AttorneyFee: Revolutionizing the Law Firm's Cash Flow

It's always fun to meet someone with similar interests and background as yourself, especially when you're a lawyer NOT practicing law. Then, there are the people that really blow you away and make your jaw drop at their sheer amazingness. Meet Richard Komaiko, co-founder and CEO of AttorneyFee. His CrunchBase profile describes him as a "policy wonk turned technologist turned crusader for access to justice" who writes books during his down time and speaks four languages (Spanish, Hebrew, Mandarin, Shanghainese). Now, I was once a Foreign Affairs Officer for the State Department and my daily bread and butter is in international economic policy, but even I can't top that. Read more below to find how how Richard plans to turn the traditional law firm business model on its head.

Tell me about yourself.

Like you, I spent some time in DC working on U.S.-China relations. During my time on the Hill, I wrote a book entitled "Lawyers in Modern China" which analyzes rule of law and the legal landscape in China. When it got published, I figured I should probably go to law school since I had written a book on the law. While I was in law school, the market fell apart and I knew I had to look for alternatives to the traditional practice of law. I worked on AttorneyFee, which at the time was just a project with a couple of friends, and we kept pivoting until we were viable.

You never wanted to practice law?

I would not be a very good lawyer. I'm not barred. Even for attorney fee, while I initially did a lot of the legal work for the startup myself, I ended up outsourcing a lot of the legal work. I learned a lot from that experience that I'm not good at practicing law.

Do you think you need to have had practiced law to start a legal startup?

Nope.

How did AttorneyFee start?

Our first idea for AttorneyFee was a platform where potential clients could describe a problem, post it, and find a lawyer. There was no barrier to entry. We realized that it would be a failing model because it inevitably led to a race to the bottom.  We did find out, though, that price discovery was a component that people liked. Clients don't want to waste their time telling a lawyer about their problems when they might not be able to afford the attorney in the end. It leads to a lot of back and forth communication. Clients just want to know prices. We used technology to cull the web and find prices for 30,000 attorneys and published that data. It was really hard to try and extrapolate what the dollar signs meant because it really could mean anything. Eventually, we organized that data so that users could see a visual histogram of pricing for attorneys in a certain region. You can see outliers and where attorneys tend to cluster in terms of median pricing. Now we only publish data on aggregated basis. 

What's the most interesting thing you've discovered from this data?

We collaborated with researchers at the Brookings Institution to figure out which variables drive an attorney's fees. We submitted all pricing data and what we thought would be dependent and independent variables (i.e. law school, location, number of years as a practitioner, firm or solo practitioner). One day, the researcher called me and told me that there was a problem with the data. After lengthy analysis, he found that location determined 40% of the price, and experience determined 10% of the price. But there was no statistical significant for the other independent variables. However, the data wasn't wrong. Instead, the study ultimately concluded that 50% of the variation in attorney fee pricing is purely made up. So essentially, attorney fee pricing is bullshit. This study will be published in the American Journal of Economics later this year.

What's been your greatest challenge?

Our greatest challenge is probably the same challenge as every law startup out there--building a sustainable business. It's really hard. The revenue coming in has to be more than the capital flowing out. It's already hard to raise money and find funding; it's even harder to build a sustainable business. I've probably seen some ten other law startups go up and out of existence.

Any advice to budding legal entrepreneurs then?

Focus on building a business. Stop thinking about disrupting the industry. Theoretical and philosophical ponderings are nice, but they don't ultimately matter.

What's your goal for AttorneyFee?

We want to get into the business of law. We see hundreds of law firms buying marketing service in order to find new customers, but getting the customers to pay is as big a challenge as getting customers in the first place. We see a huge issue with cash flow in the legal practice. Sometimes customers don't have enough money for a retainer and attorneys find themselves need to take the case on credit. However, most law firms do not have lines of credit or collection departments. That's what we want to get into. We took our inspiration to innovations in capital happening in the medical field, and are gearing up this October to release our mobile platform that will front the money for clients to pay the attorney. We will then collect from the client over time. This injects law firms with liquidity. This requires a lot of financial expertise and capital. Moreover, the entire transaction is instantaneous. Cases will be approved or rejected in a matter of seconds. We believe that a client walking into a law firm to procure legal services is much like the customer who walks to a car dealership to buy a car. Once that customer walks off the lot, the possibility of them returning to buy the car is small. By allowing instantaneous approvals, we let lawyers close the transaction.

What are the ethical implications to this idea?

Attorneys do have ethical obligations to not file frivolous suits, but ethics don't really come into play here. This mostly revolved around the consumer's acknowledgement of the obligation to return the money. 

What has been your relationship with consumers? Attorneys?

Consumers like us a lot, because they can't get the information we provide anywhere else. They also appreciate that it's free. Attorneys tend to fall in one of three camps: 1) the ones who see us as the apocalypse towards the commodification of their jobs; 2) the ones who love us. 10,000 attorneys return to AttorneyFee periodically to check trends in pricing and adjust their own to be more competitive; and 3) ambivalent. Some just don't care. 

What's in store for the future of AttorneyFee?

We have a clear vision of our future. We're planning 10 new hires in the next days. We're increasing our bandwidth and investing lots of month in our growth over the next six months. We are preparing to do something very disruptive and novel in the legal industry.