Clio vs Alexi - Why Legaltech Investing Could Be Hurting Innovation
The legal technology industry is undergoing a shift deeper than product innovation or the latest AI feature. We’re entering a phase where capital deployment, data ownership, and competition strategy are reshaping the market, and sometimes spilling into public legal battles. Like the one between Clio and Alexi, both amazing legaltech companies. I suspect that this is being caused by legaltech companies moving away from making tools to now providing capital to other legaltech companies. Are we overestimating the size of the legaltech industry? How does this affect antitrust laws? What happens to all these companies intertwined with each other in a down markets, is legaltech failing to raise capital?
Why Legaltech Companies Are Investing in Other Legaltech Companies
The old model of legaltech was straightforward. It used to be: build a product, win customers, and grow revenue. What we’re seeing now is more complex. Increasingly, legaltech companies are investing in other legaltech startups, not just acquiring them. This isn’t casual, it’s strategic. I find it interesting that a company would raise money that it needs for its operations, and then use that money to invest in other startups in the same industry. I found that very odd.
Take The LegalTech Fund (TLTF), the first venture capital fund dedicated to legaltech, which closed its second fund at over $110 million in 2025, and backs startups across AI, automation, hiring, and workflow tools.
Players such as Consilio and other enterprise legal services firms support this fund, showing that established legaltech players want influence over the next generation of tools, not just compete with them. But this also creates a host of problems.
Clio Ventures and Broader Corporate Investments
Another clear example is Clio Ventures, the investment arm of Clio, one of the largest practice management platforms in legaltech. Clio Ventures has invested in:
EvenUp – AI-powered personal injury tech
Steno – legal support services
Proof – court document workflows
Definely – contract automation and review
Clio’s strategy is not just about owning a suite of tools; it’s about shaping a connected ecosystem that lawyers rely on.
Why These Investment Strategies Matter
There are real strategic incentives behind these moves:
Hedging against disruption – legaltech companies are investing in potential competitors early.
Market intelligence – It's a way of gaining visibility into innovations/competitors.
Influence over standards – Shaping integration and interoperability.
Optional future acquisitions – Establishing a foot in the door
But these models also raise valid concerns. When a few dominant companies start investing in or backing the next wave of startups, there’s a risk of market concentration rather than open competition.
Case in point: Clio vs. Alexi
The tension between legaltech investment and competition came into sharp focus with the Fastcase (now part of Clio) lawsuit against Alexi.
Fastcase, after being acquired by Clio, filed suit in late 2025 alleging that Alexi breached a data licensing agreement by using Fastcase’s proprietary legal database to build a competing platform, contrary to the terms of their internal-use agreement.
Alexi, however, has pushed back, calling the lawsuit a form of “sham litigation” designed to stifle competition and asserting that the dispute is part of a larger anticompetitive strategy by Clio and its partners. Mark Doble, the CEO said, ‘We believe an open and competitive legal tech industry is critical to the betterment of law firms and legal services, and we will do everything we can to continue to fight for fair competition.’
This isn’t just a contractual dispute; it’s a sign that data, not just code, has become the core battleground in legaltech. What people don’t discuss in the media is how the once affordable and great services that were offered by the acquired company rise in price and drop in quality. One big legaltech company will buy a bunch of smaller legaltech companies and try to bundle them up and offer them to lawyers.
Why This Affects Lawyers, Founders, and Legal Ops
For lawyers evaluating tools, founders building solutions, or firms adopting AI, this evolution matters. Tools are no longer standalone. Data access can be limited by licensing or litigation. Competition may move from product features to control of core infrastructure.
It also illustrates a deeper truth. That even as lawyers experiment with building their own AI apps, enterprise software still controls critical assets that many startups depend on.
The Future of Legaltech Isn’t Just Tools. It’s Power Structures
The legaltech market is at an inflection point. Innovation isn’t just a function of creativity; it’s about who controls the data. The Clio vs. Alexi situation isn’t an isolated news story. It’s a window into the next phase of legal technology competition, one where money, data, and power compete in ways lawyers and founders must understand.