase in one almost always increases the efficacy of at least one other function.
For example, the more funds Atrium raises, the more marketable the story. And the more Atrium markets the fundraising event, the more of the world it is demonstrating its technology to.
What Does This Mean For the Legal Industry?
The legal industry is not particularly malleable. Two reasons why include the industry’s financial buffer, and a tradition of hierarchy and security.
The Financial Buffer of the Legal Industry
Like many industries traditionally flush with money, there’s often little incentive for change in the legal industry. This resistance partially congeals into a culture of comfort and resistance to change.
Hierarchical Tradition and Culture of Security
The law (like medicine) is a high-stakes industry where failure is not cheap; people’s livelihoods are at stake. In response, humans have tended towards putting their trust (and power) into a small group of elites that lead this industry.
This hierarchy is manifested in the robed attire of judges, imposing design of court buildings, strict tiers of the appellate system and unique and opaque form of language that has developed around the legal industry. We are left with a culture of hierarchy at the expense of adaptability. Such a culture inevitably exists across many industries and in varying degrees. However, in the law, this is a particularly deeply ingrained context. But technology startups are making their mark.
Time’s trajectory could place the future anywhere between the polarities of security and innovation. The legal industry may even broaden and split to cater to these two mentalities. Traditional law firms may devote their resources to cases needing security (for example, criminal cases and large business deals), and NewLaw may adapt to where speed, cost and ease of use is best (e.g. contract creation and early-stage company legalities).
These changes are already upon us; Kan is one of many non-legal founders who are bringing their creative flair, technical expertise and passion for a great product to the legal industry. Over the next two decades, as we approach the 100th anniversary of the invention of the computer, we can only imagine the changes yet to come.
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