I am a long-time follower and admirer of Axiom and friend of Axiom’s former 10-year president Paul Carr, so it’s with particular pleasure that I re-post Mark Cohen’s investigative piece, What’s Up With Axiom?
Not long ago, Axiom was often touted as law’s next big thing. The on-demand corporate legal talent company that launched in 2000 has enjoyed nearly two decades of expanding revenue, client base, talent pool, and brand recognition. Still, the industry spotlight long cast on Axiom has shifted in recent years to other legal service providers, notably The Big Four, United Lex, and Elevate. This has caused many in the industry to question: “What’s up with Axiom?”
Spoiler alert: Axiom is doing just fine. It serves more than half of the Fortune 100, reported 2018 revenue run rates of $360M; has a curated talent platform of approximately 2,000 lawyers/professionals across seven countries and three continents, and a well-established global brand. Axiom is highly selective—only 5% of attorney applicants are hired. Axiom’s legal team is not only highly pedigreed but also experienced. Axiom attorneys have an average of over 15 years of experience ranging from recent graduates to former law firm partners and corporate general counsel. Its workforce is considerably more diverse than large law firms. Women comprise 55% of Axiom’s lawyers globally, and the company is known for having a large minority workforce. Axiom’s turnover rate is also markedly lower than the large firm benchmark. So why the gloom and doom?
Some Twists and Turns
Eyebrows were raised when Axiom invested in a managed legal services business sometime in 2015. This raised questions about Axiom’s market positioning as well as whether the new business unit, and its eventual digital contracts business, meshed with the company’s core talent/resourcing model. The chatter intensified in November 2016 when Founder and long-time CEO Mark Harris, the face of the Axiom brand, was replaced by Elena Donio, a seasoned tech executive but new to the legal industry. Questions about Axiom came to a head on February 19 2019 when the spin-offs of Axiom’s enterprise contracts intelligence (Knowable) and Axiom Managed Solutions (AMS) units were announced. Axiom’s remaining corporate legal talent business simultaneously announced its intent to go public. It is now in a quiet period, an SEC-mandated embargo on promotional publicity. The enforced silence has further fueled speculation—and doubts—about Axiom’s future.
The Axiom Talent Platform Was And Is A Well-Funded, Scalable, Horizontal Structure Promoting a New Legal Culture
One way to understand Axiom’s recent moves is to examine its roots. When Axiom launched in 2000, it endeavored to create a new model of on-demand corporate legal talent. Mark Harris, Axiom’s Founder and longtime CEO, has often said Axiom was created to address unhappy and over-billed clients and to improve the lives of many of the lawyers that worked for them. Harris, a lawyer-turned-entrepreneur, drew from personal experience as a Davis Polk associate. He saw an opportunity to reconfigure legal delivery by altering its structure, economic model, and culture to better suit clients and lawyers. Harris recognized the growing misalignment between firm lawyers and equity partners as well as firms and clients. He constructed a law company —not a law firm– designed to respond to both.
Axiom tippy-toed around whether it was a law firm or a law company. The distinction is significant for financial, structural, risk retention, regulatory, and cultural reasons. Axiom replaced the traditional hierarchical, leveraged firm partnership model with a flatter, more egalitarian, and agile one. It jettisoned the partner/associate distinction in favor of “Axiom lawyers.” The company also became law’s first scaled “gig” provider, tapping into a rich talent pool of lawyers eager to engage in sophisticated corporate legal work– but not if it meant logging 2000+ billable hours. Axiom endeavored to make the practice of law fun again. It’s whimsical orange logo, hip office, and glossy website—more Club Med than the traditional law firm—were testaments to a new kind of legal delivery and a different culture that persists to this day.
Harris understood the importance of capital and landed it early on. Axiom received its first outside funding round in 2000, raising $5.4 million, and turned a profit in 2003. The company has had three subsequent funding rounds. The investments fueled expansion, helped attract talent, and enabled Axiom to invest in technology and a strong senior management bench. Axiom had little difficulty drawing qualified candidates from a large pool of capable lawyers craving an alternative to the cold grind of big law. It also collected data on lawyer performance and customer satisfaction.
Convincing buyers, especially conservative General Counsel, was a higher hurdle, especially when Axiom launched at the turn of the Millennium. The legal market was markedly different then than it is today. Law firms were the industry’s dominant provider, and their hierarchical partnership structure, leveraged economic model, and precedent-bound, insular culture were major obstacles confronting Axiom or any other provider introducing a new delivery model. Law firms had a virtual monopoly on the supply of top legal talent, and they played the talent card to justify ever-escalating rates. Axiom recognized this and blunted the quality issue by recruiting lawyers from top firms and stripping out firm cost-escalators from the traditional model–partner tribute, lavish offices, bloated staff etc. Axiom was Big Law quality at half the price.
Axiom’s Model Was Well Suited To The Post-Financial Crisis World
The global financial crisis caused a reboot of business and the way goods and services are bought and sold. Law was not immune; clients demanded “more with less,” and intense pressure was applied to General Counsel to reduce legal spend. This played to Axiom’s model, and the company flourished even as law firms reduced the size of incoming associate classes, laid off lawyers and staff, and “de-equitized” underperforming partners. More work was in-sourced to in-house departments, and Axiom’s flexible model became an appealing alternative to increasing corporate legal department headcount.
A 2012 The New York Times article reporting on the post-financial crisis legal landscape concluded that “a more sweeping transformation may be on the horizon. And it may look a lot like Axiom Law.” Axiom had 900 lawyers, an array of impressive corporate clients, and a new organizational and economic model that was well-suited to the austerity of the time. Mark Harris, Axiom’s founder, observed that, “the interests of law firms went from serving the clients to serving themselves.” Legal consumers did not much care whether Axiom was a law firm or a legal talent company. It mattered to Axiom because: (1) as a talent company, it was not subject to capital investment constraints affecting law firms; (2) senior management and high-performing lawyers/professionals could acquire (residual) equity in the company; and (3) Axiom’s risk shift to the client conferred a further cost advantage over firms that retain risk.
Questions About Axiom’s Future
The three simultaneous February 19, 2019 announcements raised several questions about Axiom: (1) Why did the company spin off its tech and managed services arms when the market is increasingly tech-enabled and investment in legal tech is at an all-time high?; (2) Why did Axiom bring on Elena Donio, a tech executive with no legal industry experience only to spin off its core tech unit a couple years later?; (3) Why would Ms. Donio, a highly regarded tech executive, elect to stay with Axiom’s talent company post-spin-offs? and (4) What is Axiom’s business model that is about to be publicly-offered?
No one outside of Axiom’s senior management can be certain of the answers– and they cannot say because the company is understood to be in quiet period prior to its forthcoming IPO. The opinions expressed above and below are solely the author’s—Axiom declined to answer questions or provide information in connection with this article, and all data referenced herein was in the public domain. Still, there are many clues—and educated inferences—to be drawn from public information on the company as well as broader marketplace maturation.
Axiom spun off its tech and managed services businesses, but it did not go cold-turkey on tech—far from it. Al Giles, the company’s London-based Chief Revenue Officer, gave a presentation at Legal Geek last October on legal industry innovation and modernization that hinted at Axiom’s direction. Giles’ remarks made clear that technology is a critical complement to any curated legal talent pool (leveraging data to map legal talent to task). This is what Axiom is after its spinoffs—a 21st century talent marketplace.
Ms. Donio’s relief of Mark Harris can be explained, in part, by her experience taking a company to the next level. Her tech background fits well with Axiom’s tech and data-driven talent management model. Going forward, Axiom will likely expand its legal professional talent roster. Ms. Donio and other Axiom senior executives are well-suited to manage the build-up of this critical talent pool. Her election to stay-the-course with Axiom reinforces the conclusion that the company is by no means backing away from tech as it doubles-down on its core talent management business.
Axiom’s decision to spin off its other business units and to go public with one core offering makes sense as an IPO strategy. Its two thriving spinoffs can each scale and focus on their core offerings, allowing Axiom to do the same. It is also prudent from a competitive standpoint. Axiom has taken a hard look in the existential mirror and concluded it will not directly compete with EY, Deloitte, PwC, KPMG, UnitedLex, and Allen & Overy for enterprise legal service business. Instead, it will focus on global legal talent management that will doubtless include both attorneys and other legal professionals.
Axiom has made the difficult decision to forego the short-term revenue of its two spin-offs in favor of pursuing a focused, longer-term path to success. Rather than write-off Axiom, other providers might be wise to engage in a similar differentiation journey in a rapidly maturing global legal marketplace.
Mark Cohen is a lawyer, law professor, legal innovator and strategist, and founder of Legal Mosaic.
Mark says of himself “I write about changes in the global legal marketplace”.
Mark is a member of the Program Board and Teaching Fellow on Australia’s College of Law new Master in Legal Business.