The AI Gold Rush in Legal - and the Math That Doesn’t Add Up

Legal AI is in the middle of a capital surge that feels a little off.

Over the last couple of years, AI vendors in legal have raised hundreds of millions of dollars in a very short period of time. The justification is familiar: “We’re going after the $1 trillion legal services market.”

But here’s the uncomfortable truth: most legal tech businesses are not competing for a trillion‑dollar market.

For decades, even the most successful legal technology companies - including document management systems with extremely high margins and long-term customer lock‑in being the system of record - have operated in total addressable markets measured in the hundreds of millions, not trillions. And they took decades to get there.

So what changed?

Uber, Airbnb - and the Category Error in Legal AI

When Uber and Airbnb raised hundreds of millions (and later billions), it made sense. They weren’t selling software to taxi companies or hotel chains.

They were replacing them.

• Uber went after the taxi market.

• Airbnb went after the hotel market.

They weren’t building booking systems for incumbents - they were building alternatives.

Many AI vendors in legal are raising capital as if they’re Uber or Airbnb - but selling as if they’re a vendor to incumbents.

That’s the category error.

If you’re selling AI to law firms, your market is not the $1 trillion legal services economy. Your market is the portion of firm spend that can be safely externalised without destroying the firm’s economics.

That number is much, much smaller.

The Inevitable Squeeze: Growth Promises vs. Firm Reality

When you raise on trillion‑dollar promises, the pressure doesn’t disappear - it compounds.

AI vendors in this position face a hard set of outcomes:

1. They need to find relevance at scale, because firms won’t outsource their core value beyond the hype period.

2. They move toward disintermediation, slowly positioning themselves between firms and clients.

3. They’re forced to share revenue with firms to make the numbers work.

None of these outcomes are neutral for private practice.

Firms are being asked - sometimes implicitly - to train, fund, and validate future competitors.

And the market is now waking up.

The Quiet Fear Inside Private Practice

Law firms know two things at once:

• They cannot build everything themselves.

• They are being pressured to buy AI from vendors who may one day eat their lunch.

That tension is real.

Precedents, workflows, client data, institutional knowledge - these are not just “inputs.” They are the firm.

Handing them over to a platform with misaligned incentives isn’t innovation. It’s leverage - just not yours.

Data Sovereignty Is Becoming Non‑Negotiable

We’re moving fast from:

• Low‑hanging fruit off-the-shelf AI workflows sold by AI vendors to firms

to a world where:

• Firms productise themselves

• Precedents become platforms

• Institutional knowledge becomes defensible IP

In that world, data sovereignty isn’t a feature - it’s survival.

Firms will push back against disintermediation. They will demand clarity on:

• Who owns the data

• Who can train on it

• Where it runs

• What happens if it leaks

• What is the total liability exposure of the AI vendor if they breach no-use of customer data clauses

Where Jylo Is Different

Jylo exists because this tension exists.

We are not here to replace law firms.

We are not here to skim value from their work.

And we are definitely not here to monetise their precedents.

Our business model is deliberately aligned with private practice.

• We do not own or reuse customer data

• We offer on‑prem deployment in the client’s own Azure environment

• We provide an unlimited liability cap if customer data is misused

• Our business model does not require us to compete with our customers — now or later

Jylo is an alternative platform, not a Trojan horse.

A place where firms can safely:

• Build

• Productise

• Experiment

• Scale

without funding a competitor in waiting.

Don’t Make Your Precedents Their Profit

The next phase of legal AI won’t be decided by who raises the most money.

It will be decided by:

• Who firms trust

• Who respects data sovereignty of those firms

• Who understands that law firms are not distribution channels - they are the product

Private practice isn’t going quietly into disintermediation.

And the platforms that understand that will be the ones that endure the hype.

Jylo is built for that future.