Legal bills are notoriously long, detailed—down to the tenth of an hour—and often flawed. Errors can be caused by undertrained staff assigning the wrong billing increments to a task or lawyers charging for work that’s unrelated or unnecessary. It’s up to the client to vet the bill, line by line.
Furthermore, sorting through legal bills so that finance and accounting teams can allocate fees is an inefficient use of employees’ time and companies' budget.
Both are tasks that software should be handling, according to SimpleLegal. The startup is positioning itself as an enabler of a data supply chain connecting the law firm, in-house legal team, and finance team by producing a realtime feed of expenses, replacing PDF and paper bills with an interactive, visual dashboard.
“Taking the crap off people’s desks is what gets customers interested,” says SimpleLegal co-founder Nathan Wenzel. “It’s what this software is for.”
Getting data instead of PDFs means companies can find out how much they’re paying for what and easily follow up with law firms about any questions.
Aiming for Efficiency
Wenzel and co-founder Patrik Outericky are repeat entrepreneurs , previously running Edge Solutions, a successful data analytics services company. After working for a variety of clients, they developed a suite of analytic applications to help corporate legal departments and insurance companies to review legal invoices. SimpleLegal builds on that process, bringing it to all kinds of businesses.
SimpleLegal was born out of impatience with inefficiency—Wenzel observed that insurance companies would typically audit their legal data in assembly line fashion, often assigning skilled, high-level professionals to painstakingly review invoices one item at a time. The ineffectiveness struck a chord for Wenzel who, as a former data consultant, once refused to key expense figures into Excel from a PDF file because it was silly to extract numbers from a computer just to type them back into a computer. Seeing the same problem in auditing legal bills, he set out to develop a software solution that would automate, parse, and organize the muddle of invoices.
The system has stood up to the job. In pilots with several companies willing to hand over their historical data, the results of the algorithms closely matched the findings of the experienced human auditors. In fact, in some instances the algorithm detected discrepancies that less-experienced auditors tended to miss. The clients reported that the software was more consistent than some of their employees’ work, Wenzel says.
Making the Process Better
“We’re not trying to be a new puzzle piece [for auditors],” Wenzel says. “We fit into their existing process.” First, law firms can submit bills by email or direct upload. Then the system takes over, using its natural language processing system to order the data and flag inappropriate charges. Auditors’ judgments continue to play the key role of helping the software constantly stay one step ahead. “People and software working together is how you really create value. Software can weed out the frequent, transactional issues and people can then focus on high-value tasks,” Wenzel says.
Smaller companies spending less than $25 million on legal fees are SimpleLegal’s prime market, according to the founders. The system can save those businesses’ high-level staff from time-consuming bill-proofing—an attractive offer.
“What allows us to initiate the sale is this headache that either a founder or General Counsel or the CFO is having where they’re just getting mountains of PDFs dumped on them and having to sort it out,” Wenzel says. Plus, SimpleLegal streamlines payments and invoices since clients pay their bills directly through the system.
SimpleLegal is also getting traction with larger companies. It landed a pilot with a Fortune 500 insurer that’s handed over a year’s worth of legal data; about $1.1 billion dollars worth of legal bills.
Currently, SimpleLegal charges 1% on the bills that run through its system, but they anticipate moving to a flat-fee, tiered model based on anticipated legal spending in the future. Also down the road, Wenzel says: “Our goal is not just to make auditing better. Our goal is to fix the billing problem created by hourly billing. We've already helped customers move to a fixed price model.”
What does your company do?
We organize the legal vendors, projects, financials, budgets, and more so that the lawyers can focus on protecting and growing the company.
What's new about what you're making? How is it different?
Large companies have teams called “Bill Review Units” that review and adjust legal bills (vaguely similar to medical bill adjustment). Today, these teams are entirely manual.
We programmatically review 100% of the incoming bills to automate or assist in the reviews.
For smaller companies, those spending <$25M/yr on legal bills, no tools exist today. They are forced to manage PDF or paper bills and retype amounts into Excel.
We bring a streamlined version of the tools larger companies use down to this market. We are the data supply chain connecting the law firm, in-house legal, and finance teams.
Who are your competitors? How are you different?
For smaller companies, the “status quo” is the main competitor. They have people today who manually re-key invoice amounts into Excel to allocate expenses.
For larger customers, potential competitors are the existing eBilling vendors: Bottomline (NASDAQ: EPAY), DataCert, CSC, Mitratech, LexisNexis, and Thompson Reuters. They don’t offer what we have but they claim to come close through basic key word filters.
An outside company like HearsaySocial could escape their “social” roots. They have the skill set, the enterprise sales force, and industry credibility to launch a competing product. But they could represent more opportunity than threat because both of our customers would likely be interested in both sets of products.
What do you understand about your business that others just don't get?
Existing vendors run 50% gross margins (NASDAQ: EPAY). So for them, life is good. Why change?
Their value used to come from connecting to law firms. But with today's technology, securely sending and receiving files is a commodity. Unburdened by legacy systems, we built a platform to connect to all law firms. We understand that sending/receiving data is critical, but is a commodity.
We believe the real value comes from helping customers understand what to do next to actually help them save time and money. Our machine learning software makes it clear to our customers what they should do next.
How will you make money?
We charge a subscription fee based on the volume legal dollars billed through the application. That’s how companies currently pay for products in this space.
Incumbents today who only offer a portion of what we offer have revenues > $100M/yr.
How do you acquire customers?
Customer acquisition is a combination of distribution parters to a broad array of smaller customers and direct enterprise sales to larger enterprise customers.
We have a distribution deal pending with a large PE firm to provide our service to their portfolio companies.
SimpleLegal is conducting a Regulation D offering via Wefunder Advisors LLC. CRD Number: #167803.
Wefunder supports three different federal laws that allow startups to raise money legally. To comply with the law, Wefunder Advisors LLC and Wefunder Portal LLC (both owned by Wefunder Inc) also list startups depending on the regulation used.
Legal May 16th 2016
Wefunder Portal LLC
for 277 startups
Wefunder Advisors LLC
for 100 startups
for 3 startups
Curious how well the companies have done? Or how many raised follow-on financing?
Some fine print: 1) These numbers include startups currently live on Wefunder if they pass their minimum target. 2) Some startups use two different laws at the same time (i.e., Regulation D and Regulation Crowdfunding).
Join 478,354 investors who funded 363 startups with over $129.5 million1
wefunder.com/simplelegal is managed by
Wefunder Inc. runs wefunder.com and is the parent company of Wefunder Advisors LLC and Wefunder Portal LLC. Wefunder Advisors is an exempt reporting adviser that advises SPVs used in Reg D offerings. Wefunder Portal is a funding portal (CRD #283503) that operates sections of wefunder.com where some Regulation Crowdfunding offerings are made.
Wefunder, Inc. operates sections of wefunder.com where some Regulation D and A offerings are made. Wefunder, Inc. is not regulated as either a broker-dealer or funding portal and is not a member of FINRA.
You may also view our Privacy Notice.
Wefunder, Inc., Wefunder Advisors LLC, and Wefunder Portal
LLC do not review user-generated content beyond what's
required by US law. Some user-generated content, including investor
biographical information, may not be accurate.