Skip to main content

A string of pricing changes by legal software consolidator Dye & Durham Ltd. DND-T has sparked outrage among many clients. It has also been a boon to upstart rivals.

On Wednesday, Calgary startup Athennian (legally named Paper Interactive Inc.) will announce it has raised $42-million in private capital, led by Silicon Valley’s Centana Growth Partners, to expand its business. Athennian is one of a couple of fast-growing firms selling software that business lawyers use to track and manage the tangle of legal entities within the corporate structures of their enterprise clients.

The other, Toronto’s MinuteBox, announced earlier this month it had raised $5-million led by Toronto brothers and tech entrepreneurs Richard and Michael Hyatt.

Dye & Durham CEO defends controversial price hikes

Investors have turned cold on Dye & Durham. Here’s why

Both were co-founded by lawyers and offer customer-friendly software over the internet. Both say they have leading Canadian law firms among their clientele: Athennian’s 200 clients include Dentons and Torys.

They have something else in common: Both claim a big part of their success has come from picking off clients of Dye & Durham, or D&D, and other long-standing providers of dated software installed on customer premises with limited functionality. Many potential clients are still using spreadsheets and minute book binders, Centana partner Eric Byunn said.

Athennian chief executive officer Adrian Camara, in particular, credited a recent pricing action by D&D subsidiary Fast Company for prompting “dozens” of its customers to sign up with his five-year old company. “That drove quite a bit of growth for us because customers just get fed up and want to switch off the platform,” Mr. Camara said in an interview.

He said his 67-person company’s annual recurring revenue has increased 500 per cent in the past two years and is nearing $10-million.

Pricing actions, including big price hikes, are a core part of D&D’s strategy, which involves buying companies that provide critical software-based services to law firms – and which often have little competition and high switching costs. That “reduces the likelihood that customers seek out new vendors once the solutions have been implemented, regardless of cost,” D&D stated in securities filings when it went public in 2020.

Legal customers across the country have expressed outrage about D&D’s significant price hikes on software used to process real estate financing transactions, although the higher fees are passed on to their clients. Dozens complained to Canada’s competition bureau and in January a Toronto litigation firm launched a class-action lawsuit against D&D for allegedly violating competition laws by reneging on a promise to freeze prices.

D&D CEO Matthew Proud defended the price hikes last month, saying they were justified because his company offers “by far the most advanced real estate financing software in the world. … We also believe customers should pay a fair price” for it.

The most recent pricing action that Athennian and MinuteBox say has helped them isn’t a price hike, but a change in how D&D’s entity management clients pay. Last Sept. 20, Fast Company e-mailed clients to say it would move them to subscription-based pricing 10 days later instead of charging them every time they used the software. Customers were told they would be cut off from using the software for new files unless they locked in for 42 months, and presented a monthly price based on past usage.

Peter Norris, a partner with law firm George Murray Shipley Bell LLP in Sarnia, Ont., said in an interview his firm had considered shifting to a cloud-based alternative to Fast Company and didn’t want to lock into a long contract in exchange for “no increased functionality. … The very short notice contributed to our decision to move away from Fast Company.”

His firm signed on with Athennian even though it would be paying more. In exchange it would get a better product with more functionality – such as the ability to automatically generate documents and make actions such as preparing tax filings more efficient – plus improved service “and better value for money,” he said. “We feel like we have a partner [in Athennian] who is responsive, wants to help us and doesn’t just see their customer as a debit card.”

MinuteBox CEO Daniel Levine says his company has experienced a similar influx from former clients of incumbent vendors. “Any time a competitor adjusts prices and business model, that’s a signal to customers it’s time for an internal review” and to consider moving to cloud alternatives, Mr. Levine said. “A lot of that comes from Fast Company. It’s a huge opportunity.”

Mr. Proud dismissed concerns about his upstart rivals in an e-mail, saying entity management software is “a very small part of Dye & Durham’s overall business,” amounting to less than 0.5 per cent of next year’s expected revenue, or less than $3-million. He said Fast Company had “very low” customer churn of 5 per cent last year.

D&D’s pricing actions have also been shrugged off by investors. “We know across their businesses that raising pricing has been part of their strategy,” BMO Capital Markets analyst Thanos Moschopoulos said. “The risk is that it could lead to potential churn but we have seen that a lot of what they do is very sticky. I wouldn’t be apprehensive unless we start to see more evidence of churn than we’ve seen to date.”

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.