Surge in legal tech funding in Contract Lifecycle Management (CLM) Technology – a Hockey Stick Growth
Today, Contract Management is the most successful branch of the legal tech industry next to eDiscovery that is seeing exponential investment because of the emergence of CLM requirement by corporates, ALSPs & law firms, and of course high rate of adoption of the CLM systems by the users leading to increase in new CLM SaaS companies across the globe. The competition has increased with vendors leveraging emerging technologies such as blockchain and AI to provide a seamless and intuitive experience to the users.
The recent spurt of key investments included:
- Icertis raised $80 million funding in a Series F round by B Capital Group, Greycroft, Meritech Capital Partners, Premji Invest, PSP Growth, and e.ventures.
- Ironclad’s recent investment round raised $100 million in a Series D funding led by venture capital firm BOND with participation from Lux Capital, Accel, Sequoia Capital and the Y Combinator Continuity, investors.
- French CLM start-up Leeway that earlier raised $4.2 million in a Seed funding round by HenQ, Kima Ventures.
- Arteria AI, a spun out of Deloitte, has received $11 million in Series A venture funding round by Illuminate Financial, and Information Venture Partners.
- Evisort, the NLP-driven contract management platform, has bagged a $35 million Series B investment from General Atlantic, Amity Ventures, Microsoft’s venture fund M12, and Vertex Ventures.
- The Danish legal tech Champion Contractbook has raised $9.4 million in Series A funding round lead by Bessemer Venture Partners and Gradient Ventures and $30 million in a Series B round lead by Tiger Global, Bessemer Venture Partners, by Founders and Gradient Ventures.
- Akorda raised $4 million in a seed round by Revel Partners, Bloomberg Beta & Aspect Ventures.
During early 2020 & mid 2020, a significant number of investments were also made in the CLM space. The no-code Contract Lifecycle Management system Agiloft raised $45 million in a growth equity investment by FTV Capital. Indian CLM company SirionLabs raised $ 44 million in a Series C round lead by Tiger Global and Avatar Growth Capital. Also, LinkSquares has raised $14.5 million in a Series A round by Jump Capital, First Ascent Ventures, MassMutual Ventures, and Hyperplane.
It is also quite evident that multiple venture capital funds like Tiger Global, Sequoia Capital, Y-Combinator, Bessemer Venture Partners, Avatar Growth Capital are heavily investing in the legal tech space wherein some invested a lot in the CLM space itself.
While we are discussing a lot about the CLM funding and the development around CLM across the globe, progress in the Indian sub-continent cannot be over-looked. Multiple CLM companies have emerged in India during this phase including Contractum by Quant LegalTech, SpotDraft, Razor 365 by Practice League, Sirion Labs, The Legal Capsule, Komtrakt by Lexplosion, Avacom by Avantis etc.
What drives the traction of investments and whole lot of attention for CLM?
Before we dive further on this, we need to understand what CLM system is? CLM is an end-to-end Contract Lifecycle Management system which is leveraged to track and manage every aspect of a contract for its initiation, performance, compliance, and other success factors and through every stage of the document’s lifecycle (from execution to renewal or expiration) on a single platform. The management process itself begins when a contract is proposed and continues throughout the delivery of the promised good or service and into contract renewal, automates and streamlines contract processes during all the key stages.
“Corporate legal departments need to do more with less, and tools and technologies like these can achieve the goal of faster, better, cheaper contract management,” as stated by Dan Jansen, CEO and managing director of Nextlaw Ventures, the legal tech-focused venture capital operation whose first investment round was funded by what he called a “significant” investment by law firm Dentons.
While the evidence of CLM demands are multi-faceted, let us understand them one by one.
- CLM – Emergence as Business Requirement: The benefits of the CLM systems are numerous as it enhances contract requests, maximizes contract authoring, optimizes the negotiation process, manages obligations, compliances & renewals, centralizes information for quick access, customizes templates and also facilitates collaborations between different parties etc. Some platforms even provide AI powered templatization, extraction & review to facilitate pace and standard position while avoiding all the risks associated along with the contractual obligations. That is why CLM is a boon for the lawyers, in-house legal, business executives and sales team etc. which eventually brings a lot of mandate to use the systems.
- Cost Saving by the Business: The points mentioned above makes the business stakeholders life much easier which attracts them to use the system. Also, the business leaders are looking forward to investing less in such activities. If manually done, the above would require a lot of resource investment which is in-fact unnecessary.
- Surveys, Opinions and Forecasts: The Association of Corporate Counsel (ACC) has conducted a survey of Chief Legal Officers (CLO) in the year 2021, which concluded that contract lifecycle management is the top legal tech priority, with 67 percent of respondents indicating that this is where they want to invest their money. The below reports by various market research organisations are forecasting upto $3.04bn revenues for the CLM area of legal tech.
|Report Source – Expected Revenues by||Period||Expected Revenue Increase||CAGR|
|Quadrant Knowledge Solutions Report||2018 – 2024||$983.5 mn – $3.04 bn||20.70%|
|Global CLM Software Market Outlook by EMR||2020 – 2026||$1.25 bn – $2.7 bn||13.80%|
|Imarc Report||2020 – 2026||$1.51 bn – $3.04 bn||11.87%|
- Effect of the Pandemic: It is evident that CLM is the hot area for investors at this juncture. The reasons for the same can be traced from the year 2020 and the early 2021. The current pandemic has caused substantial loss to the businesses, pushed the legal teams to adopt technologies that help them review contracts impacted due to this crisis, flexible and future proof contract solutions. Work from home triggered the requirement of eSign to digital storage, online collaboration, negotiation, abstractions and many more.
Contract lifecycle management is a complex topic with growing demand for cost efficiency, contract analytics and intelligence, access from anywhere, swift collaboration etc. It entails intricate processes with numerous data dependencies that are difficult to monitor manually but very much relevant to business and strategic decisions. This is nearly impossible to monitor meticulously unless assisted by a CLM system. This augmented demand has resulted into arrival of several CLM systems across the globe and the subsequent fundings. In this growing World, we foresee that the trend will continue, and the saturation is not going to occur soon.
Authored by Legal Innovation Team, Algo Legal
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