At a recent event organised by Abreu Advogados’ Instituto do Conhecimento (Knowledge Institute), in partnership with the Brazilian Association of Lawtechs and Legaltechs, a brief overview was given of the legaltech market in Portugal.

With the presence of two promising local startups, Neural Shift and LegaU, face to face with two other Brazilian legaltechs, JusBrasil and Inspira, it was possible to get a significant idea of the main challenges facing the local legal innovation ecosystem and also a projection of its future.

Starting with the myths. It’s not true that the small Portuguese legal market is a factor directly proportional to the small number of Portuguese legaltechs. Currently, and taking into account a growth stage, the number of companies in the sector would optimistically be in the region of ten start-ups at most. It is well known that being a small, niche market is not synonymous with failure. Quantity does not translate into quality. The most concrete example is Israel’s Startup Nation, with more than sixty startups on the Nasdaq. For Dan Senor and Saul Singer, local forerunners, one of the reasons for a thriving ecosystem, even in a restricted space, is the classic categorical imperative: think local and act global.

There is no news of scalable legaltechs in Portugal. The most successful cases are still restricted to national law firms and legal departments. It’s time, therefore, to expand borders and thus achieve a degree of maturity, which today is still in its infancy.

Another myth is related to the inefficiency generated by a highly regulated market. The strong regulations on professional practice maintained by the Bar Association initially prevent innovative and radical initiatives from emerging. An example of this is the On-Line Dispute Resolution (ODR) platforms, which are practically non-existent in Portugal and which today are an important mechanism for resolving disputes between consumer companies and consumers. However, nothing prevents initiatives based on compliance innovations, i.e. legaltechs that can exploit current market failures vis-à-vis local legislation. One example is the legaltech Move, still in its early stages, which is exploiting the deficient human resources market and its legal aspects in terms of hiring immigrant and migrant labour.

On the other hand, the lack of initiatives to resolve the current glaring market failure, consisting of the gap in applications for work visas and citizenship for foreigners, is striking. The government agency, AIMA, is unable to respond to the strong demand, causing a negative externality and a high number of lawsuits on the matter. Remember the mantra: innovation is about capturing opportunities, and currently no legaltech has ventured into this blue ocean.

And here are the truths. In an innovation environment, as in the Israeli example, the classic premise is rebellion. In other words, the predisposition of local people to want to innovate, to question the status quo, what the beatnik Jack Kerouac, imitated by Steve Jobs, referred to as people who move the human race forward. So there is a lack of rebels in Portugal. We can mention some good names, such as Pedro Santa Clara, founder of 42 Lisboa, but they will be restricted to a small, heroic number.

Another truth is that the significant absence of public policies in the Judiciary, namely the adoption of open data, has resulted in the non-existence of Portuguese legaltechs that carry out jurimetry and data analytics in the sector. Following the global trend towards open justice and an increasingly data-driven society, it draws attention to the lack of practice in the pillar of data governance, transparency and accountability in the sector. It’s the classic cascade effect: without data, without ‘raw material’ to feed the jurimetric platforms, a highly promising and beneficial sector for society is killed.

We mustn’t lose sight of another truth: local venture capital is rarely seen. And Portuguese investment funds are practically non-existent, perhaps only occasionally investing in legaltechs. It is essential for them to succeed if they are to achieve exponential growth. In other words: in the start-up environment, you won’t get very far without money.

For a country that is a pioneer in venture capital, the lack of interest among venture capitalists in the sector is really worrying. We urgently need to disseminate the culture of legaltech among stakeholders and all its benefits and potential.

The inexorable path of innovation and the power of legaltechs cannot be underestimated, but the Portuguese market today is still in its infancy.