A B.C. company that has emerged as a leading provider of internet-based software for lawyers is the latest in a slew of upstart Canadian IT companies to reach a “unicorn”-level valuation of US$1-billion.
Themis Solutions Inc., better known as Clio, has raised US$110-million in equity led by U.S. fund giant T. Rowe Price Associates Inc. and backed by OMERS’s growth equity arm. The financing values Burnaby, B.C.-based Clio – whose software for managing law practices is used by about 200,000 lawyers, primarily in the U.S. – at US$1.6-billion. Tech companies that reach valuations of US$1-billion are often called unicorns.
Several Canadian tech companies have achieved that distinction through financings or takeovers since last fall, including, Hopper Inc., Wealthsimple Technologies Inc., Galvanize Inc., Verafin Inc., Benevity Inc., Dapper Labs Inc. and Clear Finance Technology Corp.
Clio plans to use the money to make more acquisitions, hire 250 employees this year (up from 575 now), expand globally, build out its technology and prepare to go public as early as 2022, CEO and co-founder Jack Newton said.
“Clio is in a vertical we really like,” said Andrew Davis, director of private investments with T. Rowe Price, which typically backs private tech companies it believes will go public in the medium term. “It was very clear they had good product market fit. They drive a lot of value for their customers and allow lawyers to go about the business of providing counsel instead of managing the business.”
Like many tech vendors to small and medium-sized businesses that have seen their fortunes soar during the COVID-19 pandemic, Clio has benefited from accelerated adoption of digital tools.
Clio positions itself as an operating system for lawyers, particularly small and medium-sized practices. Using its online platform, lawyers track time and appointments, manage cases, share documents with clients, bill and handle payments and bring on new clients. Most of Clio’s customers used no prior case-management software and had relied on pen and paper, or on basic digital tools such as spreadsheets.
Like other subscription software providers, Clio offers a moderately priced alternative to expensive on-site solutions for large firms that were historically out of reach for smaller operations. Once customers join, they tend to be loyal, regular users. “Once you have more than one person you need to consolidate information in one place, and that’s where Clio shines,” said Megan Cornell, founder and CEO of Ottawa-based Momentum Business Law Professional Corp., a 15-lawyer firm that has used Clio for almost a decade. Using Clio “has absolutely allowed our firm to grow,” she said.
With widespread sheltering at home last year, Ms. Cornell said “there was literally no disruption” to her business. However, many other firms without online practice management tools initially struggled. As a result, Mr. Newton said, Clio experienced its fastest yearly growth ever in 2020, and revenue should surpass US$100-million on an annualized basis in 2021. “There’s a reckoning everywhere [in] all industries, including law, that not being in the cloud is not acceptable,” Ms. Cornell said.
Mr. Newton and childhood friend Rian Gauvreau, who grew up in Edmonton together, started Clio in 2008, sparked by the latter’s experience working as an IT manager with a law firm. They saw that small law firms faced more ethics and malpractice complaints than large ones, in part because they lacked software to help them effectively manage their business.
The duo’s platform was an immediate hit upon its introduction at an American Bar Association conference in 2008, and the company later attracted backing from some of the top U.S. private capital firms, including Bessemer Venture Partners, TCV, JMI Equity and Version One Ventures.
Matt Emery, general partner with JMI, said his company decided to invest in 2019 as part of a US$250-million financing led by TCV that saw the two U.S. funds largely buy out earlier shareholders and infuse an undisclosed sum into Clio. Mr. Emery said it was clear Clio “had the market-leading product with the happiest customers. They have a lot of room left to run in this market, empowering law firms to run their practices as successfully as possible.”
Like vendors of online practice management software in other market segments, payments processing represents a big and fast-growing source of revenue for Clio. The platform’s ability to bill and handle payments cuts the period from services rendered to payment received to minutes from months. On average, Clio clients have collected 16 per cent more monthly revenue since the pandemic started than before, Mr. Newton said. Payments and financial services could eventually represent most of Clio revenues, he added.
“The era of digital transformation is just beginning in legal,” Mr. Newton said. “COVID-19 has helped catalyze that digital transformation, but we see ourselves as still being in the very early innings of what we hope to accomplish.”
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