What’s driving Litera’s acquisition strategy, and where is it going?
Bob Ambrogi discusses Litera’s acquisition strategy with CEO Avaneesh Marwaha. In 2016 Litera embarked on a buy, build, innovate acquisition strategy, breaking out of its document drafting business to become a significant player in the transaction, litigation, and firm intelligence spaces. Read transcript
MEET OUR GUEST
Avaneesh Marwaha, a former IP lawyer, became the CEO of Litera in 2016. In the podcast, he shares his thoughts about the company and its plans to disrupt and transform how legal professionals work.
Bob J. Ambrogi
Lawyer and Legal Journalist
Bob Ambrogi is a lawyer and journalist. He has been commenting on legal technology for over two decades. Follow him on LawSites, Above the Law, LawNext, and Legaltech Week.
Before Litera, Avaneesh was an attorney, general counsel and entrepreneur. He is active in the legal and local community and serves on several boards.
Speaker 1: Welcome to Legal Tech Matters and a Litera podcast dedicated to creating conversations about trends, technology, and innovation for modern law firms and companies big and small.
Bob: Welcome to the premier episode of Law Insights. Part of a new podcast series produced and presented by LITERA. I am the host Bob Ambrogi publisher of the legal technology and innovation blog Law Site. And given that this is the first episode I can think of no more appropriate guests to kick it off than the CEO of LITERA, Avaneesh Marwaha. He is a former intellectual property lawyer who transitioned his career into a series of business executive roles, including as chief operating officer of Keno Kozie Associates, a major provider of outsourced IT for global law firms before becoming LITERA CEO in 2016. Avaneesh, welcome to the show.
Avaneesh: Thanks so much and congrats on the first episode.
Bob: Thank you. I was thinking that the last time we’ve talked a number of times over the last few years, but the last time we had a really substantive talk, it was in March of 2020, very early, as we were just trying to figure out what the heck was going on in the world. I think we had all been locked down for all of about a week or two at that point. Anyway, I know you had a young child at home, so how have the past what’s that 18 months or so been for you?
Avaneesh: It’s been a series of highs and lows. I think, you know, for me as an individual, it’s been somewhat of a blessing on days because not, not traveling. And as you mentioned, have a young child at home, it’s been really fortunate to, to be there and experience this time of her life and having flexibility to manage that as in low you know, as a family, we haven’t had a chance to travel. We haven’t had a chance to get her out as much as we’d like as a young child to experience the world and get those opportunities. And we hope to start that soon. Professionally again, I think highs and lows highs, it’s been amazing to watch our team be resilient and perform. And the lows are, you know, we like every else struggle with fatigue and participation and how do we make sure our folks don’t get burned out? And so, it’s been highs and lows, but I would say the highs are winning, which is good.
Bob: Well, you’ve certainly had a busy period of time at LITERA over these months. And I want to talk about that, but before we do that, I wanted to just ask a little bit about your career. Because as I said, you started out as an IP lawyer, then moved into business roles and eventually to LITERA, but how did you make that transition? What, what got you to want to leave IP law and get into the business side of things?
Avaneesh: I’ve always wanted to impact large scale of people and being a lawyer that was the first step and, you know, giving my, my clients at that time, advice and counsel how to leverage their trademarks for third party licensing or branding opportunities, helping my clients with FDA/FTC work was great, but it seemed like you were just a cog in the wheel. You weren’t part of the decision-making that really impacted the employees of your clients or their customers. So, after a few years of being a lawyer and advising my clients, I realized that to make real impact, you had to go to the business side of our organization and took that risk early in my career to say, let’s just go see what happens by being involved in business and taking a seat at the table, and you know, as a lawyer, you always think you have really good ideas, but when you get to put them in practice, you get to really validate those ideas.
Avaneesh: And are there, are they good or not? So got lucky with my first endeavor and gave me the confidence to keep going. And like you mentioned, got really lucky to join Keno Kozie and help them with a, a really good growth story during my tenure of four years there. But even then, recognizing that in legal IT services there is only so much you can do. Cause most of the firms have already acquired their tech and all you’re doing at that point is making sure it works and it’s up and running at the real impact you can make is on the technology side and software in this industry at that moment in time, back in 2016 was ripe for disruption and we felt like we could make a big difference at scale coming to this side of the table. So, it’s been a slow, I guess that’s slow for most people, but it’s been a pretty decent approach to coming out of law into the business side of things and leveraging my legal degree still. And you know, being a logical thinker, but definitely don’t practice law anymore. That feels okay to me.
Bob: And it probably helps to have that understanding of the market from having been a practitioner and having known what lawyers do.
Avaneesh: It does help. I think that’s, that’s been one of the critical components of coming here is taking technologists and builds over time that CIOs have bought and said, what if we actually had a focus on the end users, the lawyers themselves, could we make a bigger difference? And I think that has helped quite a bit.
Bob: So, the LITERA that we can sit here and talk about today is a very different company I’d say from the one that you joined in 2016, as a matter of fact, when, when you came aboard, it was initially of Microsystems, right? And then soon after you announced this combination of kind of four leading document technology companies, Litera, Microsystems, XRef, and the Sackett Group into a single business. I wonder if I could just talk briefly about why that, how that came about and why it came about.
Avaneesh: So back in 2016, a private equity fund called K1 acquired Microsystems, Bayside Donna’s Grove, Illinois. And that’s the organization like you mentioned, I joined CEO and sat back and thought about what can we do to have a material impact on this industry, leveraging software and bringing good software best practices back to the industry. And my time at Keno Kozie and being a practicing lawyer recognize that most of the complaints that lawyers or practitioners have revolve are Microsoft Word and the interaction of applications in Microsoft Word. So, by using that as a problem statement, we said, what can we solve? And we decided that the drafting ecosystem is right for disruption – an area we can really improve. So, we looked at the market landscape at that time, it felt like we acquired the best products with next XRef, Sackett Group, and LITERA to really solve the drafting lifecycle and built a product around that space called LITERA desktop, which is a unified experience at drafting. So that was the reason behind that first consolidation of technology was saying, there’s a problem out there, how lawyers and paralegals create content and documents, which is what law firms are paid for. And there’s gotta be a better way to do it. And that was our first step towards consolidating technology. Yeah.
Bob: Over the last three years, LITERA has made if I’m counting right. 11 acquisitions, hope I didn’t miss any in that count and have a number of different kinds of companies. I mean, the most recent one probably that got the most attention was, was of Kira, but there’ve been a number over the years. And, and I, I think certainly people have traditionally thought of LITERA as a very document focused product software company. Do you think these acquisitions over the last three years have changed that focus at all for LITERA? Or do you still see it as a, as a kind of a document centric company?
Avaneesh: I think it’s changed or not changed, but to evolve from being document only to, you know, be more focused on a complete matter story and more focused on the business of law potentially versus just the practice of law. And it’s been interesting to, to step back and view our story. You know, now a few years in, you know, as we look at acquisitions and why we did, there’s always been a statement attached to it, right? We’ve always thought of a problem first and identified a problem. And then when I found the best ways to solve them, whether it’s building our own tech or buying technology, and it’s often, you know, 34% of time, you would say, so our biggest customers ask us to get into something because they’re struggling with solving it with the technology that exists today. So, we’ve been fairly lucky that the strategy we’ve taken of listening to market defining problems accurately, it’s evolved us out of documents and into more of how do you make lawyers productive? How do you help them with client retention? How do you help them with margin protection and, and use your happiness? And that focus for us has been a, a good litmus test of success.
Bob: So, is that how you describe kind of the, the philosophy, I guess, or the strategy that that’s guided these acquisitions over the last three years? Yeah,
Avaneesh: I say there’s, there’s three critical components to our buy, build or innovate strategy. And it’s really around number one, we have to help our customers maintain or improve client retention. And we believe we can have an impact there. If our technology and software can help them produce high quality work on time and on budget. If those three things are real, we believe client retention will always be high. Number two is margin protection or increase. And if we can help partners and lawyers win more matters at the right price, staff it with the most effective and efficient attorneys on staff that are available. And then finally remove waste from the process. In the matter we think we can have a real material impact on realization rates and margin potential. And then finally end user happiness. Having been a past lawyer, a lot of my friends are managing partners at firms today. Look, we’re not going to solve the happiness quotient for lawyers, but we can’t be detractors in that process. So we have to build software that is easy to use. That’s got some value to it and that people want to come back to. So those three things have been our backbone for the last three years or four years at this point,
Bob: Don’t make lawyers less happy. I like that approach.
Avaneesh: You can do to make our profession happy. So, let’s not lie about it. Yeah.
Bob: Yeah. Can we, let’s talk about a couple of those acquisitions. We may not have time to go through all of them in detail, but I could probably clearly two of the most significant ones were in 2019 with Doxly and Workshare and moving you into this area, moving LITERA into this area of transaction management. So, why did it make sense for LITERA to move in that direction?
Avaneesh: So, the problem statement that came up that we had, and we wanted to solve for was why are transactions expensive? Why is there no visibility from the client or a seller into the transaction is going to be completed on time? Why is it paper driven and why does it require someone’s wet signature to complete? We had just completed a transaction between two private equity funds as a brand and being the client of that transaction to some big law firms. It just, wasn’t a great experience. And this day and age, if you defined human intensive, paper-driven wasteful and expensive to someone in the Bay Area, they would create a technology and it’d be worth billions of dollars overnight because that’s what software is built for. So, we decided that we can solve it. It’s a natural extension to our drafting workflow because most of our drafting products are used by transactional lawyers.
Avaneesh: The next step of creating a purchase agreement is section negotiate it, and then sign it and then close the matter out. So why can’t we extend the workflow beyond Microsoft Word and take it into a platform to manage transactions. When we decided that was a problem statement that we wanted to solve for, we felt, you know, again, you do buy versus build analysis. It just made sense to go and hopefully bring on board the two best brands at the time. Doxly, which was focused on North America and, Workshare Transact, which was focused on UK/EMEA and say together, can we build one global transaction management platform that can provide the largest law firms in the world, one platform for all their deals and can provide localized support for regional firms in the US or in EMEA. And it can be robust and hopefully have interoperability so you can compare documents into it. You can proofread documents, the things you’re used to doing and Microsoft Word, can we bring some of that, your operability to transaction management over time? So, we’re only a couple of years into that thesis and pretty excited about the future of it. A lot of work to be done still, as we can identify more, more problems to solve. But I think the long run we’ll find transaction management hopefully becomes a hundred percent SaaS based and hope we have both of that market share, but there’s, it’s a highly competitive marketplace and we’re really excited to be a player in it.
Bob: Yeah. And as we speak, it was about, about a month ago that you also acquired Kira the kind of pioneering AI document review company, contract review company. And, and, and, and you positioned that as somewhat of an extension, or at least fitting in with your acquisitions of Doxly and Workshare and your move into transaction management. So how do you, how do you see those pieces as fitting together and why did you want to acquire Kira?
Avaneesh: Well, one of the things that Kira has identified really well is this notion of doing total diligence. You know, why only review 10% or 5% of the content in a data room for legal review? Why are, why are we not reviewing everything that’s in legal review or accessible for legal review? And when you bring that kind of concept into the transaction, LITERA Transact already does, it just extends our reach into one platform. So, like allows a practitioner to spend more time on one ecosystem, which has proven over time that you can do that efficiencies just go up, risks go down, and ultimately the client is happier. So, we always look for opportunities to extend the ecosystem, offering to keep a practitioner into one space, as long as possible. You know, LITERA, desktop keeps lawyers in Word for almost 95% of their drafting needs, which is great. They’re there, they don’t leave Microsoft Word. They can stay there and do their work because of the tools we provide. The longer we can keep someone, a LITERA Transact for all their transactional needs, I think has that same value. So that’s really where a Kira acquisition fits in. We had a gap in due diligence at leveraging the data room to, to review more documents. And I think Kira is a fantastic piece of software that can fill that gap for us.
Bob: So, Avaneesh, I don’t know if Noah ever told you this, but last year when he, he had hired the guy named David Curle to help on a thought leadership and writing. And at the time I talked to them and Noah promised that as soon as the, as soon as we’re all able to travel again, he was going to have me up to Toronto for a blue Jays game. So, I think that obligation is now transferred to LITERA at a Cubs game or something. I’m not sure how that works, but yeah,
Avaneesh: That’s a standing, standing invite for you in any city we’re in. Always.
Bob: Yeah. So, what other, well, a couple of other significant acquisitions to talk about, but another kind of different direction you moved into last year or a new direction was with the acquisition of Foundation Software Group and the creation within LITERA of a firm intelligence business. And then just, just last month, another acquisition Concep, a provider, a B2B relationship marketing that became part of that Firm Intelligence business unit. So again, in terms of, we were talking about being doc-centric before, and, and I understand you’ve moved beyond that. So how do you see firm intelligence as an important part of Litera’s mission to its customers?
Avaneesh: It’s extending our experience of knowing how law firms work into, into how data influences decision-making at law firms. It’s a recognition that LITERA prior to Foundation Software Group only had an impact after a matter was won, and the matter was created that LITERA could be used. So, we wanted to find a way to help law firms win more matters, to be more productive in the matters they win, and then to find hopefully more margins from those matters over time. So, what Foundation does is it gives us the platform to not only respond to RFPs, better go after new business in a more efficient way, but the architecture that exists within Foundation allows us to bring in other data sets to make it an area where anybody in the firm could draw different analysis. So, we also acquired Clocktomizer in late spring that gets into pricing and budgeting and reviewing prior work to figure out what’s the most successful way to win future work. With Concep, we can help with the top of funnel activity, law firms partake in to increase client opportunities and matter opportunities in the future.
Avaneesh: So, if we can do a better job as a business to help firms win more matters at a more effective price and staff it with the right people that are available, that are most effective on that type of matter. I think it helps us on the practice of law, so the drafting of documents, the doing the transaction deals, doing the cases, all that, then we can have a larger impact. And so, it’s almost like, can we, can we help feed the practice of law engine with better business of law activities, and that’s the lens we took with the Foundation acquisition. And subsequently Clocktimizer and then Objective Manager and then Concep.
Bob: Right. And there have been even other acquisitions that we haven’t had time to talk about, including the litigation management platform, Allegory, Best Practice, Table of Authorities generator, Best Authority. But, but given that our time is a little bit short. I wonder if I could just ask how these acquisitions overall in total have shaped how the company views itself today. How it, how it’s changed Litera’s place in the market, and really, how does the LITERA that we see today compare to the one you took over in 2016?
Avaneesh: This is one of the more prouder things to talk about as a CEO is just the metrics of the business, because it’s a true reflection of the hard work that the team has put in, and that our customers keep investing in us. LITERA today is approaching $200 million of recurring revenue. We are a profitable organization that’s able to re-invest back in the business routinely. We have over 15,000 customers globally, and we feel really positive about the next three to five years and approaching hopefully some north star metrics of, you know, four or $500 million of revenue. And the only way we can keep that up. And the reason why I feel really bullish about our opportunities in front of us is we are so hyper-focused on end users. We are, we have those three focus areas I talked about – client retention and margin potential and end user happiness – that if we can keep that up and make sure all of our products are, have user experience built into them that have high quality, and we have white glove service then we have the ability to keep our 15,000 customers with us. Looking back to where we started as Microsystems. You know, we were a $16 million company back in July of 16, 85 employees roughly and a thousand customers. So, it’s, it’s been quite the journey from then to now, as you approach a thousand employees this year, it’s been a very humbling position to be in. And it’s one that comes with its own stresses and making sure all thousand employees are safe globally during the pandemic, making sure they all have the flexibility to perform, not just at work, but at home or in the community. Whatever is important to them, that’s important to us. We’ve had a really trialing time the last 18 months, not just the pandemic, but in the US we’ve had a lot of activist movements and even globally, we’ve, we’ve seen more of those spike up…
Avaneesh: And as a business we’re, we are routinely trying to make a good position, a good stance of human rights. So, it’s been a really robust period of time, not just for the business, but for the people around us. And we just want to be good stewards of that and make sure we always do right by our, our shareholders and by our people, and always make the best decisions that we can. We’re not always right. Yeah. And when we get it wrong, we say, sorry, and we try to fix it, but we try our best every day.
Bob: Yeah. And in most of these acquisitions that we’ve been talking about here today have occurred since the pandemic began. How challenging has it been to absorb those companies, those cultures, their employees at a time when you can’t even get together physically
Avaneesh: It’s, it’s not easy. It, it requires a lot of resiliency in people to build trust quickly on a Teams call. And we hope that when we meet in the future face to face, we like what we see, and we are happy to keep working together. It’s an interesting situation, I think back to other relationships that people create differently, right? Back in the day, we would meet people at a social event and become friends and I’ll potentially meet someone over Instagram and you find common interests that way. And it’s all, it’s all different. And it’s been interesting to watch our team and how they adapt to those new challenges. For me, personally, as a leader, it’s very difficult. I, I thrive in face-to-face interactions with my people. It gives them a chance to ask me questions on the fly. They get direct, direct feedback for me, and you can really impact culture in a face-to-face way, which is I think a strong suit of mine, but not having that now is a challenge that we find different ways of achieving that as best we can, but it’s, it’s definitely different.
Bob: So, from $16 million in 2016 to $200 million in 2021, what’s ahead for LITERA. And are we likely to see an IPO on the horizon somewhere?
Avaneesh: It’s always a potential outcome for a company of this size and scale. Is it the outcome? I don’t think, I don’t know. I don’t think so. It’s been nice to watch other brands in this industry go IPO. Cause that means there is a market response to it that is positive. It’s been a good validation that the efforts we’re putting into this have value in the marketplace beyond what we feel is valuable. Is IPO on the cards? You know, who knows. You never know in this day and age where we end up, but I do know that we have a very strong strategy to get to the next phase of growth we want to get to. And we’re just going to be heads down on that.
Bob: Avaneesh is there anything else you’d like to say before we wrap up today?
Avaneesh: No, Bob, I appreciate, I appreciate this first podcast, I do want to commend you for your resilience too. I know it’s, it’s tough being in an industry that you’re in, that, you know, face to face was big for you going to the shows and all that, but you’ve pivoted very well with, with LITERA TV and now our podcasts. And I’ve always appreciated your partnership and these, these projects that we take on.
Bob: Well, I appreciate it. It’s been a great opportunity to work with you and folks at LITERA on these things. Well, thank you so much for joining me today. It’s been a, it’s been a great to speak with you and catch up with you. And I will as always continue to stay tuned for the next big news story out of it.
Avaneesh: It won’t be, it won’t be far out. Don’t worry.
Bob: Stay well.
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