Disco, the fast-growing US legal tech company with a focus on eDiscovery, has laid off dozens of staff due to ‘the coronavirus and economic uncertainty’, making it the first business in the sector to publicly acknowledge crisis-driven job cuts.

In a statement to Artificial Lawyer, Disco said: ‘Due to the coronavirus and the economic uncertainty facing the nation and the world, Disco felt it was important to make difficult decisions and implement changes up front to proactively address and reduce potential risk.’

A local news site in Austin, Texas, where Disco is based, said that local sources reckoned the number of job losses were around 75 people at present. The company has seen rapid growth since 2012 and has over 400 people listed on LinkedIn as staff members.

The move also indicates just how much Covid-19 has impacted litigation eDiscovery work in the US, where disputes represent a huge part of the legal market compared to other countries. The US has closed many of its courts, slowing down activity, meanwhile many large companies that may have initiated complex litigation have likely put plans on hold until the crisis passes. While many cases will rumble on given the long timescales, others will cease, or go on pause.

The company would not say what departments the job losses had been across, but given that the legal tech company also offers resource-heavy, project-based services related to eDiscovery, such as custom coding and language review, it may well have been in such areas.

The company’s website is still advertising for both technical and project management roles across the US, from New York, to Chicago, to Austin. Although, it’s possible the layoffs have now superseded those job adverts.

The statement continued: ‘The decision to reduce our workforce was made solely to offset a potential downturn in business due to the coronavirus crisis.’

However, the company, which works with 75 AmLaw 200 law firms and which received $83m in funding last year, was keen to stress they were going to continue ‘as usual’.

‘We remain confident in our business strategy and our plans for ongoing product and service innovation, customer acquisition and long-term growth. Business will continue as usual, and customers will see no disruption to service due to internal changes,’ they added.

What Does This Mean?

Disco is the first well-known legal tech company to acknowledge lay offs – and a job cut that local insiders in the US estimate to be around 75 people, which is a significant number.

It’s quite possible other companies are doing the same, they just have done so without it being noticed outside of the company. This may be especially true of legal tech companies with staff that number in the 100s.

As noted, one of the challenges Disco may have faced – and is facing – is that they have built additional services on top of their software offering, and it may be that group that has been hit hardest. However, that is just a logical deduction and the company is dodging the question. So, the cuts may have been across the board.

It’s interesting though that they say they are going to keep growing over the long term and will keep making new products. They probably have no choice but to say that. Law firms want to make sure they engage with providers that will be there by the end of the year, and Disco, despite all the chaos at present, is still competing in a market against other companies providing eDiscovery software. So, they have to tough it out and send the right message, while also cutting their costs so they don’t burn through their reserves during what looks to be a sustained quiet period for the company.

Will We See Other Legal Tech Companies Cutting Staff?

No legal tech company wants to lay off staff it has spent time and energy hiring and training, and are now valued members of the team. They all also know at some point they will have to hire again to fill any vacated roles.

Also as Artificial Lawyer noted recently, the sales cycle for legal tech is long and slow. Conversations started this week may only reach signature in six months from now, or longer. Businesses have to keep going and keep thinking long term.

That said, those that have taken a lot of funding may feel more need to trim costs rapidly compared to others. Hopefully Disco’s actions will not become the start of a trend, but being realistic they could be, especially among other eDiscovery-related and larger legal tech companies that carry heavy overheads.