The legal high-tech boom is reaching new heights. And like that, several investors and consultants are beginning to whisper “bubble.”
With the rush to raise funds, two unicorns born since ChatGpt's pivotal launch, and the acquisition of rare, massive laws from startups, Legal Tech is undergoing transformation.
When rejected for back office use, it now wants to attract the talent of top engineers and investors, and leverage the possibilities of generating artificial intelligence in the legal field.
This raised several concerns among industry watchers like former lawyer and entrepreneur Zach Abramowitz. He currently runs a killer whale strategy.
He warns that a surge in legal technology revenue may be a sign of an imminent bubble.
He says that almost every law firm is testing competing legal technology products. This paid exam is increasing revenue for legal software companies, which drives evaluations from venture capitalists.
Abramowitz said the question is how “sticky” the revenue is.
“It's booked like a recurring revenue,” he said. He knows law firms that fired hundreds of licenses on products such as Harvey. In some cases, Harvey has emerged as a winner, but Abramowitz isn't sure it's trapped as a reliable long-term revenue.
Over the next 12-18 months, the law firm will decide which vendors will commit over the long term. This means deploying solutions across your organization and signing multi-year agreements.
He said the legal industry will gather around top tech performers, with other vendors seeing revenue falling.
“Calculation” on the horizon
The fear of the legal technology bubble has echoed throughout the venture industry.
This February, veteran software investor Rick Zlo shared a conversation with another investor about Legal Tech on Turner Novak's podcast, The Peel.
“They said, 'Rick, every single person in these companies works.' If all the companies in the category are working, that is probably the most frightening thing that could happen, Zullo told Novac.
Jake Saper, general partner at Emergence Capital, described the exciting yet unsettling landscape.
The Pearl Off, Glove Off podcast, hosted by Goodwin Chief Operating Officer Mary O'Carroll, said the rapid adoption of legal technology has led law firms to recognize that some products are not meeting expectations.
In some cases, only a small percentage of business users are involved in the tool. Furthermore, the tools do not provide the value they promised. Saper warned that the bubble-up legal technology industry is heading towards “calculation.”
800 pound gorilla
Long sales cycles and customer terminations have already put a heavy burden on the legal technology market. As Abramowitz states, adding the constant and looming threat of getting Steamroll by Openai, conditions hindering industry troubles.
It's only a month has passed without another story of a lawyer citing fake case law generated by ChatGpt. However, many lawyers have opted for chatbots over specialized tools from legal software vendors, research data shows.
Law360 Pulse asked 390 lawyers between November 2024 and January 2025. This asked what generator AI tools were used in the workplace for legal or other tasks, except for the finding of e. 62% of respondents answered ChatGpt, with more than twice the share of respondents who said LexisNexis or Microsoft Copilot.
Abramowitz said that “the single best legal research tool in the market” is not a legal technical tool. This is a web-based research feature that utilizes advanced automation.
He shared a conversation with one lawyer whom he believes is likely to be using chatbots by many of his colleagues in the company. The lawyer noticed that his writing had improved and that there was no explanation.
“My guess is that having these tools probably saved more lawyers the night and weekend,” Abramowitz says. “You're safe and don't need to enter any sensitive information. You're just doing research.”
“How is the company supposed to stop you from using deep research?” he asked.
The future of the legal technology market may depend on it.
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