Speaker 1: Good morning. I'm Kiwi Camera, the founder and CEO of Disco. Thank you very much to the organizers for the invitation to speak today. And thank you to so many of our largest customers who are here, both as speakers and in the audience. I'd like to talk a bit today about the accelerating impact of technology on legal services. And before I dive in, I just want to share a bit about my background, because I think it gives me a bit of a unique perspective on the space. I studied computer science as an undergraduate, and then went to law school, clerked, I briefly taught corporate law, and then I practiced as a law firm litigator and litigation partner before founding Disco eight years ago. And so when I look at legal technology, I look at it both from the lens of legal tech company Disco. But I also look at it from the point of view of a practitioner. And really the reason it was a difficult decision for me to give up the practice of law to make the jump to Disco eight years ago. But what made me make that decision was getting really excited about the possibility to have legal tech that could truly automate away the parts of the practice that don't require human legal judgment, so that great lawyers could focus on doing the things that they went to law school to do. I think we are still as an industry early in that journey. But I think that prize is in sight. And I think what we're seeing now is just a sea change, a kind of step function increase in the productivity that great lawyers can have, enabled by great technology. And I think it's going to have consequences for how all of us, no matter where we work, whether it's in legal departments and law firms and service providers, or in technology companies, do our jobs. And so today's talk is why I believe that. So first is just the fact that technology is coming to legal, and it's coming quickly. If you talk to any of the investment bankers who follow this space, and I think there are a few on the conference attendee list today, they can give you a market map of legal tech companies that will have hundreds of startups on it in dozens of categories. And that map will include startups that are addressing kind of established areas of legal technology, like legal research and e-discovery. But it will also include many companies addressing what are essentially greenfield areas of legal technology, things like automated diligence and contract lifecycle management. And so for whatever reason, there now are 100 plus well-funded startups going after the legal space and building amazing technology. Now, why is that? Why has there been this explosion in interest in legal tech? I think it's two things. First, investors have come to the realization that legal is one of the last functions that every company has, right? It's a line item on everybody's P&L, whether your company is in pharma or defense or financial services or consulting, it doesn't matter, you have legal spend. And yet legal is one of the last such functions that does not have a big software company. If you look at sales, it has Salesforce, support has Zendesk, finance has NetSuite, HR has Workday, IT has ServiceNow. But who does legal have? Nobody. And if you look at how valuable those companies are, if even Avalara, which is software for sales tax, I think last time I looked, Avalara has a $14.7 billion market cap. At the high end, think about Salesforce for sales, that's a $220 billion market cap company. ServiceNow for IT, $115 billion market cap for IT. So investors believe and the founders of these technology companies believe that there's a big prize out there, the possibility of building the company that builds the technology that powers legal. So that's, I think, why you're seeing the explosion of companies. And the adoption of legal technology, it's being accelerated today by a couple of really big secular tailwinds. First is the explosion of data, both in quantity and in variety. All of you in the audience will know what I'm talking about there. Second, there's an increase in legislation, regulation, and litigation. And it's driven both by an underlying increase in legal roles, but also by the globalization of business operations, which causes companies to be exposed to the legal rules of more jurisdictions. Cloud adoption and work from home accelerated by the response to the COVID pandemic are also tailwinds for legal tech. And the advances of the cloud platform companies, right, what can be done using Amazon Web Services or Microsoft Azure, or the Google Cloud Platform, these platforms enable radically different and radically better user experiences. And they greatly accelerate the pace of innovation, because legal tech companies get to basically build on top of the work of thousands of engineers at Microsoft or Amazon or Google. And then last is the practical reality now of artificial intelligence, machine learning, and analytics. Legal is a space that's almost purpose-designed for real applications of AI, where you can make a seven-figure or eight-figure impact while accelerating the work and actually increasing quality. And legal is actually one of the rare spaces where that really is true, right, where you can have a turnkey AI solution that this year will make a seven- or eight-figure impact to the bottom line. And all those kind of growthy tailwinds are coupled with increased budget pressure on corporate legal departments, the continuous desire to do more with less, and tremendous competitive pressure in the market for legal services, law firms, consultancies, and service providers, where there are just so many participants and it's become a survival imperative to find a way to differentiate from the service provider down the street. So look, that's why we're seeing this huge explosion in legal tech companies. I want to now double-click on one thing that I think we've learned over the last 20 years in Silicon Valley, and that is when we talk about technology companies, we don't mean just software, right, the biggest technology companies don't only sell software, they are what we call in the Valley full stack, meaning they deliver the actual end solution that the end buyer here, a corporate legal department, wants instead of just delivering software tools to an incumbent who then delivers the full solution. To understand what I mean, think about Amazon and Shopify in the e-commerce space. Shopify sells tools for e-commerce, right, it helps existing brands build online shopping and helps them enter the e-commerce world. Amazon's original e-commerce business is not tools for other people, it just is e-commerce. Amazon replaces Walmart. If you think about Amazon versus Shopify, Amazon, because it owns e-commerce rather than just tools for e-commerce, is a much larger company pursuing a much larger market. Or think about Uber or Lyft or any of the other on-demand companies, they did not sell software to incumbent taxi companies to use to do on-demand transportation, instead they delivered a full stack service, they delivered the actual transportation, but their approach to it was differentiated from incumbents by the technology that they built. Now, as companies grow, they will often wind up doing both. They'll both sell the full stack solution, but they'll also sell access to the underlying technology. So if you think about Amazon, third-party sellers on Amazon's e-commerce website now outnumber the sales that are done by Amazon itself. And from the point of view of third-party sellers, what Amazon is selling is technology rather than a full stack solution. Amazon Web Services is, of course, another great example where Amazon sells tools. Tesla is another great example. You can buy a full stack solution in the form of cars, or you can buy technology in the form of batteries. So the point is that modern technology companies don't think about them as coming into your space and offering you software that you can take it or leave it. What they're doing more and more is coming into your space and doing whatever it is you do, but in a fundamentally better way because they're powered by technology. So what does that mean? It means that old ways of thinking about technology adoption are a little bit dangerous in the modern world. The old way of thinking about technology adoption uses kind of the model of big company IT. And the idea is when new technology is invented, the IT department evaluates it and puts it through POC and maybe runs a pilot and essentially acts as a gatekeeper to ensure that the company as a whole is selecting and deploying the right technology. And that basic model is how a lot of legal tech, eDiscovery, for example, has worked historically. New technology is invented, IT or litigation support or practice support or a services vendor, some kind of incumbent vets the technology, pilots it, and then if they like it, deploys it. What's dangerous about that in a world of full-stack technology companies is that a full-stack company may not just sit back and wait until the incumbents adopt its technology. Instead, it may just come on the scene and start delivering the end solution to the ultimate buyer in a fundamentally better way because it's powered by technology. And so what this means is there's increased pressure to figure out whether the technology that is being brought to market is really worth adopting. Let me give you a couple of examples here. I'm going to give you a good example and a bad example. So a bad example of reacting to a fundamental change in technology is, of course, Blockbuster, right? Both with mail-order delivery of movie rentals and then later on with streaming, Blockbuster did not embrace a fundamental change in the technology used to deliver entertainment. And as a consequence, it's out of business. And notice who it lost to, Netflix. Netflix did not sell software for video delivery to one of Blockbuster's competitors, and it did not sell streaming software to one of Blockbuster's competitors. No, it's a full-stack entertainment company. It sold the end result, great entertainment on demand to Blockbuster's customer, you and me. Now, that's a bad example. A good example of reaction to a fundamental shift in technology is Disney, right? You may remember that Disney bought Steve Jobs's other company, Pixar, right, to get into computer-powered animation. And later on, when streaming came onto the scene, Disney launched Disney+, a terrific success, leveraging all of Disney's advantages as a, you know, decades-long incumbent, the tremendous library of Disney characters and material. And because Disney aggressively embraced new technology, Disney remains a force to be reckoned with in the entertainment space in a way that Blockbuster obviously does not. Now, if you're with me so far, which is that legal tech is coming, that technology is not going to be just software, it's going to be full-stack solutions, it's really dangerous to ignore it because you might wind up being Blockbuster, and also there's a tremendous opportunity in embracing it because you might wind up being Disney. Well, you might ask, well, why will these full-stack companies be technology companies, right? Couldn't you become a full-stack company the other way, by being a services company and then building great technology? And while in theory that's possible, I think the last 20 years of history in Silicon Valley say it just very rarely happens that way. And why? It doesn't happen that way because people who don't come from a technology background systematically underestimate what it takes to build great software. They underestimate the investment you need in product and design to figure out what experiences would feel magical to the customer. They underestimate the investment in the application layer to make sure that everything is seamless and smooth and performant, and they underestimate the investment in platform. And this by far is the most common mistake, right? To invest only in features that salespeople show in meetings, it often feels like the right thing to do, but that's like investing in the upholstery of a car and the sound system and the heads-up display while completely neglecting the engine and transmission. So you'll see that at software companies and companies with a software culture, they will often spend 50% or more of their R&D budgets not on features that salespeople talk about, but instead on platform, right? Performance, scalability, embracing the latest advances in cloud computing and AI, and so on. And just in practice, non-software companies have not succeeded at making, at having the appetite to make that caliber of R&D investment. Second point is that making that kind of R&D investment is really expensive, right? Software engineer salaries continue to increase, you need more of them, the world, you know, it only goes in one direction, which is more competitive. And software companies have a tremendous advantage in that they have far easier access to capital than traditional services companies, especially highly leveraged services companies do. If you look at publicly traded software companies today, high growth software companies are trading at numbers north of 20 times revenue, not earnings. And those valuations trickle down to the private capital markets where startups raise money. And so look, building great technology is really expensive and only software companies are able to raise the capital to afford to do it. And that's why you tend to see full stack companies start with technology and go full stack rather than emerging from services incumbents. So let's say you're with me. The next thing I want to do is relate all this to a dictum that you often hear at conferences like this about innovation coming from people, process, and technology. And that's certainly true, but which of the three has the biggest impact depends on where you are in the technology kind of maturation life cycle. I'm going to use some legal tech examples so you understand my point. If you look at Westlaw versus Lexis, right, that's mature technology. And what matters more in your legal research effectiveness? It's not technology. It doesn't matter that much whether you have Lexis or Westlaw. It's much more about people and process. You have great people and process applied to the task of legal research. But that was not true much earlier in the technology adoption life cycle when Lexis or Westlaw were new. That is, when people were deciding between a traditional law library with books and either Lexis or Westlaw, it wasn't people or process that mattered most. It was technology, right? The best people in process in the world will not make lawyers as effective with the traditional law library as they can be with either Lexis or Westlaw. Now, I would argue that you see the same kind of shift in emphasis between technology, people, and process in every area of technology. When there's a step function change in technology, technology is super important, and being technology agnostic is a recipe for winding up like Blockbuster. As the technology matures, people and process become more important because everybody winds up standardized on the new underlying technology. I leave it to you to assess where you think we are in that technology adoption life cycle across the different areas of legal technology. But I think the level of emphasis that you put on technology and whether it's sensible or not to be agnostic about technology really depends on whether you think you're in a mature space or an early space. And obviously at DISCO, we think it's early days across every area of legal technology. Okay, last thing I want to do is, so what, right? Let's say you believe me. How should you react to that if you're a lawyer in a corporate legal department or a lawyer at a law firm or an executive at a service provider? The first thing, if you accept the things I've said today, is you need to look for a technology partner, right? A technology company that is going to invest in building and deploying and supporting and making effective the legal technology that is coming. And you should look for a partner, you know, obviously based on their current offerings, but really much more based on, is this someone we believe will win the software R&D battle over the next three to five years, right? As legal technology comes into its own. That's number one. Number two is if you're a corporate legal department, you really have a lot of options, right? You can think about adopting full stack solutions, just buying directly the end result from a technology provider. You can think about buying technology directly and then mandating that your outside service providers use it. Or you can think about mandating that your service providers adopt certain technology, or at least explain the technology decisions that they're making and how those are impacting their ability to improve legal outcomes for you. If you're at a law firm, I think you need to look at yourself as somebody competing in a really crowded market and looking for differentiation. And I think technology can be a key part of your differentiation strategy, right? If technology lets you be 10 times more productive than the lawyers down the street, if technology is like having Westlaw while they have a traditional law library, then being early to the party, maybe not first to the party, but in the first half of the industry to get to the party, right, is a tremendous advantage. And one that you should not only adopt the technology, but you should be talking about it to your clients, articulating it quantitatively in terms of the improved results that you're driving. And it becomes a reason why a legal department ought to select your firm. And last, if you're a service provider in the space, these are dangerous times. You can be Blockbuster or you can be Disney. And I think it's in eDiscovery, for example, very obvious that now is the time to do some real soul searching and think about how the market's going to evolve over the next three to five years and what is a forward-looking strategy, right? Not hanging on to video rental in-person revenue, but leaping forward and embracing streaming. So, look, I think it's a really exciting time for all of us. Obviously, at eDisco, we like to think that we're playing a role in leading the legal technology revolution. But honestly, we believe that this is just a huge step function change in productivity for lawyers that's going to create tremendous value for everybody involved in the ecosystem. And so we believe really to a great extent, the rising tide lifts all boats, which is why it's so fun to be at a conference like this. Thank you again very much for the invitation and look forward to participating in the discussion.