The Global Legal Tech Report research initiative into the Latin American markets reveals a flourishing ecosystem with a positive outlook despite the impact of COVID-19, that is home to a range of Legal Tech companies at different stages of development.
The Global Legal Tech Report is a research initiative of the Australian Legal Technology Association (ALTA) and Alpha Creates, backed by research sponsors Macquarie, KPMG, the Law Society of England and Wales, Baker McKenzie and Toro Digital.
“The complex regulatory environment, inundated court systems and the excessive costs associated with legal representation has sought the best of the innovative minds throughout the entire Latin American market, “ the report’s Global Director, board director of the Australian Legal Technology Association and CEO of Legaler, Stevie Ghiassi said.
“With real and pressing problems to solve, it has become home to a flourishing ecosystem of emerging legal technology companies - a region to watch,” he said.
The oldest Legal Tech company in Latin America was founded in 1988 while 63% of the respondents’ Legal Tech companies have only entered the market from 2016 onwards.
“This finding is consistent with what we are seeing in other regions like Australia where the perfect storm of decreasing cost of technology development, rapid improvement in underlying technology and the rise of legal entrepreneurs has breath new life to the Legal Tech market,” said Alpha Creates Principal and lead researcher, Eric Chin.
The impact of COVID-19
According to the report, the COVID-19 pandemic is the top revenue challenge for Legal Tech companies in Latin America. The pandemic has impacted Legal Tech companies’ sales conversations as well as halted some buying decisions as law firms and legal departments transition to remote working.
Despite the challenges posed by the pandemic, 81% of the respondents indicated a positive revenue outlook for the next 12 months.
Access to funding an issue
The report also reveals access to funding is the top challenges for Legal tech companies in Latin America, along with a healthy cash flow and financial runway. Only one in four (25%) of the respondents have raised funds for their Legal Tech companies.
There is still an education process that needs to happen for potential investors in Latin America to understand the nuances of the Legal Tech market and how it differs from Fintech or Regtech.
“As Legal Tech companies in Latin America forge new paths in the legal and technology crossroads, the growth potential of Latin American Legal Tech companies will attract investors,” shares Alpha Creates’ principal, Graeme Grovum.
Mixed signals from AI Legal Tech companies
Despite dominating the legal media headlines, the researchers continued, artificial intelligence (AI) is “not the main engine” that powers Latin America’s legal tech companies. Fifty-one percent of the respondents indicated AI is their core underlying technology but this follows 65% that indicated database and 53% that indicated pre-programmed codes (noting that respondents were able to select more than one option).
Slightly more AI Legal Tech companies (79%) in Latin America have reported a desire to expand overseas than non-AI Legal Tech companies (61%). Somewhat counter-intuitively, proportionately more non-AI Legal Tech companies (86%) indicated a positive revenue outlook for the next 12 months than AI Legal Tech companies (76%).
A Global Initiative
The project is being undertaken in collaboration with global legal technology associations. The Latin American report was produced in collaboration with the Associação Brasileira de Lawtechs e Legaltechs (AB2L).
“Our Paramount transformative purpose is to connect the legal universe to the new exponential and collaborative reality that is arising from the fourth Industrial Revolution. We believe that the union between law and new technologies will benefit society and justice. ” Daniel Marques, Executive Director at AB2L said.
“With the largest cluster of legal tech companies in Latin America, Brazil offers an infinite range of opportunities for investments and partnerships with Brazilian Lawtechs and Legal Techs, which due to
their large volume are already born with an international vocation,” he said.
“The main engine of today’s society is collaboration and this first global report on Lawtechs and Legal Techs around the world is proof of that. Transparency and information sharing are essential elements
that drive our information society.”
The Global Legal Tech Reports for Australia, New Zealand, Asia and Africa are completed and available for purchase, with field work nearing completion for the UK and Europe
Participating legal technology companies will receive their regional report free and a substantial discount on the global research report, which will see a cross-jurisdictional comparison of the trends from each jurisdiction. The global report will be available from November.
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