Who founded Legalzoom?

When the lawyer goes online : How startups are changing the legal system

Richard Susskind still gives the lawyers four years. Four years before the computer takes over routine work. Until legal disputes are resolved with a click of the mouse. Until some lawyers lose their jobs - at least if they don't adapt to digital change in good time. Susskind's thesis of the end of jurisprudence as we know it today is a provocation. For many a start-up founder, however, it is also a motivation. Because the change that the British author describes in his books has long since begun.

One who stands for this change is the Berlin founder Daniel Biene. He wants to change the way people find and pay a lawyer. In the past, you asked around your friends or looked in the yellow pages when you needed a lawyer. But Biene says: “That is out of date.” Last year, he and two colleagues founded Legalbase in Berlin: a platform that finds the right lawyer at the push of a button - and takes away the worry of what that might cost. Because Legalbase has a price tag on every legal service. Having a will drawn up costs 249 euros, for example, and anyone who needs help setting up a GmbH pays 400 euros. “This creates more transparency,” says Biene.

Other countries are way ahead of Germany when it comes to legal tech

The USA shows that such a business model can work. There, the company Legalzoom, which is also involved as an investor in the Berlin start-up, is relying on a very similar model. Legalzoom also offers legal services over the Internet at a fixed price. The difference: Legalzoom is no longer a start-up. The company was founded in 2001. Today it employs almost 900 people and has a level of awareness of 80 percent in the USA. So almost every American knows the company.

This shows that while the digitization of legal services has only just begun in this country, it has long been in full swing in other countries - and quite successfully.

Startups help consumers get right

But the so-called “LegalTech” scene is also slowly growing in Berlin and the surrounding area: The number of start-ups offering legal services online is increasing. In addition to Legalbase, Flightright, based in Potsdam, is also active here: a start-up that helps passengers to get compensation if their flight is canceled or delayed. Instead of searching for the right form for a long time, consumers simply enter their flight details quickly on the platform. The first assessment of whether you are entitled to compensation is free of charge. If the start-up can actually get money out for them, it will withhold 25 percent of the compensation. Founded in 2010, Flightright has since found a number of imitators. Passengers also receive compensation from Fairplane from Vienna or Refund.me also from Potsdam. And that is just the beginning. Other providers transfer the model to other cases.

The Berlin start-up has specialized in revoking loan agreements without risk. Many old contracts for real estate loans contain incorrect revocation clauses, with the result that consumers can get out of the loan prematurely. Many are currently using it and switching to a cheaper loan. The revocation of old contracts is only possible until June - for lawyers this is still good business. Via their platform, the founders of Right Without Risk offer consumers the opportunity to check the revocability of their contracts free of charge. Only if they successfully assert themselves at the bank will they collect a success fee.

A new market is emerging

All of these models work through one thing above all else: mass business. It is only worthwhile for them if a number of customers of a bank or an airline make use of the offers of the founders. This is the only way they can cope with the fact that they keep checking inquiries free of charge that don't work out.

But are the founders seriously competing with established lawyers? Markus Hartung doesn't think so. "Rather, they are creating a new market," says the Berlin lawyer and director of the Bucerius Center on the Legal Profession. No customer would go to the lawyer on their own initiative just because their flight was delayed. But if he can have his claims checked quickly and free of charge with a click of the mouse, that is a different matter.

The founders ensure more transparency in prices

It is similar with offers such as that of Legalbase, the start-up that brings lawyers and clients together. This has not changed anything about the work that the lawyers take on. Only the way they find their clients - or they find them. However, the new offers have one effect in the industry: They ensure more transparency. Because when start-ups offer legal services online, it becomes clear what customers actually have to pay for them - and what not. So it is quite conceivable that some consumers will continue to go to their lawyer around the corner in the future - but then hold against them how cheap the service is on the network. “That can depress the prices for legal services,” says Markus Hartung.

In his opinion, however, another branch of the legal tech movement has greater potential to shake up the industry: the automatic evaluation of contracts and documents. Because machines certainly take on some of the tasks that lawyers have previously performed. This is made possible by artificial intelligence, which is used, for example, by the Berlin start-up Leverton. As part of a research project, the founders developed a self-learning machine that fishes data out of documents at lightning speed. It is currently used primarily to check real estate contracts for banks, pension funds or large law firms.

How software searches contracts quickly and successfully

If, for example, an investor wants to buy several properties in a package, he has to quickly check thousands of contract pages: He has to know how much the commercial rental space is, which tenant has which right of termination or when he has to pay for which repairs or damage. What a lawyer sits at for hours, the Leverton machine spits out within minutes. "We use computer linguistic software for this," says Sebastian Schuhl. The special thing about it: The software not only recognizes individual words, but also references in the text. If, for example, a reference is made in the contract to another document, the machine searches for it immediately and automatically links the information. If the document is missing, it will also indicate that. Because the machine is self-learning, its results become more and more accurate over time. "With every document that the software reads, it gets better," says Schuhl. The software is already better, faster and cheaper than a human can ever be.

And yet Hartung says: It doesn't necessarily have to be a danger for lawyers. Rather, it gives them the chance to concentrate on what they are really good at: analyze filtered data and make a recommendation on this basis. So the machine makes lawyers more efficient - not unemployed. At least not yet.

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