Big Law skips R&D. At least, that’s Crosby’s mic-drop.
NewMod—sorry, Crosby—the AI-first law firm snagged $60 million from Bain Capital and Sequoia. Impressive haul. But founders zeroed in on a sore spot: America’s top 100 firms raked in $69 billion in profits last year. That’s bigger than Google’s entire R&D budget. And every dime? Straight to partner paychecks.
Look, numbers don’t lie. AmLaw 100 profits per partner hit record highs—$2.5 million average in 2023, per Citi data. Tech spend? A rounding error. Firms like Kirkland & Ellis or Latham pour cash into lateral hires and bonuses, not code labs. Crosby’s point lands because market dynamics scream inertia.
Does Big Law Actually Invest in R&D?
Sure, if you squint. Lawyers argue daily “research”—training juniors, hoarding deal precedents, schmoozing clients. Every novel M&A twist? That’s R&D, billed at $1,200 an hour. Philosophical, maybe. But tech firms define it differently: systematic bets on tools to slash costs, amp speed.
“America’s top 100 law firms made a combined $69 billion in profit last year, greater than Google’s R&D budget…every cent was paid out to the firms’ partners as compensation.”
Crosby’s jab stings because it’s half-true. Big Law innovates for clients, not itself. Billable hours plus use pyramid? Gold mine. Why dynamite it?
But here’s my unique angle, straight from history’s dustbin: remember Kodak? Invented digital photography in 1975. Sat on it. Clung to film profits. Bankruptcy by 2012. Big Law’s playing Kodak with AI. Partners cash checks while Crosby builds the pixel-killer.
Expect pushback. Firms tout e-discovery suites, knowledge management. True. But that’s bolt-on, not rebuild. Data from Thomson Reuters pegs legal tech M&A at $1.2 billion last year—peanuts next to law firm profits. No moonshots.
Can AI-First Upstarts Like Crosby Topple the Giants?
Short answer: not tomorrow. Big Law’s moat—reputation, relationships—holds. Clients stick for trust, not tariffs. Yet cracks show. In-house counsel demand fixed fees; ALSPs like Axiom siphon routine work.
Crosby won’t gut the core model soon. Firms might spin AI pods, echoing 2010s captive ALSPs. Latham’s got one. But firm-wide? Nah. Partner democracy kills bold bets. Profits fund yachts, not Y Combinator dreams.
Medium-term flip? Likely. Legora just flexed $100 million ARR. Chart their rocket: from stealth to nine figures in warp speed. Munich office next—Europe’s legaltech heating up. That’s market signal: AI scales law faster than pyramids ever could.
Solve Intelligence scooped Palito.ai too. Munich again—IP hotspot. Palito’s prior art wizardry meshes with Solve’s charts. Now one platform for invalidity searches, infringement maps, SEP battles. Patent pros drool. Consolidation accelerates; solos get crushed.
Litify dropped Agentic Case Expert. ACE? Intake bots spotting gold cases. Treatment nudges. Policy digs unmasking coverage gaps. Damages hunters auto-flagging bills. Personal injury mills will eat this up—hours vaporized, values juiced.
And the original cut off, but Instant Demands? Poised to auto-craft settlement letters when damages crest. Agentic AI isn’t hype; it’s workflow napalm.
Data point: Legaltech funding hit $2.1 billion in 2023, per PitchBook. Crosby’s slice proves VCs bet on disruption. Big Law profits grew 10% YoY; tech adoption lags at 20% firm-wide, per Ironclad surveys. Gap widens.
So, Crosby’s a speck now. Firms yawn. But innovator’s dilemma looms. Clients test AI natives on mid-tier matters—contracts today, diligence tomorrow, bets by 2027? Wake-up profits plummet.
Bold call: By 2028, 30% AmLaw 100 revenue from AI units. Or else NewMods feast.
Why Does This Matter for Legal Pros?
Junior associates? Redundant faster. Partners? Pressure to pivot—or distribute less. In-house? use for better rates. Everyone: upskill or upend.
Crosby’s not alone. Thomson Reuters + HotShot? Rumors swirl—watch that space. Legal Innovators list expands. Momentum builds.
Bottom line. Big Law’s R&D drought? Real vulnerability. Crosby et al. force the mirror.
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Frequently Asked Questions**
What is Crosby’s big criticism of Big Law?
They say top firms pocketed $69B profits—all to partners—instead of R&D, outpacing even Google.
Has Legora really hit $100M ARR?
Yes, publicly confirmed, with a new Munich office signaling Euro expansion.
Will AI firms like Crosby replace Big Law?
Not fully soon, but they’ll chip away at routine work, forcing spin-outs by late 2020s.
