Venture capital investments in Legal Tech and the technology industry
Thursday 27 July 2023
Diego Gallegos
Arias, San Jose
diego.gallegos@ariaslaw.com
Conference report
Biennial IBA Latin American Regional Forum Conference: Technology, social media and artificial intelligence: challenges for the legal industry in the digital age
23 March 2023
Breakout session 8
Session Co-Chairs
Luciana Tornovsky Demarest Advogados, São Paulo; Senior Vice-Chair, IBA Closely Held Companies Committee
Jose Alejandro Torres Posse Herrera Ruiz, Bogota
Speakers
Werner Ahlers Sullivan & Cromwell, New York City, NY
Tomas Gurmendez Posadas, Montevideo
Antonio Peña Greenberg Traurig, Miami, FL; Junior Website Officer, IBA International Commerce and Distribution Committee
Noreen Weiss Gunnercooke, New York City, NY; Treasurer, IBA Closely Held Companies Committee
The discussion focused on venture capital investments in legal tech and technology industries. The speakers, discussed the background of legal tech, how tech companies adjusted their financing plans, challenges and opportunities for Latin American entrepreneurs, trends in the Fintech sector, legal tech trends, normal concerns of investors when investing in Latin America, and the type of deals expected in the coming year. The key points discussed included the commercial pressure in legal tech, the impact of rising interest rates, the effects of regulatory environment in startups, and challenges faced by Latin American entrepreneurs, such as regulatory uncertainty and access to capital. The speakers also discussed the importance of IP protection and exit alternatives in the region, and the types of deals expected in the 2023-2024.
Noreen Weiss described the history of legal tech and how it has transitioned from being code-based to fact-based with the help of artificial intelligence (AI). Antonio Peña discussed the impact of rising interest rates on venture capital investments and how it affects different stages of investment. Werner Ahlers talked about how tech companies are adjusting their financing plans and how M&A transactions could be countercyclical. Tomas Gurmendez explained the challenges and opportunities for Latin American entrepreneurs, such as regulatory uncertainty, access to capital, and labour restrictions. The speakers also touched on the trends in the Fintech sector, with the majority of deals being Fintech-related but also seeing significant ‘prop-tech’ deals in Latin America.
There is a challenge regarding legal tech, in that many firms do not have a document management system, but the trend is towards firms embracing technology. AI in a data-intensive environment such as the legal sector, is currently only 40 per cent accurate, and there are intellectual property questions on how AI can mine data sets and produce outputs.
The speakers also discussed the normal concerns of investors when investing in Latin America, such as the lack of exit alternatives and IPO development in the region, as well as issues relating to IP protection and regulatory uncertainty.
Looking ahead to the next 12 months, there is expected to be greater seed or early-stage investment. There may also be opportunities in M&A and strategic combinations between companies for late-stage deals which do not get completed.