Navigating the Legal Tech AI Hype Cycle
The legal technology sector is currently experiencing an unprecedented surge, largely propelled by the transformative capabilities of generative artificial intelligence. Given that AI’s core strength lies in text processing, and few industries are as text-intensive as law, this synergy has ignited a veritable gold rush. Yet, this excitement is tempered by a palpable undercurrent of anxiety. GenAI threatens to automate tasks that historically commanded hourly rates ranging from $500 to $1,500, prompting concerns about the future stability and status of legal careers long considered robust. Nevertheless, the promise of lawyers being able to draft, review, and research at speeds previously unimaginable – akin to equipping every associate with a jetpack – is a powerful draw.
Evidence of this burgeoning interest is clear in the investment landscape. In 2024 alone, legal tech startups globally secured a staggering $2.2 billion in funding, according to Crunchbase data. For founders building in this space, such market validation is both exhilarating and, at times, overwhelming. However, what often goes unsaid in the polished pitch decks is the unique challenge of navigating a market at the zenith of a hype cycle.
Just a few years ago, in 2019, selling legal tech solutions required a fundamental shift in client understanding. Michael Grupp, CEO of legal automation platform Bryter, recalls a time when he had to add a slide titled “What is legal tech?” to his presentations before pitching to major insurers. This educational component became a crucial asset, slowly building trust and opening doors with skeptical buyers. Sales cycles were protracted, often averaging around eight months and sometimes extending to years, which was then the industry norm. Partners would listen politely as AI software’s potential to draft documents or flag compliance risks more efficiently than human colleagues was explained.
Fast forward to 2025, and the landscape has dramatically transformed. Partners at leading law firms are now acquiring legal tech products after a single demonstration. The once speculative notion that “half of what my team does now could be done by AI” has rapidly evolved into accepted wisdom. The legal industry, renowned for its deep-rooted traditions and continuity, has pivoted from asking “What is AI?” to demanding “We need AI yesterday” in a remarkably short span.
However, this rapid adoption also ushers in intense competition. The utilitarian nature of AI technology means that virtually anyone can create an AI-powered solution with a user-friendly interface. Consequently, new competitors are emerging weekly, ranging from established Big Law incumbents to nimble three-person teams from accelerators like Y Combinator, often pitching remarkably similar products. The market becomes a cacophony of funding announcements, feature launches, strategic hires, and M&A deals, as every player vies for prominence.
In this environment, experienced founders like Grupp emphasize the critical importance of ignoring the pervasive “noise” and relentlessly focusing on speed. While this might sound like a familiar refrain in the AI era, it remains fundamental to success. The advice is to embrace imperfection: say “yes” more than you explain, accept less-than-ideal customers, navigate awkward use cases, and tolerate messy implementations. While maintaining a keen eye on financial runway, the emphasis should be on making aggressive one-year bets rather than meticulously crafting five-year plans. As one venture capitalist bluntly put it, the choice is often between rapid deployment and risking irrelevance as the underlying large language models evolve.
Having personally navigated the legal tech cycle’s troughs and crests for seven years, Grupp observes that the industry transformation he championed is now front-page news. What began as a nascent wave, necessitating that “What is Legal Tech?” slide, has swelled into a tsunami, fundamentally reshaping the operations of multi-million dollar law firms.
Founders are urged to regularly “zoom out” to avoid being consumed by the hype maelstrom. Seeking counsel from trusted advisors who have witnessed previous tech cycles rise and fall, and relying on a board for clarity amidst the whirlwind of hot takes, are crucial strategies. Ultimately, it’s vital to appreciate the unique opportunity of catching such a significant wave. While intimidating, having the world’s attention on your industry means doors that are typically bolted shut swing wide open for a limited time. The most enduring advice remains to build something truly impactful, for the inevitable day when the hype recedes.