Crossbeam VC's LegalTech predictions for 2025
VC and Market Predictions for LegalTech in 2025
LegalTech VC Fundraising Predictions:
I’ll start with a few VC/fundraising predictions and then move onto market predictions further below.
LegalTech startup fundraising will continue to be hot. LegalTech investments hit an all time high (again) in 2024, raising a total $4.98 billion in 2024 according to Law3601, a 47% increase over the $3.37 billion raised in 2023. We’ll see if the total dollars raised in 2025 is greater than the 2024 figure of $5B, since $900M of that figure was in one transaction (Clio2). I anticipate several of the LegalTech players that announced large rounds in 2024 will also announce even larger rounds in 2025 and we’ll see category-specific fundraising wars. These larger rounds will also dominate the total fundraising market for LegalTech, and I anticipate we’ll see at least 5 rounds raise more than $200M.
Relatedly, some Series A’s will be abnormally large, as founders and funds aim for winner-take-all outcomes in certain categories. We already saw this in the first few days of 2025 with Eve raising a $47M Series A from A16Z and Lightspeed3. Relatedly, LawHive announced a $37.9M Series A in the last few days of 2024 led by GV and TQ Ventures4.
Even though overall fundraising will continue to be hot, early stage (seed) fundraising will start to show signs that fundraising is getting harder. Venture funds generally try to not invest in competitive companies, and many of the logical investors are already conflicted in a few areas (e.g. many firms are now conflicted out of AI for contracts). Furthermore, larger LegalTech companies are growing more expansive product visions, so the field of what could be considered competitive is growing so the investable base is shrinking. We’ll likely see a rise of more regional specific startups (e.g. LatAm, Australia), but many US investors will sit those rounds out.
And because there’s so many LegalTech startups, the bar for raising an early-stage round will be raised. Early stage investors are going to expect to see more traction, and earlier. Many companies have interesting products, but LegalTech startups are going to be expected to show at least initial signs of their go-to-market strategy ahead of a seed round.
And even growth stages will start to be harder to raise - since each company will have to answer the question of “why can’t Harvey/Leya/etc do this.” Companies across early stage and growth will be expected to have a clear answer of what moats they have today and what moats they’ll have down the line - and the expectation for proprietary data will be high.
LegalTech Market Predictions:
AI Adoption in law firms went from 19% in 2023 to 79% in 2024 (according to Clio5). Those are stats for AI generally (e.g. do they use any AI product), but in 2025 I anticipate we’ll also see AI adoption increase materially within each LegalTech vertical. For example, that same Clio report shows that only 11% of lawyers are using an AI contract review solution, and 18% are using an AI document drafting solution. I anticipate each of those figures to ballpark double this year.
The overall market for tech products will continue to expand, but we’ll also start to see signs that it’s harder to sell into (big) law firms. Top law firms are seeing several new product pitches per week, (almost all of which have an AI angle) and there’s starting to be some fatigue. There’s also more competition within each category of LegalTech, and while some top law firms may try more than one product in a category, many of the greenfield opportunities to sell into big law are now gone.
That said, there are still many local lawyers that are just warming up to the idea of using more tech (let alone AI solutions), so we’re still in the early innings. For example, depending on the report, it’s estimated that only 40% of lawyers use a CRM6, so there’s plenty of room for tech adoption.
Larger startups and companies will continue to expand horizontally to try to become a platform solution. Everyone wants to be the everything app, and there’s some logic to having everything apps in the LegalTech market since security and compliance are paramount, and often larger companies have the resources to do a better job with security.
We’ll start to see a bigger focus on AI / tech tools for PI (personal injury) and other contingent pricing law. Most big law firms are still reliant on hourly rates, so while tech adoption there is already happening, I think the real “aha” for Legal x AI is in areas where lawyers get a fixed % of a settlement. The incentives here just make a lot more sense - if your revenue is based on x% of a settlement, you want to use any tool in your power to help you win that and keep costs down. We’ll also see more AI adoption in areas that use flat-pricing, such as immigration.
Many more companies are going to become law firms / start practicing law. KPMG announced plans a week or two ago to start practicing law (more here from the WSJ7), and I think 2025 will be a big year for larger companies (and startups) to launch their own law firms.
https://www.law360.com/pulse/articles/2279245
https://www.clio.com/about/press/series-f/
https://www.prnewswire.com/news-releases/eve-secures-47-million-to-fuel-era-of-ai-native-law-firms-302353165.html
https://www.orrick.com/en/News/2024/12/Legal-Tech-for-Smaller-Firms-Lawhive-Raises-37-9-Million
https://www.clio.com/resources/legal-trends/
https://www.jdsupra.com/legalnews/2024-crm-success-survey-why-law-firms-3367568/
https://www.wsj.com/articles/kpmg-wants-to-be-the-first-accounting-giant-to-own-a-u-s-law-firm-heres-why-224949f2