Is online marketplace for legal services UpCounsel a potential knife in the ribs for a legal industry that’s already imploding? Recently, The New Republic published a feature foretelling the end of the golden age for big law, given recent mass layoffs or complete disintegration of high-end firms.
“You’re starting to see the economics of law firms really changing dramatically,” says UpCounsel founder Matthew Faustman, “which is why they’re collapsing right now.” Faustman’s hoping his startup will take advantage, and ultimately accelerate, these trends if it can deliver on its mission to “to make legal services for businesses accessible and cost effective” as well as “somewhat delightful.”
The platform works simply enough: Businesses in search of legal services post a job for free on the site, for which lawyers submit bids. Clients get options, while lawyers can alleviate themselves of some of the administrative hassles of running a small practice like billing. The idea is to use technology to accomplish what a law firm normally would do–coordinating “a large group of people to serve a single person,” Faustman says–but at a fraction of the price for clients.
On UpCounsel, the average hourly rate is around $140, according to Faustman. “That includes a very big range. We have some attorneys that are charging $100 an hour and we have some attorneys that are charging $250 an hour.” Faustman says the national average hovers around $280.
For lawyers, it’s completely free to use. “If you negotiate to do $1,000 worth of work, you’re going to get $1,000 dropped into your account the exact same day.” The 1,000 customers who have used the service so far have paid a 10% service fee, which is how UpCounsel will make money. There are currently 700 attorneys–who go through a screening process and need malpractice insurance–are registered within the system.
“Our primary customers are businesses between one and 20 employees. We deal with a lot of startups”–which makes sense for a San Francisco-based site currently serving Californians exclusively. “We do a lot of tech-related contracts. We’re heavy into real estate,” Faustman says, adding “We’ve started seeing our attorneys hiring one another.” The platform makes it so that so lawyers can create what he calls, “ad hoc law firms inside the system,” where an attorney in San Francisco might hire a patent lawyer in San Diego to help out on a case, for example.
According to Faustman, the site has attracted a lot of independent attorneys recovering from big firms: people who wanted to start their own practice, work part-time while raising a family, or those who’ve been laid off. (About one-fifth of lawyers on UpCounsel fall into that last bucket.) “It’s sort of a once in a lifetime moment where there’s more of them than anybody knows what to do with.”
Faustman says he started brainstorming ideas for a disruptive legal services startup during an 18-month stint at white-shoe law firm Latham & Watkins. He immediately noticed room to improve a system that both “overworked and overbilled” attorneys—for as much as $300 to $400 per hour when “they’re only seeing 100 bucks of it,” he says.
In an age of legal uncertainty, UpCounsel may help lawyers concerned about their jobs go out on their own. In Faustman’s words, “Life at a big law firm is not exactly a bundle of joy.”