Clio valued at US$3 billion after latest round of fundraising

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A British Columbia legal tech company has raised US$900 million, drawing in new investors Goldman Sachs Asset Management and Silicon Valley’s New Enterprise Associates Inc. and valuing the company — whose backers already include the Ontario Municipal Employees Retirement System (OMERS) — at US$3 billion.

The new capital will be used by Themis Solutions Inc., doing business as Clio, to expand in 130 countries and make investments in artificial intelligence and integrated legal payments to expand its platform, which simplifies law firm management by centralizing and handling functions from client intake and case management to court searches and legal aid billing.

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Clio is rolling out a proprietary generative AI product that handles routine tasks and analytics aimed at improving efficiency.

Jack Newton, Clio’s founder and chief executive, said the promise of AI technology that can be integrated into more of Clio’s products using in-house and off-the-shelf tech was a key selling point for the new investors in the funding round led by New Enterprise Associates (NEA).

“We’ve got a dedicated AI team that is building these technologies from the ground up,” he said. “We’re launching both commercial models as well as building some of our proprietary models and technologies.”

A bit of the shine has come off market-listed AI darlings such as Nvidia Corp., but Newton said the legal sector his company serves is a natural fit for the technology.

“Leading-edge AI technologies … can create real breakthroughs for lawyers when it comes to everything from delivering a better client experience to drafting a legal document more quickly and more accurately,” he said.

He added that he pushes back when it is suggested that AI will put lawyers out of work since those who do find themselves out of work can be redeployed to higher-value work.

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Clio last raised funds in 2021, pulling in US$110 million and crossing the $1-billion “unicorn” valuation mark. The following year, it reported that annual recurring revenue had topped US$100 million, a figure it now pegs as having grown to more than US$200 million.

The company, whose services are available to more than 1,000 mid-sized law firms in the United States, has expanded into the Asia-Pacific region as well as into payment processing. The payments business, launched in 2022, processes billions of dollars in legal-specific transactions annually in the U.S., Canada and the United Kingdom.

Newton joined a chorus of company founders critical of a recent Canadian tax change that raised the inclusion rate on capital gains.

“It is frustrating to see what I think many agree is a tax on innovation and a tax on investment and a tax on risk-taking,” he said, referring to the backlash that followed the announcement of the tax change in the spring budget.

Effective June 25, the capital gains inclusion rate for corporations and trusts was raised to 66 per cent from 50 per cent. For individuals, the increased inclusion rate applies to the portion of capital gains that exceed $250,000. Critics said startups and company founders will be punished by losing access to corporate investors and, if successful, they will face the higher inclusion rate when they eventually sell.

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Despite Newton’s objection to the tax change, he said there are no plans to move Clio’s headquarters from Burnaby, B.C.

“We don’t have any plans to move our offices. We’re building this company in Canada,” he said. “I’m more worried about what (decision) the Jack Newton of 16 years ago, in 2008, when he was founding the company, would make geography-wise, given this new landscape and the new realities of what it means to build a company in Canada.”

Clio’s latest capital raise brought in new investors from the U.S., including California-based Sixth Street Growth, CapitalG Management Co. LLC and Tidemark Management Co. LP. The Canadian company is also adding a new director, NEA co-chief executive Tony Florence. 

In a statement, Florence said Clio has “everything NEA looks for in a growth-stage investment,” including market leadership positions. 

“With the right foundation in place for continued market expansion and advanced AI capabilities, we believe the best is yet to come,” he said.

• Email: bshecter@postmedia.com

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