Big Law's response to legal AI startups

What happened: Legal AI startups, led by Harvey and Legora, have raised over $2 billion and serve half of the top 100 US law firms. However, traditional law firms are now fighting back. Kirkland & Ellis launched a tech-focused spinoff, and Morgan & Morgan hired JPMorgan to explore outside investment. Meanwhile, AI lawyer firm Garfield AI won a case in an English court, marking a first for AI-driven legal services.

Market impact: The legal industry is experiencing a shift, with Big Law firms responding to the threat from legal AI startups. This competition could lead to increased innovation and efficiency in legal services, potentially disrupting the traditional law firm model. The involvement of private equity in law firms signals a potential repricing of the sector's valuation.

What to watch next: In Q2 2023, monitor Kirkland & Ellis' spinoff progress for signs of Big Law's tech integration. Also, track Morgan & Morgan's exploration of outside investment, which could indicate a trend of law firms seeking external capital. Lastly, watch for more AI-driven legal victories, as Garfield AI's success may encourage other AI startups to enter the market.