Cloud-based legal technology startup Clio is the latest company in Canada to reach unicorn status after securing a $136 million CAD ($110 million USD) Series E round at a reported $1.6 billion USD valuation.
The round was raised from two new investors to Clio, T. Rowe Price Investment Management and OMERS Growth Equity. The all-equity round was led by funds and accounts advised by T. Rowe Price Associates, a US-based asset manager for individuals, advisors, institutions, and retirement plan sponsors. The new funding, which brings Clio’s total funding to $503 million CAD to date, consisted mainly of primary capital with a small, undisclosed portion of secondary.
“[Clio] ended up facilitating what felt like this mass evacuation to the cloud for law firms.”
According to the Burnaby, British Columbia-based company, the financing establishes Clio as the first legal practice management company globally to reach unicorn status.
Clio is the second Canadian tech startup in as many weeks to achieve unicorn status. Prior to 2019, Canada had struggled to produce unicorns, but that narrative has changed over the last couple of years with Quebec City’s Coveo, Montreal’s Nuvei, ApplyBoard, Clearco, and fellow Vancouver-based startup Galvanize all surpassing $1 billion valuations.
Clio was founded in 2008 by CEO Jack Newton and board member Rian Gauvreau, who developed the idea for a legaltech SaaS company after witnessing the struggles independent lawyers and small firms face running their businesses. The Burnaby-based company’s goal is to revolutionize “expensive, outdated on-premise solutions” with cloud technology that makes it easier for lawyers to manage firms, cases, and clients. Its products include practice management software and client intake and relationship management software.
Newton said in an interview the company raised the Series E round after seeing explosive growth in the digitization of the legal industry in 2020.
“The legal industry is regarded as a relatively slow industry to adopt technology, and then all of a sudden with COVID-19, [legal firms] were thrust into a situation where they needed to adopt technology, and moving to the cloud was a matter of survival,” said Newton. “[Clio] ended up facilitating what felt like this mass evacuation to the cloud for law firms…we saw, virtually, in every aspect of our business, from our core SaaS business to our payments business, really exploding growth.”
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That growth led to the second quarter of last year being Clio’s strongest on record, and 2020 its “biggest year ever.” While Newton did not disclose exact growth statistics, including revenue, he said Clio benefited from pent-up demand for legaltech solutions that the industry had been putting off prior to the pandemic.
The digital transformation push that the legal industry has seen over the past several years has been strongly accelerated by the COVID-19 pandemic. With physical distancing, the need for remote ways to interface with clients and run firms internally has grown significantly.
“[Clio is] very clearly on a trajectory to be a much bigger company.”
– Mark Shulgan, OMERS Growth Equity
According to Clio’s own Legal Trends Report for 2020, 56 percent of consumers believe that most legal matters can be dealt with remotely and prefer remote services such as calls. Notably, the report also found 67 percent of consumers reported putting off legal problems during the pandemic, pointing to a huge backlog of legal issues and possible long-term need for easy-to-use digital solutions moving forward.
Clio went into 2020 well-capitalized, having secured a $330 million CAD ($250 million USD) Series D round in September 2019 from US-based investors TCV and JMI Equity. At the time, the round marked the largest growth stage investment in a Canadian company since 2000. 2019 turned out to be the year of megadeals, with 28 in total. Among the largest VC deals in 2019 were Verafin’s $515 million round (since acquired for $2.75 billion), 1Password’s $265 million first round, and Element AI’s $200 million Series B (since acquired for $230 million USD). This past year has also seen an increasing number of investors focused on growth-stage investments.
While the $136 million Series E round is notably smaller than Clio’s Series D financing, Newton told BetaKit Clio is profitable with positive cash flow, and, therefore, did not need to raise capital.
“This was really more about bringing some really strategic crossover investors onto the cap table than it was about purely raising,” Newton said, noting that Clio saw high demand for the round and turned away investors. “It’s really about getting the funds to drive two activities…expanding our headcount and driving that M&A [merger and acquisition] roadmap, and we felt that was the appropriate amount of capital required for that next stage of growth.”
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As it looks to the next year, Clio plans to make a number of acquisitions with its newfound financing. According to Crunchbase, Clio has made one acquisition to date: Lexicata, a legal client intake and client relationship management (CRM) solution, which Clio acquired in 2018. Newton stated that Clio now plans to acquire businesses in the legaltech space that can help it accelerate growth and meet demand in the industry.
T. Rowe and OMERS are, notably, investors with reputations for helping companies achieve such growth objectives and for offering long-term partnerships. Mark Shulgan, managing director and head of OMERS Growth Equity, who led his firm’s investment in Clio, emphasized that OMERS has an experienced team that acts almost as internal investment bankers to help portfolio companies through M&A strategies. Shulgan, through OMERS, is also an investor in fellow Canadian unicorn company Coveo.
“[Clio is] very clearly on a trajectory to be a much bigger company, and I think there’s a lot of whitespace to be had within the legal environment,” Shulgan told BetaKit. “Jack and his team have done a great job just continuing to deliver product innovations that are keeping them top of mind for their customers and new digital adopters, and we’ve just been tremendously impressed by the company and their performance.”
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Clio also plans to use the capital to “dramatically accelerate” the pace of innovation of its product suite. Throughout 2020, to address the increased need for cloud-based, digital legal software, Clio added features to its products such as Zoom and Microsoft Team integrations; Clio scheduler and payments, e-signatures; and an app partner program. The company is also working on a mobile app designed for legal clients to securely communicate and share information with their lawyers.
To support that product acceleration, Clio has grown its team to 575 employees and plans to hire 250 by the end of this year. Newton told BetaKit Clio aims to employ more than 1,000 people over the next 12 months.
“It’s exciting and validating our vision to have achieved unicorn status,” said Newton. “I see it as not necessarily an end unto itself but a great chapter and milestone to celebrate on our way to becoming an enduring 100-year company and that’s really our vision in the long term. It’s exciting to see that there’s so much enthusiastic investor support for the vision we have for the future of legal.”
Image courtesy Clio Software