Tech Startup Nexl Raises $23 Million, Aims for Top 50 Law Firms

Nexl, a tech startup that makes customer management software for law firms, has raised $23 million in a bid to get more Big Law clients and to acquire other companies.

Tidemark Capital, which also backs the legal business software startup Clio, led Nexl’s Series B funding round. Nexl has about 150 customers, including Winston & Strawn LLP, Dentons, and Polsinelli.

The latest fundraising comes amid a surge in funding for legal software that has built over the last few years and as a number of big deals were disclosed in recent weeks. EvenUp and Eve, both startups that make software for plaintiffs’ firms, each recently raised more than $100 million. Harvey, the legal tech startup valued at $5 billion, said this week that it had raised another €50 million ($59 million) to expand internationally.

Unlike those startups, Nexl focuses on the business of law firms, rather than the legal work product itself. Its software includes tools for customer relationship management, email marketing, and project management.

Nexl is looking to acquire companies that are “elevating the business of law,” founder Philipp Thurner said. Nexl has about 90 employees and aims to hire about 40 more by the middle of next year, Thurner said. The latest funding will also be used to develop a platform that specifically targets the 50 largest law firms, he said. Nexl has Am Law 100 and 200 clients, but will make a play for the biggest firms, he said.

AI investment in the practice of law will have a leveling effect on law firms if they’re all using the same tools to quickly deliver a similar quality of work, Thurner said. That means firms will have to differentiate themselves by providing a better client experience and carving out parts of the market where they can grow, he said.

Law firms face roadblocks to AI adoption in the practice of law because many of those tools could undercut the billable hour—and they carry the risk of high-stakes mistakes in legal arguments and citations, Thurner said.

Changes in law firm billing don’t yet appear to be happening widely. Many lawyers say the amount of work sent to outside counsel and the use of non-hourly fee arrangements haven’t changed due to AI, according to Bloomberg Law’s new State of Practice survey.

AI is easier to adopt when it comes managing client relationships and interactions with customers, Thurner said.

“In the business of law, it’s super easy,” he said. “That’s the stuff no one on the admin side wants to do, right? But it’s so, so important to do.”

Dave Yuan, the founder of Tidemark Capital, said the customer management and AI revolution in the legal industry was reminiscent of a shift in the private investing industry 20 years ago. At that time, investors became less insular and began sourcing investments through data and software, rather than at their “kids’ soccer games,” Yuan said.

“These law firms aren’t your traditional kind of clubby firms, where you find clients at the golf club by going and golfing with their neighbors and such,” Yuan said. “These are modern organizations that are hiring teams to target the biggest clients in the space, that are using technology to break in.”