LRN Secures $30M in Final Private Round

With the new millennium already a month old, it would seem the Internet scalpel has been applied to every industry. Yet at least one business has remained elusive: the lucrative practice of providing legal advice and services, currently entrenched in the clutches of the nation’s law firms.

But while soon-to-be-public LRN, which outsources requests through a network of 1,600 law professors, isn’t exactly shaking the industry’s foundations, the six-year-old company is beginning to cause some tremors. This past week, LRN secured a $30 million round with Softbank Venture Capital in what will likely be its last round of private financing.

“This is not something that a lot of the big firms are going to want,” said H.T. Smith, chair of the National Bar Institute Board, “but boutique firms that specialize in a particular area of law definitely don’t want to give their business to the big firms. That’s the type of protection LRN gives you: It’s just like your personal law clerk.”

By matching requests with a database of law professors specializing in more than 3,000 areas, law firms and corporations are able to obtain research at a 40% discount to fees charged by first-rate law firms, said Dov Seidman, the Los Angeles-based company’s chairman and chief executive officer. If the information is already in the company’s expert-based database, the discount is even steeper.

“The hallmark that made it a new business model is that every dollar of revenue resulted not only in a product but a copyrighted asset that provides content we can license to other attorneys,” Seidman said. “We have been able to demonstrate to the legal community that law can be a one-to-many model.”

Indeed, LRN’s “Knowledge Service Provider” business model is already attracting the attention of Wall Street. Although Seidman declined to provide a specific time frame for an IPO, LRN client Morgan Stanley Dean Witter is a probable front-runner to lead the placement.

A “One-to-Many” Model

Proceeds from the Softbank round will be used to bulk up LRN’s sales force to “aggressively” market its services as well as technology enhancements to improve content delivery over its Web site. But given that Seidman expects this will be LRN’s final round of private financing, an IPO would provide the marketing muscle needed to grow the company’s business model.

“We’ve created a system that allows us to harness the excess capacity of some of the preeminent legal minds,” Seidman said. For William Lash III, a professor of international law at George Mason University who’s taken several LRN assignments, the company’s experts are able to field assignments that would take a junior associate days or weeks in a “matter of hours.”

“The key is that LRN’s experts don’t have to start from scratch,” Lash said. “The assignment could be something that I just completed a paper on.”

By allowing LRN to host in-house portals for corporate legal departments, employees from companies such as Morgan Stanley, Lucent Technologies Inc., Johnson & Johnson and Conoco Inc. are able to take gain access to “plain English” lessons in law.

“We are creating a common platform for legal training and education,” Seidman said. “Our clients are working with us to define industry standards.”