Building Clio's $3 billion legal tech empire with Jack Newton

Today's episode is sponsored by VXT, the phone system built for law firms. VXT integrates with practice management systems so that when lawyers make calls, Their billable time and legal advice can be saved in the right place automatically. 20 percent of billable time goes unrecorded. A lot of that is phone calls that get forgotten about. Get some of those billables back using VXT. Go to vxt. co. nz or click the link in the description to find out more.

Sophie Svenson: Welcome to the very first live episode of the file notes podcast. We have Jack Newton, CEO and founder of Clio, which is the most widely used practice management system in the world to kick it off and get to know you.

We have truth, truths, and a lie. So I'm going to say them and then afterwards you can reveal what the grand lie is. But, firstly, many people know you as CEO of Clio, but not many people know that your first venture into entrepreneurship started much earlier, shoveling snow in Canada. Secondly, Clio is going to be sponsoring an AFL team this year here in Australia, much like you have sponsored the Canucks, a Canadian hockey team.

And lastly, you have a fake office at Canada Place. So you could say that you had a Vancouver address instead of Burnaby, which apparently no one has heard of. What one is the lie?

Jack Newton: As much as I wish it was true, that the lies that we're sponsoring in AFL team, although we have seen a very positive response in Canada to our sponsorship of the Vancouver Canucks.

So maybe. This would be a great thing for us to invest in Australia to help further accelerate our growth here, but the snow shoveling entrepreneurship story is true. And the the fake Vancouver address is also true.

Sophie Svenson: So is Burnaby, being not someone from Canada, is Burnaby like a small place or?

Jack Newton: Burnaby's not a small place, but it's the lesser known, I would say suburb that is, is regarded as part of Metro Vancouver, but not part of Vancouver proper. So back in the day we had a virtual address at a shared office space, like a WeWork in Vancouver that originally it was actually a result of the fact that myself and my co founder, Ryan Govro were working in a distributed way.

When we started working on Clio, I was living in Edmonton, Alberta, which is. on the other side of the Rocky Mountains from Vancouver and Ryan was working in Vancouver and a number of our early staff were working from home, both in Alberta and British Columbia in Canada. So we, we were actually a distributed workforce, a work from home model, remote work model way back in 2008.

In 2009, before it was cool and we needed a place to, to call home from a mailing address perspective and picked 999 Canada Place in in Vancouver, which is an iconic location in Vancouver. It's our, if you've seen photos of downtown Vancouver, you've probably seen the white sails that are are, I would say much more modest version of the Sydney Opera House in terms of a city landmark and And then eventually when we founded a real physical office, we ended up founding that in Burnaby, which is lesser known, you know, I'm sure you haven't heard of Burnaby, but basically is a city within greater Vancouver.

Sophie Svenson: And sponsoring a hockey team. Was that your idea or how did that come about first time? Yeah, it was

Jack Newton: Interestingly, it was something I ended up quarterbacking. I would say it was actually the vancouver canucks Idea, they actually approached us about this idea and I think they were looking for Iconic vancouver companies that they felt would be Good partners with them that were aligned.

I would say from a You a values perspective and from a, um, you know, even corporate positioning perspective. And they approached us about this idea. And although it's something I probably wouldn't have contemplated kind of in isolation when they talked through some of the rationale for how this could make sense and how it could help elevate our profile in, in, in North America and in Canada.

And we've tied it into a number of. Activations we're doing at different arenas with away games and home games and opportunities to bring partners and customers and so on to to Kuck games, both home and away. It's turned in and we're still early in the season, but it's turned out to be a really exciting partnership for us.

And funnily enough, last night at a, a customer and prospect dinner, we were holding in in Melbourne here. One of our prospective customers came up to me and said, Hey, one of the reasons I'm here tonight is because I'm a huge Canucks fan. It turns out his dad is is Canadian and he's got a love for hockey.

He actually flew out to Vancouver to see some of the playoff games last season. And he said, I saw Cleo on the boards and I saw Cleo on the Jersey and thought, wow, this is a real company. And I'm going to come and, um, check out their dinner just because of that. So I thought that was really interesting and I certainly never would have anticipated that a partnership like that would have impact on the other side of the world down here in, in Australia.

So very early days, but you know, and maybe more than anything my, my kids are super excited about this partnership. Something I didn't realize is if you play NHL 25, the, you know, on, on Xbox or, you know, your PlayStation this is the EA hockey game. If you play NHL 25 the Canucks have the Cleo logo in the video game on their away Jersey.

So my kids friends were like, isn't that your dad's company? And so it's had a lot of impacts and a lot of people have reached out. You know, I think it's cool to see a legal tech company get that kind of. Prominence and brand awareness, which is I think really a first for the legal tech industry and something we've seen a lot of Cool response around

Sophie Svenson: yeah, I think in terms of cleo as a whole everything seems very cool from cleo con to Sponsoring a hockey team to all of the events you guys do.

Jack Newton: We try to be cool, you know, the cool legal tech company is our North Star. I

Sophie Svenson: love it. And are the Canucks your team?

Jack Newton: That, that's a tough question. My I moved from Toronto to Edmonton when I was about eight years old, grew up in Edmonton, did my schooling all the way through to my master's degree in Edmonton.

And I've been in Vancouver for about 15 years. I have allegiance, as I could claim, to either the Toronto Maple Leafs, the Edmonton Oilers, or the Vancouver Canucks. And the when I moved to Edmonton, it was on the tail end of the most incredible hockey team, you know, probably to have taken the ice in the last 40 years, which is the Edmonton Oilers the tail end of the Wayne Gretzky and Marc Messier, Grant fewer and that whole team just an absolute legacy team.

And you know, we won A couple of stanley cups right on the heels of me moving to edmonton So still have a deep place in my heart and root for the oilers and the canucks especially with their playoff run last season i've been cheering for as well, so i'm trying to have my cake and eat it too and sometimes that's hard in the semi finals and the You Cup finals last year, the Canucks and the Oilers actually were facing off and I've still got a lot of family in Edmonton So there's some tense phone calls around who we were rooting for and supporting but I figured I couldn't lose You know, one of them's gonna go through to the finals and turned out to be the Oilers But hope to see both of those teams in the finals again this year.

Sophie Svenson: I love it And So when you were a kid, tell me more about what it was like growing up. You were in Canada and you went on to study software, but now you're CEO of a legal tech company. Tell me about how that all happened.

Jack Newton: Yeah, it was, I would say if I go back to my childhood, I was always very entrepreneurial.

I think I always had a bug to create something, create a company. I think as I started to learn computers. I was lucky in that my, I remember my dad brought home an 8086 computer probably when I was 6 or 7 years old. I started programming, you know, some simple programs when I was 8 or 9 years old as well.

And just immediately kind of fell in love with this idea of creating stuff. I think creating something from nothing, whether that's software or whether that's a company. I found the creative process around that really exciting and motivating and energizing. Other ways I scratched that entrepreneurial itch over, you know, my youth was in Edmonton.

It's a place, it's pretty much the most northern populated community in Canada. It's a city of about a million people. And it snows a lot. It gets very cold. The winters can get down to minus 40 or colder. So very very wintry place in and a great place to build a snow shoveling business.

You know, me and I ended up recruiting my brothers. One of my early entrepreneurial ventures was just starting a snow shoveling business, could work out and turns out a very good business model in, in Edmonton. We. I expanded to thinking about ways of facilitating more rapid food delivery to remote northern communities in Canada and wrote up a business plan and almost launched a company that was almost an early predecessor to to Amazon's food delivery services.

I started a computer building company and this was, Before the days of Dell and all the kind of big computer companies today back in the days where computers tended to be kind of home built machines I had a a computer building company called Digital Identity, and then I went to university, unsurprisingly I got into computer science, ended up pursuing a master's degree in computer science, and had my first job out of school with a a startup that my university professor recruited to.

One of my university professors recruited me to a company called Canomics. That was a life sciences startup company. And I was basically software developer number one in that company. And I would say that's where I really kind of caught the startup bug and wanted to start building building a company of my own.

After, you know, I would say four or five years of experience at Canomics, I started to kind of want to scratch that itch and reached out to my childhood best friend, Ryan Gover, who I mentioned earlier, who at that time had I, I met Ryan when I was eight years old. We met in grade three, became fast friends.

Ryan ended up moving to Vancouver to pursue his MBA and his his undergrad before that. and got a job as the IT manager at a law firm called Gowlings. And when I got this startup itch, I looked at the technology landscape. This was 2007 and saw what a huge opportunity I felt the cloud would eventually be.

And we, we saw the early, I saw the early generation of cloud computing companies. Like we saw salesforce. com. I was really inspired by the likes of 37 signals and, um, some other early web application startups in those days and talk to Ryan and said, Hey, look, it looks like this is going to be a really important technological transformation wave, the kind of wave you, you maybe get one or two of those opportunities in your life to, to ride that wave and what industry might be ripe for transformation.

And Ryan, thanks to working closely with lawyers at Gowlings had identified the fact that. Lawyers don't really leverage technology the way they could and furthermore the technology that was available at that time Was really lousy hard to use poor user interface all of it And that was basically the light bulb moment where ryan and I realized I describe our ourselves at that time being You know two hammers looking for a nail like the cloud's going to be the platform and the solution But what is the industry we're going to go disrupt and we pretty quickly honed in on You on legal as being ripe for transformation suffering from really poorly designed software, a lack of adoption among lawyers.

And in particular we saw what a huge demographic the solo small firm market was in, in legal and decided to jump in both feet, jump in with both feet in, in building out Clio. And we were both and software developers by background. So we rolled up our sleeves, started coding the first versions of Clio and launched it in March of 2008.

And as they say, the the rest is history.

Sophie Svenson: And so what process did you go through with your co founder? I know you said that he was in a law firm, so he was seeing these issues and probably interacting with the practice management system, but how did you really, understand the problems and put yourself in the shoes having not been in the legal industry yourself at the time.

Jack Newton: Yeah, I think it's one of these opportunities where you can as an outsider actually in some ways get more profound insights around the opportunities in an industry look like compared to those that might be inside the machine so to speak and maybe less able to see what those opportunities look like when You And when we looked at what lawyers were doing, how they're running their law offices and tried to unpack basically what kind of solution we could build for them.

We realized that even though lawyers use a bunch of specialized language, they'll refer to matters and they talk about concepts like trust accounting and they have certainly a bit of a lexicon that is different than the average person's. When you. Boil down what a law firm is doing.

It's basically project management, it's time tracking, it's billing, it's client collaboration. And all of it orbits around doing legal work, but at the end of the day, what we realized we needed to build for lawyers was just a really great project management system that has time tracking woven into it, that has a really powerful billing extension to it.

And something we thought was a very innovative and powerful opportunity for a cloud based tool at the time was to also weave in really powerful client collaboration capabilities into that platform where interacting with your clients could be moved from something that you would do, you know, over a phone call or over email into something you could do in an integrated collaboration platform in your practice management platform.

And that coupled with a process that we leveraged called the customer development process where this is a framework developed by Steven Blank. And it's a wonderful process that's described in a book called the four steps to the epiphany. Certainly something I'd recommend to anyone listening to this podcast, thinking about starting a company, starting thinking about building a product.

And what Steven talks about in this book is how you really deliberately go through the process of. Identifying and discovering who your target customers will be and build a product working backwards from that target customer base as opposed to the usual software development model Which is typically a little bit of a build it and hope they'll come kind of approach like a field of dreams kind of approach as opposed to this very deliberate working backwards approach from from Stephen Blank's framework, and by the way, Stephen Blank is, I would say the originator, and he's a mentor of Eric Ries and the Lean Startup model, so much of his thinking has informed what Eric talks about in the Lean Startup, but the four steps to the epiphany I would describe as the OG book talking about this opportunity, talking about this framework, and I would say that insight and that new perspective that being an outsider to the industry gave us, coupled with an approach where we really listened carefully to what our customers were asking for and what they wanted to see in the product and the problems they were facing, we were able to iterate out from that kernel and develop ultimately what became Clio.

Sophie Svenson: And so were there any other practice management systems at the time that were cloud based, or that you were just building at the same time or that you were coming up again?

Jack Newton: That's what we were blown away by when we had that lightbulb moment for Clio. We thought, this seems like such an obvious idea, frankly, that there must be competitors out there.

Somebody else must have come up with this idea. There must be a competitor, a startup building exactly what we're talking about. Or there must be, LexisNexis or Thomson Reuters are one of the big guys that's building this product because we saw what was happening with the cloud is just so inevitable that somebody would be ahead of us on this curve.

And when we did that research and turned over every rock we could find trying to find that competitor somebody that was ahead of us on this idea we couldn't find anyone. And one of my mentors at the time said, if you have a great idea that has no competition, It's either a horrible idea or you're about to become very successful.

And you know, we hoped for the latter, basically, and jumped in with both feet and started building Clio. Although an early experience for us was the first trade show that we went to. I mentioned launching in March of 2008. We launched at the ABA Tech Show in Chicago. And we Had a conversation with somebody that dropped by our booth that said, you know, started asking us questions about what does Clio do?

Do you have document management? Do you have billing? Do you all sorts of questions about how the product works. And then they started digging further into, you know, how big is your team? Are you guys funded? Have you reached venture capital? What kind of, do you use agile? What, how long are your sprints really kind of got into some minutia.

And at a certain point we were like, are you a lawyer? Thinking this is a very unusual line of questioning. And he flipped over his name badge and, you know, which had been flipped to the blank slot side, flipped it over and said, Oh, I'm with Rocket Matter. I'm with the competition. And Ryan and I were like who's Rocket Matter?

And we, you know, packed up our booth as the show wrapped up, went up to our hotel room and Googled Rocket Matter. And our hearts sank because this Rocket Matter company. More or less was the same idea as Clio and there may be a month or two behind us. They weren't launching it at tech show. They were just kind of milling around and networking.

But you know, it was so interesting. Ryan and I were just heart broken, almost just crest fallen by this development. But I think looking back at this, it was actually really Catalyzing for us because you know, I think back to that old startup Maxim. It's not about the idea. It's about execution For us is a really catalyzing moment where we realized okay, we may be Basically, you know Jumping out of the starting blocks in this race at about the same time as this new company called rocket matter that has basically The precious idea that we thought you know, we uniquely had developed on our own but we realized that it's now, you know, all up to us around execution and how fast we develop.

And if we can basically achieve product market fit faster than Rocket Matter. So that was, I think, looking back a real, um, crucible for us realizing that, hey, this isn't, we don't have this market to ourselves. We were, we're going to have competition. And then within a year we had. three or four other competitors.

So even though we were first to market, it quickly became about execution and strategy and how we would develop and execute on a strategy that would hopefully see us achieve market leadership.

Sophie Svenson: And it definitely all worked out because Clio is insanely big. Now, did you ever think Clio would become this big of a business and platform Pretty much every attorney and lawyer is using.

Jack Newton: No, I mean, you'd laugh if you looked back at some of mine and Ryan's early business plans and conversations, but we really wanted Clio to be, you know, what is sometimes called a lifestyle business when we started. You know, something that would maybe, you know, be able to pay me and Ryan a, a nice salary.

You know, maybe we employ two or three people to help support the business. Yeah. And Ryan and I would get to build a business together and hang out together, and that would be a win. That was basically our ambition. We also really bought into what the 37 Signals guys talked about.

David Hennemeyer Hanson and Jason Freed, who had a very anti VC bent to their writing and thinking. And they had bootstrapped 37 Signals to, to great success. And so we looked at what they did and We can do the same thing. We'll bootstrap this. And then one, one of our, what turned out to be one of our early investors, cold emailed us saying, look I know you guys are looking to bootstrap Clio, but I'd actually be interested in investing.

And Kristoff at that point had just sold his business to the MySpace guys. And in this cold inbound email from Christophe Jans, he basically said I just invested my first angel investment, which was Zendesk. So he invested in Zendesk back when it was like four guys in a bar in Copenhagen.

And he said, I'd love to invest in Clio. And in an early conversation with Christophe, Ryan and I talked about the fact that we were not really looking to raise capital. And looking to bootstrap the business. And the perspective Christoph offered us that really was kind of a big turnaround was, he helped us understand, if you don't swing for the fences, if you don't try to build that category leader somebody else may raise venture capital coming to your market and Basically steamroll you as the bootstrapped company and what you think you might be able to carve out as a nice little living in a niche of the space as a bootstrapped company may not actually exist because the venture funded competitor will come and eat your lunch.

And the other thing, you know, we realized about especially the software as a service business is you've got this almost paradoxical quality. where the faster you're growing, the faster you're burning cash. Because all of your customer acquisition costs are front loaded, even if you have positive long term economics for a customer, maybe you make 2, 000 off of a customer in their lifetime, but you might need to spend 1, 000 to acquire them up front.

And again, you've got that J shaped curve where you're going to be burning a lot of capital as you drive growth, And if you don't have, if you're trying to drive that growth through bootstrapping, it just becomes a limiting cash becomes a limiting reagent to your growth. And I would say that was a real epiphany for me and Ryan, where, you know, about a year into building Clio, we shifted gears and said, okay, let's raise money.

Let's take money. Christophe ended up being our first external capital put about a million dollars into the business. Let's gear shift from lifestyle business to swinging for the fences and trying to build a category defining company. And we proceeded to raise money from Christoph and then Acton Capital, which is a German based venture capital firm for a Series B.

Went on to raise a Series C from Bessemer Venture Partners in two thousand and fourteen. That was A $20 million round went on to raise a series D of $250 million in 2019, $110 million series E in 2021. And then just earlier this year, we announced what was the largest funding round in Canadian history a $900 million round led by NEA and a group of other incredible investors.

But what's notable about that is across all of the, that funding, we've actually burned a very small amount of capital. We've been very capital efficient over our growth journey, and we've been able to return most of the capital we've raised back to investors so that we're continually refreshing our cap table structure, and in some ways operating almost like a public company where we can be creating, Liquidity for both our investors and our employees alike along that journey, so I would say, you know way back in 2008 2009 that initial decision to Set into raising money swing for the fences trying to build a A huge company was was a major departure from the path we thought we were on but even then even in 2009 when we said Let's swing for the fences Is maybe to abuse the metaphor I don't think we had any idea that a home run would look like what Clio is today.

You know, it's just incredible to look at, you know, 150, 000 legal professionals on the platform, 1, 200 people working in the company a global footprint where we've got over 130 customers in over 130 countries. And, you know, being able to spend a week in a place like Australia and meeting with partners and, and customers alike is just pretty incredible.

I'm humbled by the success we've seen.

Sophie Svenson: And so you've listed some pretty major milestones. What's been the biggest pinch me moment so far when you're just sitting there like, wow, what has actually happened here?

Jack Newton: Yeah, I would say, um, There's been a few over even the course of the last year standing in Times Square and seeing our logo up in the bright lights of Times Square on the NASDAQ.

Were you there? I was there with our whole team. So there's a a photo on my Instagram, if anyone wants to look at it I'm Newtonian. I'm Newton. On Instagram, and it's a picture of me and the whole team, our executive team in front of this NASDAQ billboard with Cleo. And the announcement of our Series F funding round.

That was, that, that was a pinch me moment. I would say another pinch me moment is at CLE Ocon every year our annual user conference I'll come out on stage and deliver the opening keynote to the conference and. I'm speaking to 2, 500 customers and prospects and partners and thought leaders in the legal industry in a completely packed conference room, and that's pretty incredible that we've just created this community of people that are inspired by Clio.

And I'd say in a lot of ways we're much more than, quote unquote, just a software company, but really we've catalyzed. a movement where lawyers are thinking about how do we practice differently? How do we practice more innovatively? How do we practice in a more client centered way? How can we practice in a way that makes us happier and more profitable while also delivering superior outcomes to our clients?

That, that's a really exciting thing and another moment where I have to pinch myself. And then just, you know, the team we've assembled, like I'm just so lucky to have. I would say one of the most, if not the most incredible teams in the technology industry is just a inspiring, hardworking, smart curious group of people that love working together, love building great technology together, love driving great customer outcomes together.

In January, for the first time since COVID, we're going to fly the entire company into Toronto. And have our, what we call Teen Day which is basically a summit of all of our teams and an opportunity for everyone to connect and I couldn't be more excited for that as well. So I'm sure that will be another pinch me moment in a few months where I'm looking around a room of 1200 Cleons all, all together for the first time.

Yeah,

Sophie Svenson: that would be amazing. And when you're thinking about CleoCon and you say, look, you look out and you see all of these. customers or people in the industry and partners. And Clio has an amazing job at building up an ecosystem of different software around them and different partners and influential people in the legal industry.

And I'd say Clio does this better than the other practice management systems. And if you look on the website, there's hundreds of integrations. Was this a strategic decision that you made early on when thinking about Clio as a product yeah.

Jack Newton: Absolutely. It was a very deliberate decision where we realized early on that as ambitious as we may be, we will never be able to build everything for everyone.

We'll never be able to address every need of every lawyer at law firms of every size and in every practice area. And you know, over 10 years ago, we made the decision to launch. an open API and start building a platform around Clio. And again, the core strategy there was we wanted to become the de facto operating system for legal.

We wanted to make sure that Clio was the platform that is universally used by law firms, but that application software developers could build on top of that platform and create. unique value add to deliver to their clients. So we built the open API, opened the platform, and started encouraging developers to come to the platform.

And it's been an incredible success and something I think that has really grown into one of our most significant competitive advantages and one of our most significant moats where We now have over 230 integration partners on the platform. We are truly the only platform in legal. There's other LPMs that have a handful of integrations, but nobody has a platform of this scale.

And when we look to what's happening in the marketplace, when a new legal tech startup comes out, and they're deciding, who do I integrate with, They look to Clio often as the first and only integration they build because we are that dominant and universal operating system for lawyers and there's just no one else that, that really has that kind of reach and no one else that has the platform to, to build upon.

And then it's a really positive flywheel because customers want to go where the most integrations are. Customers want to go where. powerful integrations, the most value add integrations. So that helps drive them to Clio. And that in turn helps draw more integration partners to Clio because we have the most customers and have the broadest network and best distribution.

And we have conferences like, like Clio Con where, by the way, we had a hundred of our integration partners exhibiting on the floor at Clio Con. Just this incredible synergistic relationship with our integration partners, with our customers that feeds this accelerating flywheel that, that's very powerful and something I as I mentioned, something I regard as one of our most significant competitive advantages and one of our most significant value adds to our customers.

Sophie Svenson: And is that how CleoVentures started?

Jack Newton: Yeah, Clio Ventures basically, which is, you know, maybe just to describe it briefly, our venture capital investment arm was a byproduct of us basically looking at our corporate development efforts where we're looking at occasionally acquiring companies or our biz dev team where we're looking at partnering with companies in really deep and strategic ways.

And with Clio Ventures, it's a way of kind of bridging those two worlds where we see a company that we might want to support, accelerate their growth that we see as being synergistic and complementary to Clio's strategy, but that maybe doesn't fit the profile of a company that would be suitable for us to acquire.

Can we invest in that company and support them and as a shareholder help steer and influence and. guide the company to an extent and participate in whatever upside we might be able to drive for that company through, through that equity holding we have through Clio Ventures. And basically, you know, at a high level, let us place bets on companies we're excited about and help out companies we're excited about.

And again this overall approach we have with the platform, with the ecosystem, with Clio Ventures, is that it's an ecosystem that is going to help transform legal in a really profound way, and that ecosystem needs to be fostered, and that ecosystem needs to get help if it's going to be a thriving, innovative rapidly developing ecosystem, and that's The energy we're putting into both Clio Ventures and our platform and so on is an effort to build that thriving ecosystem that in some way orbits around Clio.

Clio's the nucleus of that energy but that we're helping seed innovation in many different areas of legal and that we're helping ultimately create positive customer impact and helping accelerate. That mission that we're pursuing, which is to transform the legal experience for all, which is such a big and audacious mission that we know we won't be able to accomplish it solely ourselves.

Sophie Svenson: I love it. And you said before that early on when you decided to change from being bootstrapped to using venture funding, that sounded like an important decision and since then you've been the CEO the whole time. Has there been any other really important decisions or like the hardest decision that you think you've had to make that's been quite pivotal?

Jack Newton: Yeah. I mean, I would say the entrepreneurship journey, the growth of scaling company, a company like Clio from two to 1, 200 people is a journey that's full of a lot of hard decisions. Um, you know, tracing back to some of the early days there was a decisions to, to say no to capital that we felt came with terms that were simply too onerous.

And while that was an extremely hard decision and you're making those kind of decisions knowing you might just be a few months away from not being able to make payroll they were absolutely the right decision. I think people decisions, you know, deciding. You know, when do you part ways with people because they're not aligned with their value or values, or maybe they're not the people you need for the next stage of the growth journey.

You can have extremely hard decisions around trading out people that might have been, you know, absolutely great people helping you scale from, say, 50 to 100 million dollars of ARR, but they may not be the right people to scale you from. A hundred to $200 million of a RR. So these are you know, all heart wrenching, difficult challenging decisions that, that you need to do in service of the business.

Really you need to make sure that if you're gonna build a really scaled, successful company you need to make sure you've got the right people, the best people possible in the seat for every role in the company. And you need to be recruiting in people that have maybe seen that next stage of the journey or can help you see around corners.

And, you know, everyday Clio is the biggest company I've ever run. So I'm, I've got to be on a very rapid learning journey soaking up as much as I can to help me navigate what will be that next chapter of my own growth and the company's growth. So I think that learning mindset And the idea that you need to constantly evolve your, yourself try to encourage and prod along the people that are around you to grow as fast as the business.

And ultimately what you're looking at with a company like Clio is a company that's, you know, hyper scaling, growing extremely quickly at really a geometric rate. And the people in the company need to be figuring out how they keep pace with that. growth. Are they learning as fast as the company is changing is really the ultimate challenge.

And so if you're, you know, not changing or even if you're growing kind of at a linear rate, that's just not good enough. It's not fast enough. So in those cases, maybe you can find different roles for people in the company. Maybe it's a different role, different position, different organization.

But in some cases, you know, people are just going to be maybe a better fit for a different kind of company or an earlier stage company where they can. Take the lessons they learned at Clio and go apply them to the next company. And so we've seen lots of that growth and evolution of the company over time.

And now we get to see this cool Clio alumni network that is out founding new companies and helping new hyperscalers get to the next stage of growth and so on. You know, I would say it's really exciting seeing the growth of Clio. Like I said, lots of challenges along the way lots of ups and downs but ultimately, you know, really rewarding experience that, that I'm able to sit back and look at a number of broad impacts Clio's had on the startup community.

Sophie Svenson: I love that, um, especially about who gets you to there, won't get you here, won't get you to there. Exactly.

Jack Newton: And that's definitely true. Um, and. Just a tough time, tough thing to realize for many founders, I think many leaders more broadly is, you know, realizing when is that moment you need to make a change and navigating through that.

Sophie Svenson: And are there any decisions that you have regretted over the time?

Jack Newton: Um, yeah, that's a good question. Um, I guess I'm, A bit of a stoic in the sense that I think that even what may have seemed like incorrect decisions were learning experiences and ultimately what put us on this path of the ultimate success we've seen.

To me, it's very hard to look back and assess something as a, um, as an error. And I think what you're constantly trying to do. in leading a startup is making the kind of errors that you can afford to make in a sense that they may be reversible decisions or their decisions you can recover from. And ultimately the only kind of error I think you can deeply regret are the class of errors that result in the end of the company, you know, like really fatal mistakes that You know, maybe you didn't take that funding round, but you weren't able to find an alternative funding source, and you ran out of cash.

Maybe you made some critical mistake in a hire and didn't terminate them in time, and that led you into a death spiral that ended the company. There's all sorts of errors you can make that ultimately result in the company failing, and I guess I'm lucky in that, you know, Clio is a thriving company today, and I can look back and say, I've made lots of mistakes, but thankfully I've made no mistakes that have been fatal to the company.

Sophie Svenson: Yourself, you were someone from outside the legal industry, but very entrepreneurial and ambitious. Luke Campbell is the CEO and co founder of VXT, someone I would describe similarly as outside from the legal industry, but ambitious and entrepreneurial. What advice would you give to him to make VXT the most widely used phone system in the legal industry, much like Clio is for practice management systems?

Jack Newton: I think that the secret to our success has really been something as straightforward sounding as being obsessed with our customers. Just obsessed with understanding their problems, listening to them and understanding how we can innovate on their behalf to deliver a solution that maybe they would have never contemplated or realized themselves as a solution they needed, but by being deeply empathetic to them.

By really trying to understand the challenges and problems they're facing and understanding what the State of the art and the art of the possible is with technology to develop something that is truly I think ideally delightful to those customers is something that you can't go wrong with as a strategy.

I think if you Execute on that kind of north star On a daily basis and just iterate deliver you'll see an amazing outcome. The second challenge I would say for the specific class of product you're developing is distribution and integration. So how do you think about getting the product into the hands of customers?

How do you make it integrated into the tools they're already using on a day to day basis? I think it's, you know, a reason I love the fact you guys are integrated with the Clio is I think that gives you reach to, you know, again, worldwide, 150, 000 legal professionals that would love the idea of an integrated phone system that gives them intelligence around who's phoning them and so on.

So I think, you know, obsessing about the product, obsessing about the customer and then making sure you're really nailing. Distribution and the right kind of strategic partners would be my two cents on strategy.

Sophie Svenson: I really like what you said about innovating on behalf of the customer as well, because sometimes they're not that innovative themselves, but they can tell you the problems.

That's exactly

Jack Newton: it, you know, and I think, you know, customers have a very natural and easy to understand habit of articulating their problems in terms of the features they want to see in a product. I think we're, it's just. You know, all of us are maybe by default fairly product oriented and think about here's the solution I want, but you know, the old Henry Ford quote about if he asked his customers what they wanted, they would have said faster horses, you know, the idea that the model T wouldn't have ever been something a customer described until they see it and say, that's exactly what I need, that's what I want.

I don't actually want faster horses. And I think that's the. I think the real art of being a product manager, the art of being a founder as well as, is understanding your customers underlying problems, even though they may be articulating their problems to you in the form of a solution.

Sophie Svenson:And still focusing on your time at Clio as the company has grown.

When you first started, you would have been hiring people, knowing them, working with them every day. And now with 1200 people, You probably, you won't know every single person. I do not, unfortunately. What's that been like in that transition? How you have you maintained a culture at Clio as it's grown?

Jack Newton: Yeah.

On one hand, it's really challenging and there's this weird asymmetry that exists with my employees at Clio where they hopefully all know who I am, you know, they see me in monthly town halls, they see me in their their meetings and interact with me in some level there.

There's many employees that I've never met in person and maybe not even been on a Zoom call in a smaller meeting with. So this this is, you know, a difficult thing for me because I, you know, remember the days of being, you know, a 200 person company all in one office in Vancouver and knowing everybody by name.

And I think a real. juncture in the scaling journey for for Clio. And for me was when we passed the the Dunbar number in terms of the number of employees we have. For anyone listening that isn't familiar with that concept, Dunbar numbers around 150 and so social psychologist named Dunbar dubbed this number because it's the maximum number of approximately the maximum number of relationships.

we can maintain at a time in terms of remembering people's first names and maybe what are the names of their kids and what sports they like, the kind of like fairly strong social ties we can maintain at a time. And when you pass the Dunbar number, you know, which we passed years ago at Clio you stop being able to know everybody by name what's their function, what do they do, what are their names, their kids, what do they enjoy doing and all of that stuff.

You know, for me, the trick there is, how do you think about scaling the company in a way where number one, the people you're bringing into the company are a culture ad. They're contributing to the culture in some positive way. To me, developing a system of values is really critical. So when we passed that Dunbar number at Clio, that's about where we developed our values framework, introduced our seven core values, and importantly, laced them into how we do hiring, how we articulate promotions and when we terminate somebody because they're not living up to those values.

We had to establish a more structured goal tracking system like OKRs, for example, which we've used now for 10 plus years where again, we can ladder objectives and key results all the way from the top level of the company down to individual contributors and allow them to understand how what they're working on Ness into what their team is working on, what their department is working on, and how those in turn help drive and support the company objectives as well.

That's how we, just a couple of ways we've approached scaling. And then, again I just try to take advantage of every opportunity I get to connect with Klingons in person. Whether that's, you know, flying down here in Australia to, to spend, you know, Some time with our team here, or Toronto, or Dublin, or Calgary, where we have our other offices investing in bringing the team together for things like Team Day and connecting.

And even though we're a distributed team with people worldwide, and we have people working both in offices and from home, I really believe in the importance of personal connection and the the strength of the bonds that you form in person, putting you in a position to execute really well as a team when you're back to being virtual distributed and remote.

Sophie Svenson: I 100 percent agree. Um, and I think it's important being someone that also works remotely, but then VXT also puts a big emphasis on you need to have that in person time at least once a year where everyone comes together and can collaborate and get to know someone outside of a square. Exactly,

Jack Newton: exactly.

And we have, in addition to team day, a real cadence now of what we call moments that matter, but where we're bringing the teams together. Exactly. And it may be a team that's distributed across a couple of different offices or maybe even across all of North America, but bringing them together for, you know, it might be a project kickoff, or it might be important launch milestone around a new product, or it might be a new team forming to conceive of an entirely new product line and trying to make sure we're set up for bringing people together in person.

And again, that might be. Just two or three or four days in person that really sets you up for, you know, going back to whatever your preferred modality of working looks like, whether that's in the office or at home. But having built that connectivity and that, that vision with your team.

Sophie Svenson: Something you said, so backtracking, This week you've been in Australia, across Sydney and Melbourne, and Cleo hosted the Legal Innovation Summit at the Opera House, which was great, and you spoke about the book you wrote, The Client Centric Law Firm, and something that really stood out to me was that you said that if a venture capitalist was looking at a law firm today and the way they provide their services, that they wouldn't have reached product market fit.

Jack Newton: Right.

Sophie Svenson: Can you explain a little bit about that? Cause I found that really fascinating.

Jack Newton:Yeah. Yeah. I mean, as a product guy, it is a startup guy. I always think about this concept of product market fit and for anyone listening that isn't familiar with this concept, it's a concept that was, I think really popularized by Mark Andreessen.

And he talks about the idea that any startup is going through a journey of developing a product against a target market. And you can almost think of it as two circles and a Venn diagram of overlap and how well does that product and the market fit, how strong is that overlap. And the stronger the product market fit, usually the better the growth the stronger the sales, the the better the product and so on.

And I think if you look at the legal industry as a whole as the product and the way that we're delivering legal services today. As that metaphorical startup, and you look at the market of all the legal demand that exists today there's a stat from the World Justice Project that tells us that only 77 percent of legal issues are resolved by a lawyer.

And to me that is a real condemnation of how we're delivering legal services today and shows very poor product market fit. But if you said. I've got a target market that I'm trying to sell a product to. And by the way, I've got a monopoly on that product. And only 23 percent of the people trying to access that product, trying to access those solutions is able to, because maybe of cost or friction or lack of clarity around how to access those services.

But if at the end, only 23 percent of that market is able to access the product. I think a venture capitalist would look at that and say, you, you don't have product market fit. I'm going to pass, come back to me when you've done a few more iterations on the product because you clearly don't have product market fit established.

And I think that's the takeaway message lawyers need to look at just when you're looking, taking a clear eyed look at this data, there is not product market fit with how we're delivering legal services today. And we need to, I think dramatically reinvent the way we do that. Yeah. It. And how to do that is, is what I talk about in my book, The Client Centered Law Firm, as you mentioned.

Because I think we need to reinvent from the ground up how we price and package and deliver legal services. And I think that is further amplified in the the world of AI, where it's an opportunity to completely reimagine how we spend our time as legal professionals and how we Price package and deliver our legal services.

Sophie Svenson: You shared a really good example, um, called hello divorce. When you're explaining this, could you briefly share how they have changed the way they are delivering legal services and how it's actually they've changed the billing, how they bill. And then they've also been more profitable as a firm by taking specific cases.

Jack Newton: Yeah, it's a great story of, I think the client centered approach and the kind of outcomes that can drive where. Yeah. Aaron Levine, who is the founder of Hello Divorce is a family lawyer that ran a traditional family law office and would handle divorces, and in particular uncontested divorces for their clients in a traditional way.

And the cost associated with that for a typical uncontested divorce was 18, 000, which is huge. You know, you can imagine most people. don't have 18, 000 sitting in their bank account ready to spend on a divorce they may not have expected to come around. And Aaron saw how much inefficiency there was in the traditional law firm process and saw an opportunity for technology to streamline that process really dramatically, both in terms of streamlining the interactions with clients as well as streamlining the processes of creating documents, drafting documents, and so on for her lawyers.

And what's fascinating, and that was HelloDivorce. She created a product that was able to drive that 18, 000 in the traditional model down to anywhere from 1, 000 to 2, 000 for an uncontested divorce executed on the HelloDivorce platform. So really almost an order of magnitude of cost savings. But what's Most remarkable about this story is that Erin's lawyers working at Hello Divorce were making more money than her lawyers working at the traditional law firm.

And it's because they were able to be so efficient in delivering those outcomes for their clients that they could handle a dramatically higher case volume. And they were happier, they were more profitable, they were more profitable. They were delivering more and better legal outcomes to more clients.

And I describe this as the real win and an incredible win that this client centered approach can take where, again, you look at the three main outcomes of what HelloDivorce did here. They were able to dramatically improve the legal outcomes for their clients at a lower cost basis.

They were able to make their lawyers more profitable and happier thanks to that innovation. And they were able to also increase access to justice. And we talk, when we talk about that product market fit, when we talk about that 77 percent of consumers that can't access legal services, this is not some, you know, academic problem.

This is not also not something that just pro bono legal services or other kind of band aids are going to fix when we talk about that 77%. It's somebody that needs a divorce that can't afford 18, 000 to get out of an abusive or bad relationship. Maybe they can afford 1, 000. A dramatically larger percentage of the population can afford 1, 000 or 2, 000 than 18, 000.

So when we look at this structural efficiency that Erin's been able to deliver to uncontested divorces, she's dramatically expanded the size of the addressable market that she's serving. Thanks And, by the way, is also dramatically expanding access to justice. And it's a great example of somebody tapping into what I describe as the latent legal market.

When we look at that 77 percent of legal services that are not serviced by lawyers today, what's remarkable is the 23 percent of legal services that are delivered today represents about a trillion dollars of spend worldwide. When you do the inverse of that math and say, okay three quarters of that is an incremental three trillion dollars of opportunity the latent legal market is, you know, at least, and of course, to tap into that market, services are gonna be have to be priced and packaged differently than the incumbent part of the market.

But, even with that being said we're talking about a trillion dollar opportunity for lawyers to go, you know, chase after if they're innovative and thinking about ways they can tap into the latent legal market. And for me, a huge call to action to lawyers is really how do you think about your law firm differently?

How do you think about being innovative? I think lawyers tend to fall into a bit of a zero sum mindset where they're thinking about how do I compete with the traditional way of doing things and how do I maybe win some business from my competitors in my practice area or whatever the case might be, But when you look at that latent legal market and the opportunity, I think the imperative is, how do we think about delivering legal services in a completely new way?

Take a bit of a blue ocean versus red ocean approach on, on the opportunity and it's boundless. It is just such a huge opportunity for lawyers that are able to and willing to think innovatively and creatively and in a more client centered way.

Sophie Svenson: Great case study. And I think we might be having Erin on the podcast soon.

So very timely. You'll

Jack Newton: enjoy talking to her.

Sophie Svenson: Yeah. So to wrap us up, cause I know you have a very busy day for the rest of your Australia tour that you've been doing. I have some quick fire questions that a quick answer is the first thing that comes to your mind. So if you weren't the CEO of Clio, what would be your dream job?

Jack Newton: For me, a big fork in the road was when I finished my master's degree for computer science, I was recruited to and offered a spot in Jeff Hinton's AI lab at the University of Toronto. And for anyone who doesn't know who Jeff Hinton is, he's now regarded as the grandfather of AI. He. He actually just won the Nobel Prize in Physics.

He is the architect of neural networks and what powers large language models today. So he he would have been an incredible person to study under. At the time, and this was 20 years ago, at the time I decided to go into industry because I felt like the only path for artificial intelligence was going into academia, which was the only path in, in the early 2000s.

But now 20 years later, you know, I wonder, you know, what would Jack the AI researcher, or you know, Jack with a PhD in machine learning be doing today? To, to me, that's probably the most likely alternate path if I wasn't wasn't building Clio.

Sophie Svenson: I always love asking our guests those questions, because you just get the most fascinating responses.

And, if you were to describe your career in three words, what would it be?

Jack Newton: I would say unpredictable, you know, I think when you look back kind of to your point of your last question I don't think I would have ever imagined when I graduated from my comp sci program that my career journey would lead me to being the CEO of a company like Clio.

And while that's an incredible journey, certainly unexpected or hard to anticipate one I would say Challenging maybe it's the second word just in that it's a constant learning journey a constant set of ups and downs through the startup and growth journey. It's non linear with lots of peaks and troughs in that journey.

Even though often from the outside in it looks like, an overnight success. Lots of challenges and journeys along along that journey. And maybe last I would say rewarding. It just, you know, enormously rewarding for me. It's a, it's an amazing company and I count myself very lucky to be in this seat.

I get to have amazing experiences with clients and customers and partners around the world. It's been a super fun journey.

Sophie Svenson: I love it. Very wholesome. And lastly. Sydney or Melbourne?

Jack Newton: Ooh, that's a tough one. Um, You know, I would say that as a Vancouverite, Sydney resonated with me instantly just in that, you know, it's a got a similar vibe in terms of the, being on the ocean and being you know, I think a very accessible city for a Vancouverite.

I would say a better executed version of Vancouver. Vancouver. But I've and I've been to Sydney twice. This is my first trip to Melbourne. And I've just been so impressed with the city. It's beautiful the architecture is so modern and beautiful. But it's still got a bit of a vibe and character of an older city.

And, you know, I'm all of, you know, I think 48 hours in, in Melbourne. But really have loved it. The food has been incredible. The the coffee is amazing. And I'm looking forward to having a little bit of free time this afternoon before I, I get on my flight home tomorrow. Melbourne is a city that I think is maybe a little bit under promoted in Australia.

You know, I can see how, you know, Sydney is maybe the shiny city that, that most people have heard of. Melbourne, I think, is a super special place that I look forward to spending more time in.

Sophie Svenson: We'll have to be in New Zealand next time. Yes, and I want

Jack Newton: to see New Zealand, and Brisbane has got to be on the list as well.

Sophie Svenson: Nice. Thank you so much, Jack. Thanks for having me. I've loved spending time with you over the past week. And thanks for coming on the FileNotes podcast. If anyone would like to get in contact with you or find your book or follow along with you. How can they do that?

Jack Newton: Yeah. On email, feel free to drop me a line on at Jack at clear.

com. I'm on LinkedIn. If you want to look me up there, Instagram at Newtonian and on X formerly known as Twitter at Jack underscore Newton.

Sophie Svenson: Amazing. Thank you so much.

Jack Newton: Thanks for having me.