Legal tech firm Ontra, formerly known as InCloudCounsel, has deployed a combination of AI-driven technology solutions and a global pool of senior legal talent to take on the hegemony of expensive law firms
As a keen observer of the private capital markets in Asia, Jon Crandall, managing director for Asia-Pacific at legal tech firm Ontra, has enjoyed a ringside view to a remarkable growth story. He said, “By all estimates, the private capital landscape is supposed to triple in size over the next four or five years. And that’s after it has already tripled over the past four or five years.”
However, it has become apparent that parts of the infrastructure supporting this growth are not keeping pace. A lawyer by training, Crandall, who left as partner from Duane Morris LLP to join Ontra in January this year, said, “I guarantee the law firms are not tripling in size. I would be shocked if they even doubled in size. There is a gigantic crunch on legal services and manpower.” The asymmetry between demand and supply is reflected in escalating costs. Crandall cited an instance of a law firm that charged over $4,000 for a nondisclosure agreement — a fee at the higher end of the spectrum, but not unheard of.
Which is where Ontra steps in. The company combines artificial intelligence and machine learning based technology with a global network of senior legal talent to offer private capital investors a cost-effective and scalable alternative to expensive law firms. Referring to the $4,000 contract, Crandall said, “We would do that for around $400 or $500.”
Ontra has a special connection with private capital given its founder, Troy Pospisil, worked in private equity investing at H.I.G. Capital and co-founder, Ben Levi, was a lawyer with Kirkland & Ellis. Blackstone Growth, which led a $200 million Series B funding round, is both a strategic and a financial investor in Ontra, as well as a customer. GPs and LPs who run sizable funds constitute a vital part of its client base.
The Asia operation started three years ago initially to serve American clients such as Warburg Pincus and L Catterton. With the hiring of Crandall, expansion is now a key priority. As it starts operations in Japan, Ontra is forging entirely new connections, while continuing to work with legacy clients. Singapore, Hong Kong, and Australia were picked as priority markets for good reason: the phenomenally high legal costs. Crandall said, “Technology can go a lot further and bring down that spend.”
Savings driven by technology
A typical use case for Ontra would be a company negotiating repetitive contracts. Crandall said, “Even if the contracts are not that complicated, keeping track of legal terms is tough and manpower-intensive. If you can build reporting, management, and comparison functions around data, you get much better visibility.”
For instance, once in the Ontra system, lawyers examining a contract will immediately be notified about any similar document involving the same client and counterparty. Crandall said, “You are not starting from scratch but are armed with the data immediately. In a law firm, you may be surprised by the man-hours wasted searching through files for the last contract.”
Machine learning helps examine documents for missing elements, such as governing law and boilerplate clauses. Even more critically, the system helps flag clauses that could restrict operational flexibility. Crandall said, “It’s not easy even for an experienced lawyer to pick out missing clauses, since they are more focused on what’s in a contract than what’s not.”
Ontra’s services are not necessarily only for clients who have to deal with thousands of contracts. Crandall said, “We are cost and process effective even if the client is dealing with four or five contracts per month. That’s the breakeven point where it makes sense to think about streamlining the process.”
However, legal contracts are too important to be left to a pure technology solution. Even a 5% error counts as a disaster. Crandall said, “That’s where having real human lawyers is helpful. We don’t purely rely on either technology or on lawyers. We combine the two in a way that is effective and efficient”
The human factor in contract review
Ontra insists that every single contract is examined by a senior lawyer, with over eight to ten years of experience. This practice gives it an edge over typical law firms. Crandall said, “You may need or want a large international law firm, full of legal experts. But that resource for a day-to-day commercial contract or NDA is overkill.” Simply put, these reviews are not as lucrative for large law firms as bet-the-company litigation, an IPO, or a billion-dollar M&A deal. As a result, day-to-day work is typically handled by the junior-most lawyers — first- or second-year associates for whom it doubles up as training. Crandall said, “It isn’t a good result for the client — being served by lawyers who they are paying to teach.”
Crandall is a good representative of the talent that his firm engages with. Speaking of the reasons for his move to Ontra, he said, “I wanted to be at the innovative end of the industry. With a few exceptions, law firms are stuck in a 20th century or, in some cases, a 19th century business model. It’s very individual and personal experience driven, which is not scalable.”
Ontra’s talent pool of lawyers are on the lookout for a similar challenge, eager to embrace an alternative path where one did not previously exist. The firm taps into only senior law professionals who may have decided to opt out of the partnership track or may not aspire to be general counsel at a large MNC. Flexibility ranks high among the benefits Ontra offers. Lawyers can work 15 to 20 hours a week, from a location of their choosing, so long as they remain responsive.
Building an inexpensive, effective model
Another source of cost saving is the lack of overheads with no offices to clock up millions in rentals. Crandall said, “Savings are derived from a mix of technology, lower overheads, and a more efficient process. One of the first things we figure out is how a client’s processes can be streamlined. We ensure the overall start-to-finish experience requires less time.”
According to Ontra’s estimates, its clients could save anywhere between 70% to 90% on legal expenses. Crandall said, “We are not keeping the prices down by outsourcing it to an army of paralegals, a back-office, or first year associates. Our system represents cost savings while getting better results.”
He anticipates Ontra doubling or tripling its Asia operations in a 18-month time frame. Expanding to Korea and mainland China and deploying a modified variant of its model for emerging economies, top its list of priorities for 2022 and beyond.
To hear more about how frictionless dealmaking can benefit mid-market firms, please sign up for our next webinar, sponsored by Ontra scheduled for November 30 at 10:30 am SGT