Q3 2023 SaaS Valuation and Investment Trends Report
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Filevine is changing the way legal work gets done for law practitioners and their clients. As the leading legal operating system, Filevine is dedicated to empowering organizations with tools to simplify and elevate complex, high-stakes legal work.
Note: The following has been edited for clarity and brevity.
Tell us about Filevine. What do you do, whom do you serve and what differentiates your platform?
Filevine serves law firms and legal teams. This is predominantly law firms, however a growing percent of our customer base now includes legal teams at corporations. We have several Fortune 500 customers, including FedEx, Carta, Johnson&Johnson and Kroeger’s, and we seem to be signing more every day.
In addition to having legal teams at large corporations, we have thousands of law firm customers. That's the most common type of user. We serve very large law firms, including firms in the Am Law 1001, all the way down to small solo attorneys. We run the gamut.
I think Filevine has differentiated itself by being highly configurable, such that we can manage the needs of somebody like FedEx and also a small solo shop around the corner. We're really proud of the product and it's taken a long time to get here. We're eight years into this thing, and we’ve had the opportunity to have a really steady growth rate.
Can you tell us how Filevine is embracing AI as a part of its platform? How do you envision AI shaping solutions like Filevine and the broader legal industry over the long term?
Legal work is built on language. Large language models (LLMs) and the development of those models has reached a point where quite a bit of productive work can be done by those LLMs. We envision a world in the not-too-distant future—in fact, a lot of it's already happening—where AI tooling will be like an assistant sitting next to a lawyer crafting documents. Filevine has tooling right now that already does this, and lawyers are finding speed improvements, efficacy improvements, and even quality improvements by using these types of tools.
AI will absolutely reshape the legal industry, and I think it will do two primary things:
AI will make lawyers and legal professionals more efficient. They'll be able to do more with less. That's really exciting because the labor profile of a law firm has always been very heavy on personnel. If you can change that calculation even by 5, 10, 15, maybe 20 percent… the margins at a law firm become much more attractive. And that means a lot for the lawyers’ bottom line. It also means a lot for clients who are waiting for resolution of their matter to get things handled more quickly.
The area that I think is less intuitive—but ultimately more impactful—will be around quality and accuracy. Today, lawyers miss things. I know that sounds incredible and shocking, but from time to time a lawyer may well miss something in a document.
Sometimes the AI simply is better at pulling out particularized facts. We've had lawyers tell us, “My paralegal had the dates wrong around certain key timeline points in this case. I had AI review it. I was skeptical, but the AI was right and my paralegal was wrong.” We've seen AI extract pieces of evidence from a document that completely changes the complexion of a case to the surprise of the handling lawyer.
I think it's quite likely that AI almost becomes part of the standard of care for how lawyers operate. I think clients are going to expect that second layer of an AI review on top of a human review when somebody's working their case. Given how efficient AI is, from a cost perspective that seems like a no-brainer.
Suffice it to say, we are very, very bullish on AI here at Filevine.
Your entrepreneurial story is interesting in that you are an attorney who identified real pain points and then built a company to address those concerns. Tell us about your founder journey, and how you came to start Filevine.
The animating concern I had as a lawyer—and frankly a lawyer who's not naturally very organized—is that when lawyers are not organized, sloppy work doesn't just turn into a negative result in a case: It can have significant negative impacts on the lawyer’s reputation. As a young attorney, I really worried about making a mistake that could cost my client dearly. I developed systems that helped me not miss anything. And yet it was a constant worry for me.
I often tell customers that a case management system shouldn’t just tell you what you need to do and by when, but it should also tell you what hasn't been done.
I think Filevine is particularly good at that. I was fortunate to meet a couple of developers who decided to help me found the company, including Jim Blake, who recently passed away. Jim and I worked together to develop Filevine. The initial thing he worked on was communication between lawyers, partners, associates and paralegals, to make sure nothing fell through the cracks. Eventually that initial journey was developed into a full-fledged case management system that we have today.
Let's continue that founder journey to present day. You have unique experience leading a company from inception to a large, rapidly scaling business. How do you manage your day-to-day? What have you learned and what advice can you share about managing a growing business at its various stages?
I have learned a lot and I'm really proud of where we've come as a company. I have made as many mistakes as correct decisions, so I'm far from a perfect leader.
I do think it's a really difficult balance as a founder—especially a founder who was very intent on wanting to run this company for the long run. I've had to navigate a difficult balance between understanding and following my own instincts but also being humble enough to accept coaching and assistance from others. I think I've gotten better at it over time. I meet with a coach weekly and have been doing so for over two years. I find it to be incredibly centering and anchoring.
You sort of need a confident humility, which I realize are almost two opposing principles. But you really need both. I’ve had times where I've needed to be very humble about what I don't know and where I should go next. And I've had times where I thought, ‘I'm right about this…. I'm going to talk to a bunch of people to make sure, but I'm pretty sure I'm right.’ And even in the face of significant opposition, I've said, ‘No, we're moving forward.’ Those have been some of our most important decisions. It's a tricky balance.
As far as some of the lessons I've learned: Managing is a challenge. I think most new managers judge themselves by how much their team likes them, which is understandable. We all want to be liked.
But the reality is that good leadership necessitates that from time to time people may not be happy with you, and they may disagree with you, and you may have to ask for somebody to follow you even when they think the decision you're making is wrong. I have found that newer managers have a hard time doing that. I had a hard time doing that. The touchstone should be: Am I leading the business, not just making sure my function is optimized? I see a lot of managers confuse those.
Let's chat about the Utah startup community. The Golub Growth team has had the pleasure of partnering with a number of companies in the Salt Lake area over the years, I'm continually amazed at how the tech community has really blossomed.
Can you talk about the sense of community among the Silicon Slopes tech ecosystem?
It's fantastic! You're not going to get a bigger cheerleader for Utah tech than me. I'm incredibly proud to not only be born and raised in Utah, but to be now running a company in Utah. Filevine actually started in Nevada, but we've long since been headquartered in Utah, in large part because of the ecosystem that was built here.
As a member of the LDS church, which has a large presence in Utah, there are cultural aspects in particular with LDS missionaries, where I think they've kind of learned to sell. They've learned what it's like to go door to door. They've learned what it's like to be rejected. They've learned what it's like to slog through difficult times. A lot of those folks come back from missions and are particularly well-suited towards sales.
I'm not sure you'll get a better sales culture in the country than in Utah. We're not perfect, though. If I were to criticize Utah tech, I would say that oftentimes you'll see companies that are maybe a little too heavy on the sales side and a little lighter on the tech side. Sometimes it can be challenging to recruit technical talent, especially experienced tech talent on the more leading edge of technology. For instance, if you were to go out and look for top machine learning talent, I'm sure there is some in Utah…but there is a lot more in Silicon Valley. So to some extent, if you're building a company here, you have to know that some team members are probably going to work remotely, which I think is perfectly fine. It's something we've done quite a bit here at Filevine.
Filevine has surrounded itself with both a strong board and set of investors. How do you ensure the right financing partners are in your corner when it comes to raising equity or debt capital?
I've now done this several times. I've been through a number of capital raises at this point, and I think three debt raises. The number one piece of advice that I would give to other founders in this situation is: references are everything. You really want to have a good set of references – ideally back-channel references. With Golub Growth, we knew folks that knew of you and had had great experiences working with you – and those were not necessarily people you introduced us to.
Later in the process when we get great questions from a company or a venture partner during a diligence period, I always know that I'm dealing with somebody smart and thoughtful who wants to make the right decision for themselves and for us. Oftentimes it makes us think about our business in different and better ways.
During the negotiation process, I have found that with the really great investors, you can take their word to the bank. That develops a baseline of trust to build on later, and that is critical for me.
Let’s talk about the current market environment. It's been a challenging year for most software startups. How has Filevine managed through the uncertainty of 2023? What is your outlook for 2024?
We're very bullish for a number of reasons. First of all, Filevine sells to a wide variety of customers. I mentioned that we sell into the Fortune 500, we sell to governments and universities, and of course, we also sell to a diverse group of law firms.
If you take that diverse customer set, it would be really unusual for each one of them to be down all at once. It just happens to be the case that right now legal is doing well and I think is set to do well for quite some time. There's a significant shortage of lawyers in the country, so there is a lot of opportunity to sell tech in the legal space. So some of our success through 2023 is a bit of being in a good market at a good time.
But, I would tell any startup to be careful about selling to just one set of customers. A lot of our peer companies made a lot of money selling to tech, which is great. Tech can go really, really well. But when it's not going well, it can be really, really challenging. So while we have many customers in tech, we don't rely on those; they are just one segment of our business. Having a diverse customer set makes a huge difference.
Secondly, Filevine has tried to be fiscally responsible over the past couple of years. It’s a really great place to be as a company when we don't necessarily need to be out raising money if we don't want to be.
I've learned that operating within constraints—of the product, the business, a vision, profitability—forces you to make decisions that you wouldn't have to think about otherwise. In 2020-2021, it felt like I could pick up the phone and get an investment within weeks. Today, it is a clarifying thing to run a business under constraints, and it has made me sharper as a CEO, and it's made our team a lot sharper. I think we demand more of ourselves and our people and our technology and ask that we make the right decisions along the way that are not only right for the business, but for the customer.
Can you share something that is unique about you that we might not find on your resume?
I'm sure there are several things that I'm an oddball in, but I do have six children and they are absolutely wonderful. It's busy. We just got done with Halloween—I had teenagers out at parties and an 18-month-old in a stroller. I’ll be honest, it's a bit exhausting but it's also ton of fun. We embrace the chaos.
1. The Am Law 100 is the definitive ranking of the 100 largest law firms in the United States.
Any views, thoughts, and opinions expressed by Ryan Anderson herein are solely that of Ryan Anderson and do not reflect the views, opinions, policies, or position of Golub Growth. Golub Growth is not responsible for the information or views communicated by representatives of other companies. This material is not indicative of the past or future performance of any Golub Growth product and should not be considered as investment advice or a recommendation by Golub Growth of any particular security, strategy or investment product. Golub Growth has distributed this material for informational purposes only.