When Jack Newton started legaltech company Clio alongside his grade-school friend Rian Gauvreau, it was 2008 — but based on the way lawyers worked, it could’ve been decades earlier.
Top firms located in the most expensive real-estate in Manhattan were dedicating the bulk of their floor space to filing cabinets. Paper timesheets were the norm. And it would’ve been hard to find an office that wasn’t filled with the distinctive whir of fax machines… not to mention exhausted, overworked, and unhappy lawyers. By 2008, Amazon, Salesforce, and LinkedIn had all become major players in the corporate world; within the legal space, though, it was as if the Internet revolution had never happened.
In the 15 years since, Clio has been a leader in the movement to modernize the legal industry, bringing an efficient and easy-to-use suite of products to bear on taking the law online. But Newton and Gauvreau didn’t set out to spark a revolution in how lawyers and law offices do their business on a daily, even hourly, basis. (And anyone who has ever encountered a lawyer knows just how sacred the hourly basis is.) Instead, they had a much more fundamental realization that guided them toward their ultimate destination — and it began when Newton started charging neighbors to shovel their snow.
Newton grew up in Edmonton, Alberta, where he got into computers at an early age; he remembers tinkering with an Intel 8086 that his dad brought home for him. By eight years old, he was already writing programming, absorbing the remarkable implications of what it represented. “That was so mind-bending for me, especially as a young person — that you could just sit down and write some lines of code and make something that does something useful for people,” Newton says.
Doing something useful for people always played a major role in his thought process, and at the same time that he was experimenting with processors, he also started his first businesses. One of these came out of a very simple observation: in Edmonton, it snowed a lot. People needed their driveways shoveled. So he and his brothers started a snow-shoveling business — serving a clear need in their community. (Newton likes to joke that he’s always been in SaaS, except then, instead of Software as a Service, it was Shoveling as a Service.)
Fast forward to the mid-2000s. While many people assume that Newton is a lawyer himself, he’s actually a technologist: he trained in computer science as an undergrad and then obtained a master’s degree in machine learning at the University of Alberta. After working as a software developer at a blossoming medical-technology startup, he got the itch to launch his own company, and he and Gauvreau surveyed the scene around them, trying to understand what kind of business the macro environment might support.
“We saw the cloud becoming a really transformative technology that was going to, in our mind, transform almost every industry out there. It was really obvious to us, even though the cloud was fairly nascent in 2008,” Newton says. “Our question was, what is an industry that is ripe for transformation, ripe for disruption? Rian and I were two hammers looking for a nail.”
Cue the snow-shoveling wisdom. They needed to find the space most desperately in need of what cloud technology could provide — the place where there was the most snow that needed to be shoveled. At the time, Gauvreau had actually moved to Vancouver and was working for the law firm Gowlings, and he got to observe firsthand how poorly the average law firm implemented technology. They realized that the legal industry desperately needed a cloud-based service that could consolidate and streamline many of the practices that remained painfully manual. And they also saw that it wasn’t just a corporate need: it was a societal need as well.
“It’s an important space in that the legal system is really foundational to our society, and access to justice was a huge issue where 77% of individuals do not have access to lawyers to help them see good legal outcomes for their problems,” Newton says. “We really saw that it was not only a big and important opportunity, but that legal, in a lot of ways, was the last major industry to be fundamentally transformed by technology in general, and by the Internet, in particular. Lawyers in 2008 were still doing their job like it was 1958 — they had really been almost untouched by technology in terms of how lawyers worked on a day-to-day basis.”
While the need for Clio seemed clear, Newton and Gauvreau had no sense that they were launching a company that would one day be worth more than a billion dollars and employ almost a thousand people. At the beginning, their goals were far more modest: create something that could support the two of them and a handful of other employees by making the “average lawyer’s day just a little bit better and a little bit easier to get through,” as Newton puts it.
But it soon turned out that this average lawyer looked considerably different than he expected. As a technologist, Newton had little idea of what lawyers were actually like — and most of what he did know was based on TV. He assumed that most lawyers resembled Harvey Specter, the slick protagonist of USA Network’s Suits, working in high-end firms populated by hundreds of lawyers. He was surprised to find that, on the contrary, about 80% of lawyers turned out to be working at firms of 10 lawyers or less, and a full half were practicing solo.
“They don’t have a floor of IT people, the way a big law firm might,” Newton says. “They’re solving their problems themselves, or they’ve maybe got their 13-year-old nephew that’s good at computers helping set up their IT systems.” Moreover, these lawyers weren’t just practicing law: they were spending even more of their time running small businesses, something they had never been trained to do in law school: “The law school industry is unfortunately producing a lot of lawyers that are pretty ill equipped to do that successfully. We saw a real hunger for a tool and a company that helped lawyers understand how they can leverage their training as a great lawyer into being able to run a successful law firm.”
That meant that this modest initial goal — make the average lawyer’s life a little better — turned out to have extremely far-reaching effects, because so many lawyers were so desperately in need of what Clio had to offer. At the same time, not only was the legal industry more than ready to start this evolution: as a SaaS company — Software now, not Shoveling — it actually made sense for Clio to go out and raise external funding so that they could frontload customer acquisition as much as possible. Newton had come to understand this from analyzing other SaaS case studies, where he saw evidence of a frequent winner-takes-all dynamic, particularly in vertical spaces, where the market could really support only one major player.
This is also what caused Clio to first come across the radar of TCV. “We look at large verticals and potential technology categories of different types and try to understand, for anything that seems like a potentially large opportunity, who are the most innovative market leading businesses in those segments,” TCV general partner Amol Helekar says. “Legal was one of those almost Captain-Ahab, white-whale types of categories for us where we felt like, wow, this is such a huge vertical.”
As Helekar surveyed the space, he couldn’t find any companies that felt truly innovative and paradigm-shifting as far as how they addressed the way that law firms run — until he met Newton at a conference and learned about Clio, which was doing exactly that, for more than 35,000 firms. At the same time, Clio fulfilled the other criteria that Helekar looks for in a successful investment, including unique and powerful value proposition, huge engagement with users and customers, virtuous cycles that could cause a chain reaction of innovation within the product category, and a visionary, growth-oriented CEO and management team.
“It’s the same types of characteristics that we saw with some of our notable investments, whether it’s Netflix, Spotify, Facebook, Expedia, or Zillow,” Helekar says. “When we would do customer calls on Clio, which we did well in advance of investing, we heard from lawyers that they’re using the product every day, that this is the core for how they manage their businesses. It’s the first application they log into in the morning, and it’s the last one they log out of at night. That’s where they track all their time, where they store all their data. And you could just feel the passion and the importance of the product to how they manage their practices.”
On top of that, Clio wasn’t just transforming the way that law firms conducted their operations — it was also fueling development within the whole ecosystem of legaltech. Clio now features more than 200 applications, and it exists at the center of its vertical, investing in other legaltech products as well as hosting the Clio Cloud Conference, or ClioCon, one of the largest and most influential annual legaltech conference.
But when TCV invested in Clio’s Series D round in 2019, it wasn’t a partnership that Newton entered into lightly. At the time, Clio was on pace to become a $100 million company, but Newton was already thinking past that — how they could become a $500 million company, and then a billion-dollar company, a “really durable, generational company.” To achieve that kind of growth and presence, the fit would have to be perfect.
“Maybe second only to who are you choosing as your co-founder, the next most important decision you make as a founder is who are you bringing onto your cap table to help grow the business, and in what ways can they help support you growing the business over the long term.”
“It’s like a marriage, and a lot longer lasting than some marriages: you’re entering into a five or six or 10-plus year engagement to go and drive transformation in the company and take the company to the next level.”
What impressed Newton at first was that TCV sat down with him and other members of his management team and walked them through a detailed view of how the fund thought about the legal space and where they saw opportunities to expand, as well as the feedback they were getting from their customer calls — years before they invested in Clio. This provided both a sign of good faith as well as a preview of what their partnership might look like, and Newton found himself aligned with Helekar and TCV on the various propositions that both sides brought to the table, including a strategy for using corporate development and M&A as tools for expanding Clio’s reach and value.
Crucial in making the partnership work, though, was that TCV understood and endorsed Newton’s forward-thinking outlook — a very forward-thinking outlook. “We talked about building a 100-year company at Clio, a company that’s going to outlast me as CEO and outlast everyone who’s currently part of Team Clio, and it’s rarer than you’d think to find investors that have the kind of long-term view that that TCV does on their investments,” Newton says. “A lot of investors are thinking about a three-to-five-year hold period, and I think TCV is exceptional in how many investments they’ve been part of for a decade. Or two.”
More importantly, Newton and Clio have fulfilled that initial goal of improving lawyers’ quality of life — once again, far beyond the scope of what he had initially envisioned. Lawyers do not live easy lives: they work long hours in high-pressure situations, often engaging with clients at the worst moments of their lives, whether it’s a divorce, a bankruptcy, or any number of other pivotal events.
“You spend your entire day, internalizing other people’s problems, dealing with emotional stakes that are quite high to start with,” Newton says. “And then you’re dealing with structural components of the industry, all the way to the billable hour, that really encourages a mismatch between work-life balance, including a very hard-driving atmosphere at law firms where associates and more junior folks in the firms are worked extremely hard. All of this creates a profession that has some of the highest suicide rates, highest substance abuse rates, highest rates of depression of any profession, full stop.”
By helping them to manage their workloads, streamline their interactions with clients, and increase responsiveness without piling up more hours on the job, Newton and Clio have found that they’ve been able to make a noteworthy difference not just in lawyers’ work, but in their lives. In one internal survey of their customers, Clio found that its software saved them eight hours a week — a whole workday’s worth of logistical and administrative labor that no longer needed to be performed.
But Clio didn’t spin this as time that could then be turned into more billable hours. Instead, the company coined what it calls the “Clio day.” “We really turned that around and said that the time we’re saving you is time you can go and invest in quality of life,” Newton says. “This is time that you can spend with your husband or wife or your kids — this is the school recital that you don’t have to skip and miss out on.”
It all goes back to the streets of Edmonton. People don’t pay you to shovel snow because they want to have more time to shovel snow: they pay you to shovel snow so they can do something else. Newton and Clio have applied this lesson to an industry in which the average practitioner had to shovel a lot of metaphorical snow.
Now, there’s a company that can shovel some of that snow for them.
***
The views and opinions expressed are those of the author and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). TCV has not verified the accuracy of any of the data or statements by the author and disclaims any responsibility therefor. This blog post is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified above are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this interview and blog post, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/
