The law practice management company Clio today announced a record-setting raise of $900 million, at a valuation of a whopping $3 billion, in an oversubscribed Series F investment round that the company says will accelerate its ability to continue to build and develop its multi-product platform and expand its market both to larger firms and […]
The law practice management company Clio today announced a record-setting raise of $900 million, at a valuation of a whopping $3 billion, in an oversubscribed Series F investment round that the company says will accelerate its ability to continue to build and develop its multi-product platform and expand its market both to larger firms and to more than 130 countries internationally.
The round was led by New Enterprise Associates (NEA), one of the world’s largest venture capital firms, and also includes new partners Goldman Sachs, Sixth Street, CapitalG, and Tidemark. They joined existing investors TCV, JMI Equity, T. Rowe Price and OMERS.
Clio says this latest round is the largest investment ever in a cloud legal technology company, as well as a top-five largest capital raise evere for a vertical market software company and the largest venture investment ever in a Canadian technology company. But although Clio limits its record claim to cloud legal tech, I have been wracking my brain to think of a larger investment ever in any kind of legal technology company, cloud or not, and I believe this is the largest.
(See the end of this post for my tally of the 10 previous largest raises in legal tech.)
Clio already held the record for one of the largest investments ever in a legal technology company with its 2019 Series D raise of $250 million, and in 2021 it became the first law practice management company to achieve unicorn status with its Series E investment round of $110 million at a $1.6 billion valuation.
Clio says that “a substantial portion” of the round is secondary financing that allows existing investors and employee option holders to cash out some of their shares.
Doubling Down on Success
In an exclusive LawNext podcast interview with Newton recorded last week ahead of today’s announcement, I asked Newton what this investment means for Clio going forward from today. His answer: Clio will continue to double down on what the company has already been doing and what has already brought it success.
“I think that’s one of the things our incoming investors, as well as our existing investors, are super excited about, which is with Clio, you don’t need to bet on some wild pivot in strategy to make things work,” Newton said. “Things are working really well.
“We’ve been executing very well over our entire history and especially over the last few years. We’ve seen revenue growth accelerate. We’ve seen entirely new markets for us like the mid-market open up. The international market is exploding for us. Our payments business is doing amazingly well. And our foray into AI in the form of Clio Duo has been a wild success as well.
“So, in a lot of ways, what our incoming investors in this round are so excited about is really just doubling down on what’s already working with Clio and setting us up to continue to scale from the scale we’re at today, which is now north of $200 million of annual recurring revenue, and figuring out ways that they can help us reach that next major milestone, which we’re framing as a billion dollars of ARR.”
Blazing A Trail to the Cloud
In addition to $200 million in ARR, Clio has grown from just its two original founders, Newton and cofounder Rian Gauvreau (who left the company in 2021 but remains on its board), to more than 1,100 employees, with customers throughout the world, including through its expansion last year to the Asia-Pacific region, and a growing number of mid-market customers, where Clio says it now serves more than 1,000 mid-sized law firms in the United States alone.
Part of what makes Clio’s growth story so dramatic is that when Newton and Gauvreau started the company in 2008, they were effectively bucking the system. Clio was the first company to commercially release a cloud-based law practice management platform – at a time when such systems were firmly ensconced on-premises and when many lawyers still considered it heresy to even think of putting their documents and matters in the cloud.
That foresight spawned a whole-new generation of cloud-based practice management platforms to launch in Clio’s wake. Fast-forward 16 years to today, and any firm still using on-premises software to manage its practice seems like a dinosaur wallowing in a tar pit.
‘Pioneering the Future’
“The Clio operating system is the undisputed platform of the legal technology sector, engineered to not only meet but anticipate future industry demands,” Newton said in a statement provided by the company. “We are pioneering this future for our customers, driven by our mission to transform the legal experience for all. Our commitment to delivering unparalleled value propels every decision we make, and we are inspired by the massive opportunities ahead.”
In just the past year, Clio has made a number of major product announcements, including:
The planned launch of Clio Duo, a generative AI legal assistant integrated throughout its products. Although Clio announced this last October at is Clio Cloud Conference, it has yet to roll it out. In my podcast interview with Newton, he said it will be available in September, ahead of this year’s Clio conference.
Practice-specific add-ons to its Clio Manage product for personal injury lawyers and legal aid lawyers.
The launch of Clio Draft, a document assembly tool developed from Lawyaw, the software Clio acquired in 2021.
The launch just last week of integrated accounting and bookkeeping software as an add-on to Clio Manage.
The launch earlier this month of Clio File, an e-filing service integrated within Clio Manage and currently available in Texas with other states to be added.
In 2021, Clio announced the launch of Clio Payments, a native e-payments technology built into the Clio Manage law practice management platform. That payments business has “skyrocketed,” Clio says, now processing billions of dollars annually in legal-specific transactions in the United States, Canada, and the United Kingdom.
Newton at a 2019 event in Vancouver announcing the company’s then-record-setting raise of $250 million.
Clio has also continued to expand its network of integration partners, which it says now numbers more than 250 legal technology software integrations. Its software has been endorsed by more than 100 law societies and bar associations worldwide, including all 50 U.S. state bar associations.
With this latest investment, Tony Florence, the co-CEO of NEA, has joined Clio’s board of directors. In a statement provided by Clio, Florence said:
“Clio embodies everything NEA looks for in a growth-stage investment: an exceptional, purpose-driven team, market and product leadership, and stellar business physics. Clio is mission critical to law firms, and the company’s best-in-class retention and NPS are testaments to the team’s ability to continuously innovate, deliver immense value, and meet the dynamic needs of the legal sector. With the right foundation in place for continued market expansion and advanced AI capabilities, we believe the best is yet to come. We look forward to applying NEA’s company-building expertise to partner with Jack and the Clio team on their next phase of growth.”
Building An Enduring Company
In our interview, Newton said he sees this investment milestone as a validation of his ambition to build an enduring company.
“My ambition was always to build this into something that would be a multi -decade company, a hundred-plus year company, and a company that would leave a lasting impact on the legal industry, and a company that would transform the legal industry in a really positive way. And what I see this investment round as being is, number one, a huge validation of the success Clio has had in driving that transformation, but more importantly, positioning us to even have a more transformative and more impactful next chapter to our story.”
Newton said he is particularly excited about the investors participating in this round, and noted that the lead investor, NEA, has taken over 250 companies public and made over 1,000 investments, including in such companies as Salesforce, Workday, and Databricks.
NEA’s prior investments in legal tech have been limited to two: an early-stage 2012 investment in legal research startup Ravel Law, which was acquired in 2017 by LexisNexis, and a 2018 early-stage investment in e-discovery company Logikcull, which was acquired last year by Reveal. I asked Newton if that lack of prior experience matters at all in terms of NEA’s ability to help drive Clio’s further growth. If anything, Newton replied, he sees that as a feature.
“What I really look for in investors is not necessarily investors that have a lot of experience in legal or legal tech, but rather have experience in creating generational transformational companies in their respective verticals. One of my favorite sayings is, ‘History doesn’t repeat itself, but it does rhyme.’ And what these investors are able to bring is – from the experience they have in other verticals, other parts of the software space – bring that experience to bear on legal and legal tech.”
Explosion of Investment in Legal Tech
For years, it was a truism that many established VCs had no interest in the legal sector. I asked Newton if this record round by these established firms signifies a new era in legal tech investment. He said that he sees that new era has having started in 2019, with Clio’s $250 million raise.
“In the intervening five years now, we’ve seen a real explosion in investment in legal tech. And I think AI has further catalyzed investor commitment around the opportunity that exists in legal tech, that legal in many regards – and this is a drum I’ve been banging for a decade plus now – I really believe legal is the last major industry to be fundamentally transformed by technology.
“And we’re starting to see the green shoots of that transformation really starting to happen across the board. Over the course of the 16 years that you and I have been talking, Bob, the cloud has gone from what felt like a heretical idea to what is finally, I think, generally accepted as table stakes. And AI is going through a very similar adoption curve. …
“We’re seeing lawyers embrace technology in way that they never have before. And this old notion, I think that is rapidly becoming antiquated that lawyers are technology resistant, that lawyers don’t want new technology, I think is fading into the background. What the industry, the technology industry, is bringing to the table now is great tools that lawyers can immediately benefit from and immediately see massive productivity increases from, can immediately see massive improvements in the client experience they’re able to deliver. Lawyers are showing that when they’re provided with great tools to adopt, they will embrace those rapidly.”
An IPO on the Horizon
In prior conversations, Newton had told me that he saw Clio as eventually going public – that he believed public ownership of the company went hand-in-hand with building the kind of enduring company he has talked about.
That is still very much his thinking, he told me in our interview. “I believe the public markets are a great place for enduring companies to live. And I think that’s an eventual milestone for Clio in our growth journey.”
At the same time, he said, Clio has a lot of options in terms of when and how it raises money. “We are profitable today, we have over $100 million the balance sheet, and we are growing quickly. That puts us in the enviable position of not needing to IPO. … But in the long-term trajectory for the company, I certainly see going public as a milestone that makes a lot of sense for Clio.”
When Clio launched in 2008, its target customer was the solo lawyer, and its primary audience today remains solo and small firms. With this record raise and Clio’s sites now set on growing its customer base among larger firms and in international markets, I asked Newton if those small-firm customers have any reason to worry they will be forgotten.
“No, there’s absolutely nothing to worry about in that regard, Bob,” Newton said. “And although we’re continuing to expand into new markets and new opportunities, the foundation of Clio continues to be the solo and small firm lawyer that we built the company on 16 years ago. …
“Although we’re seeing a huge amount of success in the mid-market, although we’re seeing a huge amount of success with our new products, some of which are targeted more at the larger firms, our core customer base continues to be that solo and small firm customer. And that will never change.”
The Largest Raises in Legal Tech
Clio says this latest round is the largest investment ever in a cloud legal technology company (as well as the largest venture investment ever in any Canadian technology company), but I have been wracking my brain trying to think of a larger investment ever in any kind of legal technology company, cloud or not, and I believe this is the largest.
Among the largest raises in legal tech that I have found are:
