2008 Financial Crisis Not Slowing Investment in Litigation Technology Market

Having helped raise in excess of $75 million in my career for a variety of high tech software startups I was not surprised to learn that Recommind, which offers an “eDiscovery” service aimed at law firms, has raised $7.5 million in a first round of venture funding. Although the funding was announced on October 8, 2008 and has probably been in the works for some time, there is always money available for a solid technology investment. Further and as indicated on this Blog over the past couple of weeks, the Financial Crisis of 2008 will actually provide a windfall for technology vendors in the eCompliance and eDiscovery markets.
The full text of the Recommind announcement as seen on the the Venture Beat site is as follows:

Recommind, which offers an “eDiscovery” service aimed at law firms, has raised $7.5 million in a first round of venture funding. Despite the slowing economy, chief executive Robert Tennant says his company should stay very busy in the coming months.
That’s because San Francisco-based Recommind provides a key tool for litigation. Its Axcelerate product is used during electronic discovery, also known as eDiscovery, which is the initial process of sorting through electronic records. With financial institutions collapsing, and legal battles likely to follow, the need for eDiscovery may be on the rise. Tennant says Recommind has been getting increased requests from its law firm customers, and he expects more to come, even as many companies cut back on their costs.
“Some technology companies’ capital decisions will get delayed … but when a judge says, ‘Thou shalt produce,’ you have to produce,” he says.
Of course, there are other startups entering the market — either involved directly in eDiscovery or in archiving documents for legal purposes — and they’re getting funding, too. For example, Mimosa Systems raised $17 million earlier this year. Other competitors include eDiscovery company Attenex and enterprise search company Autonomy. (Recommind also provides enterprise search.)
But Tennant says Recommind’s service is particularly advanced. He calls it “eDiscovery 2.0″ — a phrase Tennant sounds slightly embarrassed to use, but which gets the idea across. Recommind’s Axcelerate automates the initial process of sorting through documents and judging their relevance, thus making eDiscovery faster and more affordable.
Recommind has also been in the business for a while, with customers like well-known legal firms Cooley Godward Kronish and Wilson Sonsini Goodrich and Rosati. It’s already profitable, and has been growing at about 100 percent per year, Tennant says. So why does it need the funding? There’s a big opportunity for growth, he says. Recommind will use the money to expand its sales team and also acquire some new technology.
The round was let by Kennet Partners.

Labels: 2008 Financial Crisis, Autonomy, eDiscovery Market, eDiscovery Windfall, Mimosa Systems, Recommind, Venture Capital

posted by Charles Skamser @ 4:21 PM 0 Comments

The Global Financial Crisis of 2008 Will Provide a Windfall to eDiscovery Market

With the global financial crisis of 2008 in full swing, I predict that eDiscovery providers worldwide will see a windfall for years to come.    The very nature of the financial industry will provide billions of pages of paper and exabytes of electronically stored information (ESI) stored all over the world for eDiscovery professionals to uncover, extract, process, analyze and prepare for pre-trial conferences, trials and the inevitable litany of appeals.  With most law firms ill-equipped to deal with the new world of eDiscovery, they will have to rely on the new breed of eDiscovery consultants, technology vendors and electronic data discovery processing professionals to even get an initial understanding of the data involved in any of these matters.

Further, after all of the dust begins to settle, the global financial crisis of 2008 will fuel demand for the next generation of integrated eDiscovery/eCompliance/eGoverance technology to ensure more rigorous and meaningful oversight.  This is, without a doubt, the paradigm shift that we have all been waiting for in the eDiscovery market.

Following are a couple of examples of the legal action that is already underway:

Fannie May and Freddie Mac Bailout
Plaintiffs’ firm Coughlin Stoia Geller Rudman & Robbins hasn’t wasted any time taking action in the wake of the Fannie and Freddie bailout.

Partners Samuel Rudman and David Rosenfeld filed a securities class action in the U.S. District Court in the Southern District of New York yesterday on behalf of those who held publicly traded securities of Fannie Mae between November 16, 2007 and last Friday, before the federal government took over the company.

Defendants in the suit are Stephen Ashley, chairman of Fannie’s board; Daniel Mudd, Fannie’s president and chief executive officer; Stephen Swad, Fannie’s ex-chief financial officer; and Robert Levin, formerly the company’s executive vice president and chief business officer.

The complaint alleges that Fannie’s publicly disclosed financial results misrepresented the financial health of the company, and that the defendants either made false statements or failed to disclose the truth to investors. As a result, says the complaint, the defendants’ “fraudulent scheme” was successful in deceiving the public, artificially inflating the prices of publicly traded Fannie Mae stock, and causing class members to buy Fannie stock at those inflated prices.

Class Action Lawsuit Filed against the Primary Fund by Stull, Stull & Brody
NEW YORK, Sep 23, 2008 (BUSINESS WIRE) -- Notice is hereby given that a class action amended complaint (the "Complaint") was filed September 19, 2008 in the U.S. District Court for the Southern District of New York by the law firm of Stull, Stull & Brody and its co-counsel, on behalf of plaintiff and a proposed class of purchasers of shares of The Reserve Fund's Primary Fund (NASDAQ: RFIXX) (the "Fund") during the period September 28, 2007 through September 16, 2008, inclusive (the "Class Period").
The Complaint alleges that the Fund and the Fund's underwriter, investment adviser, officers and trustees and the other related Defendants, violated Sections 11, 12 and 15 of the Securities Act of 1933 by making false and misleading statements and omissions concerning the lack of true diversification of the Fund's assets, safety of principal, access to liquidity and exposure to at least face value debt of $785 million of the now defunct Lehman Brothers Holdings, Inc., that the Fund's risk profile was not only "marginally higher" than cash, the high vulnerability of the money market fund to suddenly drop below $1 per share to as low as $.95 per share, and the fact that the net asset value of the money market fund ("ANAV") was speculative and inflated. Thus, the Fund's Registration Statement and Prospectus issued September 28, 2007, pursuant to which members of the proposed class purchased or acquired shares of the Fund during the Class Period, was materially false and misleading.
Plaintiff seeks to recover damages on his own behalf and on behalf of the Class and is represented by the law firm of Stull, Stull & Brody and its co-counsel Kantrowitz, Goldhamer & Graifman, P.C., firms with significant experience successfully prosecuting complex securities fraud class actions on behalf of defrauded investors.

Labels: 2008 Financial Crisis, eCompliance, EDD, eDiscovery, eDiscovery Windfall, eGoverance, Electronic Data Discovery, ESI

posted by Charles Skamser @ 9:00 AM 0 Comments

The Financial Crisis of 2008 and SaaS Based eCompliance

Over the next few weeks, as we all try to digest all of the information and subsequent analysis about the causes of the 2008 financial crisis, I am planning to investigate the various Software-as-a-Service (SaaS) based eCompliance and eGoverance solutions and what impact they can have on diverting future problems in the financial markets.

Is more government oversight and regulation the answer? "After Monday's Wall Street meltdown, businesses are likely to face increasing compliance scrutiny, " stated John Bace, research vice president of Gartner IT Management Group, in a recent keynote address at the Midsize Enterprise Summit in Grapevine, Texas. "The shadow of yesterday [Monday] will be longer than Enron, Sarbanes-Oxley, HIPAA, or any other regulation of modern times," Bace told a crowd of about 300 CIOs.

And can SaaS based solutions with the ability to enable centralized, nearly real time and very granular information management be the right technology at the right time? As an example, would simple SaaS based email archiving technology coupled with a rules based search engine to identify internal discussions about pending insolvencies or short sale tips be valuable in the quest to avert the next crisis? As stated, over the next couple of weeks, I plan to investigate this and report my finding on this Blog.

As such, any input from any of the current SaaS based eCompliance and eGoverance providers would be greatly appreciated.

Labels: 2008 Financial Crisis, eCompliance, eGoverance, Gartner, Saas, Software-as-a-Service

posted by Charles Skamser @ 8:04 AM 0 Comments