Clio Acquires vLex for $1B, Reshaping Legal Tech Landscape with AI Integration

Legal software company Clio drops $1B on law data giant vLex

On Monday, Clio, a 17-year-old Canadian law firm management software company, announced that it has agreed to acquire vLex, a 26-year-old legal data intelligence platform, in a $1 billion cash-and-stock deal. The announcement comes about a year after Clio's massive $900 million funding round, which nearly doubled the Vancouver, British Columbia-based company's valuation from $1.6 billion in 2021 to $3 billion. vLex, which was largely bootstrapped until it was purchased by private equity firm Oakley Capital in 2022, has been a highly sought-after asset, according to Jack Newton, CEO and founder of Clio. Harvey, the AI-native legal tech startup, attempted to purchase vLex a year ago, but the acquisition didn't come together, as reported by The Information last July. vLex is a valuable property because its database of legal documents can greatly improve AI models for lawyers. "Data is one of the only long-term defensible competitive moats a company can have in the space," Newton told TechCrunch. vLex competes with the Thomson Reuters-owned legal database and LexisNexis. The acquisition comes shortly after Harvey announced a partnership with LexisNexis, aiming to enrich Harvey's AI with LexisNexis data. With the acquisition of vLex, Clio, which provides law firms with time-tracking, invoicing, and electronic payment tools, is now effectively stepping into the practice of law itself. Over the last few years, vLex has built Vincent, an AI model built on top of the company's legal content database. "AI is going to drive a convergence of what have historically been distinct categories of software: the business of law and the practice of law," Newton said. He added that Clio's clients in the small and medium law firm segment will now have access to Vincent's AI capabilities. In addition to announcing plans to acquire vLex, Clio said it has reached $300 million in annual recurring revenue (ARR).

Canadian legal tech startup Clio swoops to acquire vLex for $1B - SiliconANGLE

Canadian legal software provider Clio has pounced on its second major acquisition of the year, buying an artificial intelligence startup called vLex LLC for $1 billion. The deal will help Clio, officially known as Themis Solutions Inc., to enhance its legal management software with vLex's AI tool, which prevents lawyers from accidentally citing fake court rulings, while doubling its potential market, the company said. Clio sells software that helps lawyers manage their legal practices, automating processes such as accounting, document management and client intake. It has built a cloud-based "operating system for law firms" that also handles case file management, bookkeeping, billing, scheduling and advertising. It came to attention last July when it announced it had raised $900 million in a Series F round led by New Enterprise Associates, valuing it at a cool $3 billion. Founded in 2008, Clio was for a long time primarily focused on serving small- and medium-sized law firms, but in March it bought the U.K.-based startup Sliced Bread Ltd., which sells legal software to much larger, global law firms, doubling its market potential. It's thought that more than 200,000 lawyers globally now use Clio's platform. By buying vLex, Clio will obtain that startup's AI assistant Vincent, which is built on a rich database of legal documents. Vincent promises to generate legal citations that are free of so-called "hallucinations", Clio Chief Executive Jack Newton (pictured) told The Globe and Mail in an interview. He explained that hallucinations have caused lots of embarrassment for lawyers, leading them to file documents in court citing fictional cases conjured up by AI. According to Newton, Vincent is an AI agent that can carry out legal tasks autonomously once it has been prompted to achieve a specific goal. Lawyers simply oversee its work at key steps, rather than guide it through every prompt. According to Newton, the acquisition of vLex will be "significantly accretive" to his company's valuation. It's thought that Clio was able to beat at least one other interested bidder, the San Francisco-based legal software firm Counsel AI Corp., which does business as Harvey. Clio is now in a much better position to take on legal software industry heavyweights such as Thomson Reuters Corp. and LexisNexis, which have both made significant investments in AI themselves in recent years and created tools that are similar to Vincent. "Vincent enables fully hallucination-free AI where citations are grounded in case law and lawyers can rest easy that what it produces is trustworthy," Newton told The Globe and Mail. In a research note, CIBC Capital Markets analyst Scott Fletcher Clio's acquisition will "alter the competitive landscape" for Thomson Reuters, which will "need to continuously improve its product to keep up with peers." Newton added that the acquisition also represents a statement about Canada's ambitions to become a major player in the global technology industry. "It's extremely exciting to see a Canadian company doing billion-dollar acquisitions rather than being acquired for $1 billion," he said.