Robert Ambrogi Blog
Last week, KKR, a major global investment firm, announced that it had entered into an agreement to acquire a majority stake in Agiloft, the contract lifecycle management company. As part of the deal, the growth equity firm FTV Capital, already an Agiloft investor, is making an additional investment, and another growth equity firm, JMI Equity, is joining as a new investor.
To learn more about the deal and what it means for Agiloft and its customers, I sat down for a brief interview with Eric Laughlin, Agiloft’s CEO since 2020.
What follows is a transcript of that conversation, which I have condensed and edited for style and continuity.
For an earlier interview with Laughlin, see my LawNext podcast interview, recorded in 2021 not long after he took over as CEO.
[Learn more about Agiloft at the LawNext Legal Technology Directory.]
* * * * *
Ambrogi: I know your time is short today, so let’s dive into the news. Where do you want to start? I’d love to hear what you think this means for your customers and your company.
Laughlin: The KKR and JMI investments in Agiloft are a huge vote of confidence. It means that some of the most well-known and respected investors in the world believe in the CLM market, its size, and growth potential. They believe in Agiloft’s approach to CLM, the fact that we’ve become a leader, and the capital-efficient growth we’ve had over the last four years. And they certainly believe in Agiloft’s future in this space. They’re investing in us as a company, as a product, and as a management team. The idea is to continue to boost the growth we’ve already seen in CLM and continue our journey. So it’s exciting for us as a team.
Ambrogi: Explain to me the nature of this deal. This is not just an outright investment, right? They’re acquiring a majority stake?
Laughlin: Yes, KKR will be the majority owner of Agiloft at the close, with minority investments from JMI, FTV, and our employees. We’ve always had a strong employee ownership program, and KKR will continue that.
Ambrogi: So, it’s not a fully employee-owned company, but employees have options or equity?
Laughlin: Exactly. Every one of our employees has always had options or equity in the company. KKR believes strongly in building value in a company by having employees feel they are part of the story and the process, and by sharing in the rewards. I believe in that strongly myself.
Ambrogi: Does this mean an infusion of new cash for you?
Laughlin: Yes, but we’re not providing the financial details. It means that ownership is changing hands and cash is entering the company. KKR will be the majority owner, with minority ownership from employees, FTV, and JMI. Our founders, Colin and Bridget, are exiting the board as part of this, fully retiring from Agiloft. We’re very happy for them.
Ambrogi: What does it mean to have KKR as a majority owner? The only investment I know of that they have in a legal space is in the whole Internet Brands group, which includes Avvo and Martindale-Hubbel.
Laughlin: KKR has not been a large investor in the legal tech space, but they are a major investor overall and in the technology space. Our investment is through one of their growth equity funds called the Next Gen Technology fund, which invests in growth companies. They are funding our growth path.
Ambrogi: How important is AI, particularly generative AI, in your development going forward?
Laughlin: It’s absolutely a focus for our development. We believe the Agiloft platform is flexible enough to grow with our customers as they mature on their journey. An important step in that journey is leveraging AI at all steps of the workflow. Our goal is not to say, ‘Hey, here’s this AI thing that we can do.’ It is to integrate AI into every step of the workflow where it makes sense. We recently launched our Generative AI Prompt Lab, which allows customers to use any piece of data they have in Agiloft to create or edit templates and integrate the resulting content into any part of the workflow.
So that idea that our customers should be able to get control and self determine how they use AI within the workflow is a really important step for us. And if you look at it from the investor angle, investors think one of two things. They think AI is going to crush every company, or they think AI can really help put rocket fuel into this company. KKR obviously believes that our way of combining generative AI with a system of record creates huge growth potential.
Ambrogi: Yeah. I know that you are an alumnus of Thomson Reuters. Given the recent Stanford study about hallucinations in legal research products, do you think this could be a speed bump for the momentum around generative AI in legal?
Laughlin: Anytime we’re talking about AI, we have to include human oversight and quality control. There will be a time when we can have nearly as much faith in AI as we do in humans, but for now, we believe in a pragmatic approach. AI should be integrated where there is human oversight to avoid mistakes. This human-centric, pragmatic approach to AI is what we’ve adopted.
Ambrogi: In the press release announcing this deal, one of the investors, Alex Mason from FTV, said that the CLM market, while still young, represents a multimillion-dollar opportunity. Where do you think this market is in terms of maturity?
Laughlin: I don’t think it’s a young market. I’ve been in it for quite some time. However, we’ve entered a new stage. There are dozens, if not hundreds, of companies out there that say they do some part of CLM. That explosion of companies has been good for innovation, has been good for experimentation. But we’re now entering a phase where a few of us have reached scale and a few of us have put together complete CLM systems that have become the system of record for enterprises. When you think of CLM as not being just a helpful piece in the workflow, but being an actual system of record for a company, you can think about how big that market becomes. There’s no question CLM can be a $10 billion-plus market. Compared to other enterprise systems of record like human capital management or procurement, which have market sizes of $50 billion or more, CLM has broad applicability and a large market potential.
Ambrogi: Where do you see the strongest market opportunities for Agiloft going forward?
Laughlin: We’ve seen growth in every segment of our customer base, with the strongest growth in the mid-market and enterprise. The emergence of strong legal operations groups partnering with procurement and sales has provided an opportunity for enterprise-wide deployments of CLM. When a company decides to have one system of record, it becomes a much more important piece of technology for the company overall.
Ambrogi: Is that happening now? Many still focus on the legal department when talking about CLMs.
Laughlin: The vast majority of our customer base involves two or more departments, not just legal. A customer with us is likely spending five times as much on CLM today as they were four years ago because it’s an enterprise implementation, not just a small departmental one.
Ambrogi: Since you started in 2020, how has Agiloft evolved over the last four years?
Laughlin: We’ve maintained our foundational elements: an incredible no-code platform and a strong reputation for customer experience and success. KKR’s research highlighted that our customers are happier than those of our main competitors. The company itself is now over five times larger and serves significantly larger companies on a global scale. The scale of our operations has changed dramatically since I joined.
Ambrogi: What else would you like to say about this deal?
Laughlin: It’s important to know that we have the backing of a world-class investor that believes in growth. There’s a real alignment around employee ownership and involvement in the company. Everything starts with the company culture. The employee experience equals the customer experience. Moving into the next phase of growth, we want to continue investing in our platform, customer experience, and employees. This is very possible with KKR due to their alignment on this last piece.
Ambrogi: How much growth have you seen in employee numbers over the last four years?
Laughlin: We’ve probably seen a fourfold increase. We now have over 300 employees worldwide. We are a 100% virtual company, and our employees, like our customers, are all over the world.
Ambrogi: Great. I’m glad we could catch up.
Laughlin: It’s always good to talk to you, Bob. Always enjoy our conversations.