Bloomberg Law
Sept. 24, 2020, 9:41 AM

Investors See Promise in Contract Management Legal Technology

Sam Skolnik
Sam Skolnik

Venture capital investors are infusing cash into a wide range of contract management tools, increasing the competition among startups and larger service providers that help companies get a handle on all of their legal agreements.

Four contract drafting, management, and review platforms secured $70 million in investments in the second quarter of 2020, making contract tools the most popular among the top 10 legal tech investments. Since then, two Big Four accountancies have said contract lifecycle management tools will be a significant part of their push to expand their share of the legal services market.

CLM programs offer users a single platform to store and search contracts, managing digital legal agreements from creation through review, execution, and renewal or expiration. Vendors in the increasingly crowded field look to differentiate their products with artificial intelligence and similar tools.

The Covid-19 pandemic is solidifying the shift toward contract management technologies as corporate lawyers scramble to review contracts impacted by the crisis, say legal field innovators.

"(W)e have seen a lot of investment in the CLM space in the last few years as it has become a priority for legal departments,” Vedika Mehera, an innovation advisor with Orrick Herrington & Sutcliffe, said via email. “Covid seems to have just made it front and center and a much higher priority than before.”

The pandemic has companies taking a closer look at force majeure clauses, which typically free parties from liability or obligation when extraordinary events occur that are beyond their control, Mehera said. The shift to remote work has also forced companies to increasingly rely on e-signatures, which may require new workflows.

CLM tools are also marketed as a way to find missing corporate contracts, and reduce “contract leakage"—the difference between the value expected from a contract and the value realized as it’s implemented.

Venture Investments

Legal tech investments come from a range of venture capital and private equity companies, as well as a select group of leading law firms that promote innovation through their own venture operations.

Tiger Global and Avatar Growth Capital made the largest legal tech investment in the second quarter, pouring $44 million into SirionLabs. The Seattle-based startup uses AI and natural language processing to track contracts.

Earlier that same week, three other contract management companies announced funding rounds totaling $26 million.

A group of eight VC investors committed $115 million last year for Icertis, another contract management company. Digital contracting platform Ironclad also got a big cash injection in 2019, when it closed a $50 million series C funding round led by the investment fund Y Combinator Continuity.

“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,” said 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.

Nextlaw’s portfolio includes the “smart” legal contracts platform company Clause, which uses blockchain automation.

In-house lawyers are already using contract tools more than any other form of legal tech, according to a recent Bloomberg Law survey. More than half (56%) of respondents said they use contract management programs.

Mike Bryant, operating partner with the private equity firm Knox Capital Holdings, said he’s been struck by how much room there may be for growth in the sector—even though he initially thought some contracts startups were being overvalued.

“It’s a hairy enough problem and a big enough opportunity,” said Bryant. “There’s clearly room for more than one or two or three companies to be successful.”

Hockey Stick Growth

For decades, attempts to find missing contracts and minimize leakage have plagued corporate counsel offices, according to legal department leaders. The issues can become most pronounced when companies go public, and when they merge with or acquire other companies—and assume sometimes tens of thousands of contracts in the process.

Alex Tolston, chief legal officer of Hemisphere Media Group, a Coral Gables, Fla.-based a Spanish-language broadcast company, said missing contracts hasn’t been an issue at his company, in part because he makes sure the legal department is aware of developments at every stage of the contracting process.

But the issue “is coming up more and more” for companies generally in the context of data privacy, said Tolston, especially as they attempt to comply with the European Union’s General Data Protection Regulation and the California Consumer Privacy Act.

Tolston said his department uses a single contract lifecycle management product, which he declined to name. He said the software has been essential to be able to quickly answer questions from other business units in his company, when they ask about the terms of different types of contracts. These requests occur on a daily basis, he said.

If anything, investments into contract management companies likely will continue to grow, Tolston predicts, in large part because of their use of artificial intelligence that continues to improve.

“I think we’re at the early stages of that growth,” he said. “I see this growth on a hockey stick trajectory.”

The Big Four accountancies and other major alternative legal service providers have been ramping up their own efforts to provide contracts and other legal-related services to companies in the U.S. in recent months.

Deloitte in July launched its new U.S. Legal Business Services practice, which will work with in-house legal offices to track client contracts, among other services. A top EY official weeks later said the company also plans to boost legal managed services revenues over the next 12 months—including through its own contract lifecycle management tools.

And just last week, UnitedLex announced that it soon will be launching a new version of its Vantage platform, which is already utilized by multinational organizations to manage contract portfolios worth about $250 billion.

To contact the reporter on this story: Sam Skolnik in Washington at

To contact the editors responsible for this story: Chris Opfer at; Rebekah Mintzer at