This article was originally published on Bloomberg Law and has been republished.
Mike Gamson’s recent decision to leave LinkedIn to become CEO of e-discovery company Relativity is a notable illustration of a mainstream technology executive looking to take advantage of the burgeoning legal tech sector.
Executives like Gamson, who have helped build big tech operations, can be invaluable to smaller legal tech companies seeking venture capital and growth that could include a public offering, according to industry recruiters.
Gamson downplayed the notion that Relativity is looking for an IPO path, at least for the time being.
An increasing number of legal tech companies are fitting comfortably in that space. Investments surged in 2018, from $233 million two years ago to $1.7 billion last year, according to figures from the Legal Tech Sector Landscape Report by Tracxn Technologies.
Executives like Gamson, a former senior vice president with LinkedIn, “can bring scale around systems and processes, and build layers of management,” said Mike Doonan, a managing partner with SPMB, a tech executive search firm based in San Francisco. “They know how to get companies to the highest size.”
Silicon Valley headhunters say they haven’t seen tech leaders with Gamson’s pedigree make this type of move before.
In a general sense, one path for legal tech companies—like financial tech and other so-called “vertical software” organizations—is to pursue someone with a “domain” background, who possesses subject matter expertise, said Kathryn Ullrich, technology partner and head of the U.S. diversity practice with the Silicon Valley office of executive search firm Odgers Berndtson.
She said the alternative is to concentrate on candidates with proven abilities to kick start a company, who have helped grow tech companies from $10 million in revenues to $100 million, or from $100 million to $500 million or $1 billion. In other words, those “who have gone through that growth curve,” said Ullrich.
In cases like Relativity, “growth experience can trump domain experience,” she said.
The IPO Lure
Moving to a smaller, private company can be a potent lure for a would-be CEO, said Doonan. For instance, their compensation can include an equity stake that may be converted to stock in an IPO. It’s not clear what Gamson’s compensation package includes.
There is recent precedent for legal tech companies taking this route.
The Los Angeles-based law company Elevate, which last month received a $25 million funding boost from a private equity firm, disclosed in a company presentation that it’s aiming for a public listing on the AIM stock exchange in London in 2021.
In February, the alternative legal services provider Axiom—which now generates more than $300 million per year, according to Prism Legal blog—took steps to prepare for its own IPO. Relativity’s annual revenue is reportedly in the low nine figures.
About $400 million was invested in legal tech in the first quarter of 2019, according to data compiled by Bloomberg Law Analysis. Some $332 million went to companies headquartered in the U.S.
Gamson, who had been with LinkedIn for almost a dozen years before making the jump to lead Relativity, said in a press call last week that he joined the company because of its growth and potential, and the “incredible momentum” in the legal tech market.
Gamson said he “wouldn’t be surprised at all” to see other leaders from major mainstream tech companies make similar leaps to legal tech.
Gamson, who had served on Relativity’s advisory board since 2017, noted increasing venture capital investments in legal technology will continue to make legal tech leadership an appealing career move.
Yet although there is recent precedent for legal tech companies moving to become public, Gamson said Relativity doesn’t “see it as a goal, per se.” But he said that he and other company leaders plan to keep their options open.