At ASG, we have long been champions of the LegalTech industry.
Bill4Time, our first LegalTech acquisition in 2017, pioneered the first SaaS native solution in the legal technology industry. In 2018, we acquired PracticePanther who took the same cloud-based model and exploded it by creating a modern and differentiated practice management system. Our third acquisition of MerusCase in 2019 allowed us to focus on specialization by creating practice management software focused on the needs of lawyers in specific practice areas, such as workers compensation. Together, these three industry leading practice management software solutions created ASG LegalTech, a platform of rapidly growing legal SaaS products led by CEO Soumya Nettimi.
What we learned while operating and growing these products is that lawyers have a hard time getting paid. While the rest of the world has adopted payment solutions like Stripe or Square, lawyers haven’t been able to due to strict accounting and compliance rules.
Which is why we’re excited to announce our acquisition of Headnote - a novel online payments platform providing compliant ePayments and AR management for law firms of all sizes. Headnote was started in 2016 by Sarah Schaaf to fix the very problem of lawyers not getting paid. Leveraging their technology, lawyers can get paid up to 70% faster than industry average.
Headnote will become an integral part of ASG LegalTech. We are excited to partner with Sarah and her team to leverage Headnote’s technology to provide native payments capabilities in each of ASG LegalTech's existing products, starting with the launch of PantherPayments.
To learn more about our recent payments acquisition and the future of ASG LegalTech, I sat down with CEO Soumya Nettimi for a Q&A.
Q&A with Soumya Nettimi, CEO of ASG LegalTech
How has the LegalTech industry evolved over the last 10 years?
Over the last decade, we have seen huge progress in the legal technology industry. Lawyers have finally entered the technology age, moving from operating their firms using pen, paper, and Microsoft Office, to using sophisticated technology to automate every aspect of their firms. At ASG LegalTech, we have seen three trends dominate the last ten years:
- Widespread acceptance of legal practice management (LPM) software. LPMs were barely a concept a decade ago, and are now considered table stakes to run a successful and profitable law firm. While lawyers and paralegals used to spend multiple days per month doing things like invoicing, billing, tracking time, and managing their workflows, they now use LPM software to run their firms from intake to invoice.
- Shift from on-premise software to cloud-based solutions. Firms, generally larger firms, who previously adopted on-premise technology have realized the benefits and necessity of shifting to cloud-based solutions for the significantly better flexibility, security, and cost benefits that the cloud provides. This trend has accelerated in the COVID-19 world, where the ability to work from any location is not only a nice to have but a prerequisite to continuing to operate your firm.
- Adoption of online payments. To state the obvious, getting paid is what keeps law firms in business. While over two-thirds of consumer payments in the US are made electronically, the vast majority of payments in the legal industry are still made via cash and physical check. Law firms have historically avoided online payments for a multitude of reasons, but technological developments in the last decade have made it possible for new players like Headnote to allow firms to get paid online in a compliant, streamlined, and inexpensive way. The average time to get paid is 94 days in the legal industry, and the data we have from Headnote shows that adopting an online payments solution can reduce payment processing fees by 35% and allow firms to get paid 70% faster. Similar to how LPMs became the bare minimum for running a law firm, we believe compliant e-payments will be the next table stakes technology law firms need to adopt.
What trends have driven the need for an in-house payments solution?
Law firms need “one stop shop” technology. Firms want to avoid “software fatigue”, which is what happens when a firm needs to adopt 10+ different systems to run their businesses every day. Firms also want to avoid having their data live in many different systems, which creates security concerns.
Adopting fully native, in-house payments gives firms what they want - one place where they can run their operations, all the way from client intake to getting paid. As we look to the next decade, we imagine practice management built in payments capabilities will be the future.
Why did ASG LegalTech seek to acquire a payments solution?
It’s been an exciting few years for ASG LegalTech. We’ve acquired three leading practice management solutions - Bill4Time, PracticePanther, and MerusCase - and brought together three impressive teams to create one company working towards the same goal.
Our mission at ASG LegalTech is to automate all of the management aspects of running a law firm, so lawyers can spend less time operating their firms and more time practicing law. That work started with building and growing our three practice management software solutions. Over the last few years, we’ve learned a lot from each other and from our 30,000+ customers, about what lawyers need to work efficiently and effectively. And it’s become clear that all lawyers share one problem - getting paid.
When we started to dig in on this, we found that our customers see collection rates of 70-80% of total invoiced volume and payment times on average greater than 90 days. While these customers have adopted an LPM, they continue to use paper checks to get paid by their customers. This is driven by a few factors - the inability of lawyers to use plug and play payment solutions like PayPal or Stripe due to stringent trust accounting and compliance rules, a distaste for expensive fees, and ultimately a lack of education around the benefits of online payments.
When we started to look around at the payment solutions landscape for lawyers, we found standalone offersings, but we realized that the real need is a one stop shop - one place where they could do everything from client intake to getting paid. So we set out on a mission to find a cutting edge payments technology that could join our mission of ASG LegalTech, and create that all-in-one solution for our customers, allowing lawyers to do more in less time.
Bringing these two powerful technologies together will revolutionize how lawyers run their business.
What differentiates Headnote from other payment providers?
This is the easiest question to answer. There are three things we found most attractive about Headnote:
- Most modern & secure payment technology. Headnote is an exceptional payments solution with the most modern and compliant technology available. They were a disruptor in the market and have features no one else has, like cutting-edge analytics, instant eCheck, and a seamless on-boarding experience.
- Best solution for our customers. With Headnote’s modern technology, we knew we could not only integrate Headnote with our existing LPMs, but go above and beyond to use Headnote’s tech to create a fully in-house experience for our law firms. The new PantherPayments, our first fully native payment solution within PracticePanther, will be an incredible example of this - our customers will be able to do everything from request payments to view advanced analytics all within their PracticePanther app. In addition, Headnote allows us to provide our customers with industry-low prices, stress-free compliance, and the fastest payment times in the industry.
- Talented, unparalleled team that will lead us through the ever-changing payments industry. When you acquire a company, people often think you are acquiring mostly technology. I think of it as you are acquiring a team, and the technology comes along with it. Headnote is most differentiated by it’s leadership team - Sarah Schaaf, Thornton Schaaf, and Matt Crampton - who combined have deep experience in payments, legal (Sarah was a lawyer herself), and technology. The payments industry is complex and always changing, and we feel confident that with this team on board we will be able to continue to offer the most modern, compliant, and innovative solution for decades to come.
How will Headnote work with existing ASG LegalTech products?
When we acquired Headnote, we had two main goals - continuing to serve Headnote’s existing customers and providing Headnote’s cutting-edge payment tech to our existing LPM customers. In supporting the latter, one basic framework came to mind - this cannot be an “integration” but instead must be a fully native, in-house solution for our customers. Every other LPM that offers payments does so via integration, where you have to use two separate softwares to invoice vs. process payments. We wanted to build a seamless experience that was already built into current workflows our customers have, so getting paid doesn’t require any additional steps.
We are proud today to launch our first in-house payments solution, a reimagined and optimized version of PantherPayments, which makes us the first company to offer an all-in-one practice management and payments solution to our customers and to the industry.
What is the future of payments in the LegalTech industry?
Unsurprisingly, COVID-19 already has and will continue to accelerate the adoption of online payments. Getting paid through physical check is an option that is not safe or even possible for many during this pandemic. Compliant ePayments might be the only way for a firm to manage their A/R and survive through this time.
We have seen some interesting data on this in both our LPM platforms and the Headnote customer base. During the first few months of COVID-19, we saw new cases and matters temporarily drop almost 40% across our customer base. At the same time, we saw new sales increase almost 10%. And finally, we have seen a steady increase in online payments since March. When you put this altogether, we are seeing that the industry is certainly hurting - but at the same time coming to the realization that technology is crucial for getting them through this time.
We believe that online payments adoption will ultimately match practice management software adoption - i.e. go from 20% adoption to 80% of all SMB firms - by 2030. We are excited to play such a big role in that by offering the first fully native payments and software solutions to the industry.
What’s next for ASG LegalTech
We believe that native payments technology is the future of vertical software, and we are incredibly excited about Headnote. Bringing payments in house will be game changing for not only our legal tech vertical, but helps challenge us to think about a broader payments strategy across the entire ASG portfolio.
As for what’s next for ASG LegalTech - Soumya and the team are on the cusp of launching a new parent brand later this year which brings together all four teams under a new name that reflects their culture of creativity and innovation. As for ASG LegalTech’s future acquisitions - we continue to look to build or buy products that help cement our position as a portfolio of market leading legal technology software.