Legal Tech endeavors in the Startup Nation: why Israel is a center for innovation in the legal tech
Israel is often referred to as the ‘Start-up Nation’. Bill Gates once even called it a ‘tech superpower’. Along the years, Israeli entrepreneurs have founded and led some of the most innovative start-ups in the past decade.
Companies such as Waze, Wix, Fiverr, Mobileye and moovit have all originated there. Israel also has the highest number of lawyers-per-capita in the world, ahead of countries such as the U.S., Canada and Germany with a figure of almost 600 lawyers per 100,000 people.
There are several unique factors that have attributed to Israel’s success as a start-up nation, each of which were a key component of its success in the Legal Tech space as well.
It is important to acknowledge these factors in order to understand how they have contributed to its success.
Why is Israel the Startup Nation?
One important factor is the compulsory military service. As part of the compulsory military service for most Israelis aged 18 and older, men spend up to three years in the defense forces, while women serve two years. Rather than seeing this as a burden, many Israelis credit military service with being a driving force behind their country’s high-tech success. Many tech specialists have come through the ranks of military intelligence units, including the famed cyber unit of ‘8200’. People who have been in the Israeli military view it as a rather entrepreneurial experience, even though in the rest of the world people don’t think of the military as a place that encourages original thinking.
Immigration is another important factor. Most Israelis are born to immigrant parents (or grandparents) or have immigrated to Israel themselves. By definition, immigrants are risk-takers, leaving their familiar surroundings for a better life. Therefore, a nation of immigrants is a nation of entrepreneurs.
We also can’t forget to mention Israeli chutzpah – being blunt and straightforward. In Israel, you can walk down the street and see the CEO of a large corporation and you can approach them and say, ‘Hey, I have a company, can we sit together and talk?’ - and many times they’ll say, ‘Let’s talk’, because if you don’t know this person you know someone who does. In countries like China or India, where the social hierarchies are very clear, acting in such a way would be embarrassing, but in Israel there are no boundaries. This ‘chutzpah’ also means that Israelis don’t see failure as a big deal. You can fail three times with different start-ups, and when you pitch to investors for your fourth start-up, you would advertise your experience with multiple start-ups as an advantage.
Why Legal Tech?
A younger generation of lawyers, who are more attuned to technology, is entering the legal workforce in Israel. In fact, there are more and more tech-enthusiastic lawyers who demand tech solutions that will make their practice better and their working lives easier.
Some of these young lawyers are even quitting their legal practice to become legal tech entrepreneurs.
As discussed above, Israelis, and by extension Israeli lawyers, are typically less risk-averse than other cultures and are straightforward, informal and aggressive. Therefore, when these younger Israeli lawyers are unhappy with the way law is practiced today and demand increased use of legal tech, they will make their opinions heard and either affect change within their law firms, start their own innovative practice or become legal tech entrepreneurs.
We have seen the rise of several Israeli legal tech startups in the past few years. One of the most prominent Israeli legal tech companies is LawGeex, which offers a machine-learning and AI-based product for contract review.
In a study published in February 2018 where 20 experienced US-trained lawyers were pitted against the LawGeex AI algorithm, the AI achieved an accuracy level of 94%, compared to an average accuracy level of 85% across the 20 human lawyers. In fact, LawGeex received an additional $12 million in funding last month (April 2018).
There are several other legal tech startups based in Israel. A surprisingly growing amount of which are targeting the local legal market in Hebrew, as opposed to the larger US and UK legal markets.
A list of all active Israeli legal tech start-ups can be found in our Israeli Legal tech Startup database on Tech&Law Israel’s website.
Challenges for Israeli legal tech
Although the Israeli legal market is very competitive and Israeli law firms are constantly looking for ways to improve their service offering, many law firms in Israel have yet to embrace the latest wave of legal tech. Most of the law firms still use simple, low-tech solutions such as Microsoft Word extensions and anachronistic practice management software.
There are several reasons for the current situation:
Language tends to be a big factor in legal tech products, especially those that involve AI and machine learning. Although some of the larger Israeli law firms do work in English when it comes to contracts and corporate work, most of the Israeli legal sector operates in Hebrew. Therefore, it is clear why Israeli companies are not willing to invest resources in developing legal tech solutions in Hebrew, a language that is only used by approximately 56,000 lawyers. This is also why the vast majority of the international legal tech companies do not operate in Israel, nor do they target Israeli clients –Israel’s legal market is a relatively small one.
Israel might be the first in the world in terms of lawyers-per-capita ratio, but in absolute numbers it still has less than half the number of lawyers in the UK, for instance. Due to the relatively small local legal market, Israeli legal tech companies often aim for markets abroad.
Israeli law firms are now willing to accept certain aspects of innovative technology in their offices. Partners’ forums in Israel’s biggest law firms have requested to be presented with the benefits of empowering their practice using technology. In most cases, after learning about the various ways in which legal tech solutions are transforming the practice of law worldwide, partners at Israeli law firms are convinced.
Despite the rising demand for legal tech solutions, the adoption of legal tech solutions by Israeli law firms has been slow.
There is still a real struggle in the adoption and implementation of legal tech solutions.
Each law firm, on its own, does not have the ability to look for relevant legal tech solutions abroad, nor to reach out to companies and convince them to customize their products to fit the Israeli market and the needs of the individual law firm. This would require too much effort and resources, which Israeli law firms are not keen or able to invest.
Another issue facing Israeli law firms interested in legal tech solutions is the cost associated
with its adoption and implementation. Israeli law firms charge much lower fees than their European or American counterparts. This leaves less room for expensive investment projects, such as the adoption of legal tech solutions.
Fortunately, these are difficulties that the Israeli legal market can overcome. More and more law firms are now realising that in order to work more efficiently, and to meet clients’ continuously increasing expectations, they will need to harness legal technologies in their daily operations. In a fierce market like the Israeli legal sector, Israeli lawyers have to find ways to stay competitive and new technologies is certainly one way to do so.
The future of legal tech in the startup nation
Tech&Law Israel is the first legal tech community in Israel, bringing together different players interested in legal innovation. One of the main goals at Tech&Law Israel is to increase awareness for legal tech in the Israeli market, and in the past few months, there has been increased media attention and buzz in the legal tech sector.
A few months ago, Tech&Law (Israel) took part and organized Israel’s first legal hackathon, as part of the Global Legal Hackathon, with over 80 participants and along with the Israeli law firm of FBC.
The platform also saw great success in helping Israeli law firms and in-house counsel that seek legal tech solutions adopt the right products and solutions for them.
Israel’s legal tech scene has seen rapid growth in the past two years. With Israeli law firms’ increased interest in legal tech solutions and the continued success of Israeli legal tech companies, it is clear that the Start-up Nation has a promising future on the global legal tech stage.
About the Author: Adv. Zohar Fisher is the founder of Robus Legal Marketing (founded in 2010), one of the leading veteran strategy consultants in the field of legal marketing in the Israeli legal sector and has a long standing (over ten years) reputation in the legal business development field. Throughout the years, Zohar has acquired unprecedented professional experience and knowledge in closely and personally accompanying tens of law firms in Israel and abroad in arrange of organizational processes, branding campaigns, marketing, internet and media development. Zohar has been lauded, not once as the “law firm whisperer, leading mergers between firms, wide strategic consulting initiatives and core processes in the legal market in Israel. Over the years, Zohar has expanded the activities of Robus to include a number of departments. Today, he leads a number of departments, with particular emphasis on mergers, foreign firms, the LawFlex initiative and the Legal Tech department. Prior to founding Robus, Zohar spent a number of years working in business development at a leading law firm in Israel. He is amongst the founding players in the strategic consulting, marketing and branding field in the Israeli legal market.