The profession is predominantly male, with a 61% to 39% gender split favoring men. Racial diversity is limited, with white lawyers making up nearly 80% of the profession, leaving only 20% represented by minorities, including Black, Hispanic, Asian, and Native American lawyers.

Segmentation of the Legal Market

Diving deeper, the legal market is divided into several key segments: law firms, corporate legal departments, alternative legal service providers (ALSPs), and others, such as government, education, and non-profits. Each segment behaves differently and presents unique challenges and opportunities for legal tech solutions.

There are 869,404 lawyers employed by law firms, government, legal departments, and other organizations and another 286,547 self-employed lawyers.

• Law firms: 563,790 lawyers 

• Self-employed lawyers: 286,547 lawyers 

• Government: 145,440 lawyers 

• Legal departments: 138,064 lawyers 

• Other: 22,110 lawyers 

Law Firms

Law firms are the backbone of the legal market, representing 182,493 establishments and at least one lawyer. These firms are categorized into small (1-10 lawyers), medium (10-100 lawyers), and large (100+ lawyers). They have different pain points, have different budgets, and make different purchase decisions. 

Small law firms dominate, constituting 87% of the total; medium firms account for 12%, and large firms represent just 1%. Large firms punch above their weight despite their small number, contributing significantly to the market's revenue.

• Small law: 159,820 firms 

• Medium law: 21,553 firms 

• Large law: 1,120 firms 

In 2022, law firms and self-employed lawyers generated revenues of $385.1 billion. Of this, law firms accounted for $363.3 billion, and self-employed lawyers contributed $21.8 billion. Revenue is projected to grow to $405 billion by 2025. 

The top 200 law firms are particularly influential, representing 42% of the law firm revenues and 17% of the lawyers count, underscoring their outsized influence.

Corporate Legal Departments

Corporate legal departments play a crucial role in managing legal risks and ensuring compliance. These departments vary significantly in size and structure, depending on the organization's scale and industry. 

In total, corporate legal departments employ about 138,064 in-house lawyers. It's estimated that there are approximately 22,238 legal departments in the U.S., categorized by the size of the company they serve:

• Small (less than $1B in revenue): 17,003 departments

• Medium ($1B to $5B in revenue): 4,389 departments

• Large ($5B to $20B in revenue): 562 departments

• X-Large (more than $20B in revenue): 284 departments

In terms of staffing structure, the median across all departments is four lawyers and two staff, and it can also be broken down by size as follows:

• Small (less than $1B): 2 lawyers, 2 staff

• Medium (between $1B to $5B): 10 lawyers, 7 staff

• Large (between $5B and $20B): 38 lawyers, 43 staff

• X-Large (more than $20B): 80 lawyers, 65 staff

Spending within these departments is significant, with an estimated $90.8 billion yearly. The ACC benchmark report indicates that 53% of this spending is internal, primarily on lawyer compensation, while 47% is external, including outside counsel (89%) and ALSPs (3%).

Legal Departments' Spending on Technology

Spending on legal technology has been evolving in recent years. According to the 2021 KPMG legal department benchmarking survey, 33% of participants had a budget specifically for legal tech, with those having a budget allocating an average of $248,041, representing 13% of their total budget. More recently, the 2023 Gartner leadership vision report highlighted that 66% of legal leaders plan to increase their spending on legal technology. However, only 29% are confident these investments will significantly improve their legal operations' scale or speed. Looking ahead, by 2027, the average organization is expected to increase its legal budget for in-house resources by 15%, driven by advancements in generative AI.

Market Dynamics and Strategic Implications

The U.S. legal market is defined by three key segments: large law firms, the long tail of small and medium firms, and corporate legal departments—each offering unique opportunities and challenges for legal tech founders and investors.

Large Law: The 1% Market with Outsized Influence

Representing just 1% of firms but generating 42% of law firm revenues, large firms are a magnet for legal tech due to their high budgets, sophisticated needs, and potential for large-scale contracts. However, the sales cycle is long and requires premium, enterprise-grade solutions. Success here can establish credibility and open doors to wider distribution.

The Long Tail: Small and Medium Firms (87% of the Market)

Comprising 87% of the market, this segment is vast but diverse, with varied practice areas and budgets. While challenging to target due to heterogeneity and price sensitivity, product-led growth strategies and vertical-specific solutions can drive adoption. Founders should balance scalability with tailored approaches to unlock value in this segment.

Corporate Legal Departments: The Battle for Budget Allocation

Corporate Legal Departments: With 53% of budgets dedicated to salaries and 47% to external counsel, there’s limited room for legal tech spending. Winning in this segment requires a focus on educating buyers about ROI, demonstrating clear cost-saving benefits, and navigating longer sales cycles. Tools that enable departments to do more with less, like contract management and AI-driven efficiency platforms, will see increasing demand.

For legal tech founders, tailoring go-to-market strategies to each segment’s unique dynamics is essential. Investors should focus on scalable solutions that align with trends like AI adoption and efficiency-driven growth while accounting for segment-specific challenges.

Final Thoughts: Navigating the Future of the Legal Market

The legal market is at an inflection point, with technology, AI, and shifting client expectations driving change across all segments. For legal tech founders, the key to success lies in understanding the unique needs of each segment and tailoring solutions accordingly. For investors, the market offers abundant opportunities, but success will depend on identifying startups that can demonstrate clear value and scalability. And for corporate leaders, the future is about leveraging technology to optimize operations, reduce costs, and stay ahead of regulatory complexities.

As the market continues to evolve, one thing is clear: those who can adapt to its dynamics, align with its trends, and deliver measurable value will be the ones who thrive. The legal market is no longer just about providing services—it’s about driving innovation, efficiency, and transformation. The question is, are you ready to seize the opportunity?

Infographic

Check out our infographic that brings together insights on the U.S. legal market!

We’d love to hear from you. Reach out to us if you have any comments, questions, or suggestions.

Sources:

• American Bar Association (ABA)

• ALM | Law.com

• Association of Corporate Counsel Benchmarking Report

• Bureau  of Labor Statistics

• Dun & Bradstreet | NetWise

• Gartner Leadership Vision 2024

• Gartner The Transformative Impact of GenAI on Legal Technologies

• KPMG Global Legal Department Benchmarking

• Organisation for Economic Co-operation and Development

• Stock Analysis

• Statista

• Thomson Reuters

• United States Census Bureau, Economic Survey

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