We’ve written for some time about the benefits of verticalization when it comes to software. Legal is one of the areas of small business that is now finally leaning forward into technology adoption thanks to Canadian-based software company Clio.
The company announced on Tuesday that it had raised another $110 million in a Series E round. Clio is now worth an estimated $1.6 billion. This places it in the fast-growing unicorn club. Yet there are still relatively few unicorns among those building vertical software for SMBs.
Of course, Clio’s customers are very different from the men and women who pound roofing nails, clear plumbing lines or fix ovens. Rather, they’re lawyers who among other characteristics often demonstrate a lack of interest or ability to use software.
So we read the news release with interest that Clio claims to have some 150,000 customers on the platform. That puts the average customer value at about $10,000. An interesting comparison is the $8.3 billion valuation that we wrote about in our piece about ServiceTitan back in March. ServiceTitan’s value per customer was more than $1 million dollars.
We do wonder about Clio’s economics. So far investors have poured $400 million into a company with a relatively low ARPU. We’re assuming this since the valuation, while above a billion dollars, is relatively low on the per-customer basis. The company likes to claim it is the “first legal practice management unicorn” globally. All well and good, but back to the economics.
The company is now 13 years old, having launched in 2008. Clio now has customers in 100 countries. This places a high bar on making sure the nuances of the legal profession are dealt with across those 100 markets. To our mind, these are hard problems to solve at scale. Co-founder and CEO Jack Newton was tight-lipped about the company’s financials according to the TechCrunch piece. He did say that since its 2019 raise, the company has seen “explosive” growth.
The company offers a tiered pricing model with a starter solution at $39 per month. This offer appears to be a simple time tracking and billing. Moving up the pricing tiers gets the lawyer additional benefits such as the $125/month offering, “everything you need to run, manage, and grow your law firm”. This presumably is where the Clio solution helps clients find lawyers. Think directory or search listings. And visa versa.
Building Platform, Boosting Headcount
Clio plans to use its new capital to continue investing in its platform and expects to boost headcount by some 40% from 600 to nearly 900 employees. We’d also expect much of their attention will be on further app integration. Today that count stands at 150 but that should grow over time as well.
As we said earlier, we’re curious about Clio’s economics. What we don’t think is debatable is the change that is going on in small business software adoption. This is also true for law firms. Newton had this to say about the pace of adoption. “Lawyers and legal professionals who had hesitated to adopt technology in the past were suddenly forced to rapidly adapt to this new reality. While this technological change is in response to the crisis, it’s an enduring change.”
We could not agree more with Newton. But that doesn’t mean we won’t continue to wonder about their economics. We’d guess if they were stellar, Newton wouldn’t be so “tight-lipped”. But maybe he’s just been hanging around lawyer for too long.