When Jack Newton and his elementary school friend Ryan Wong founded Clio in 2008, they were building the first cloud-based practice management system for lawyers during a time when cloud computing was still novel and convincing lawyers to trust the cloud with sensitive client data seemed nearly impossible.
Seventeen years later, Clio has evolved from a single-product startup into a multi-product powerhouse serving as the “operating system for legal” with over $300 million in annual recurring revenue (ARR)—the predictable revenue a subscription business generates each year—and a recent $900 million Series F funding round valuing the company at approximately $3 billion.
Newton’s journey offers a masterclass in building vertical SaaS—specialized software designed for specific industries rather than general business applications. His approach demonstrates how companies can dominate entire industry ecosystems by starting with one critical workflow and systematically expanding to own the complete customer journey.
The transformation of Clio from cloud pioneer to AI-powered platform reveals five strategic principles that any vertical SaaS company can apply, along with hard-won lessons about the mistakes that can derail even the most promising growth trajectories.
The most crucial strategic decision Clio made was positioning itself as the central nervous system for law firms through Clio Manage, their practice management platform. “Lawyers start using Clio as a verb in the law firm,” Newton explains. “They’re anthropomorphizing Clio and saying ‘go to Clio.’ If it’s something we need to know, it’s in Clio.”
This system of record became “the first application they open in the morning and the last application they close at night.” By becoming indispensable to daily operations, Clio created what Newton calls “data gravity”—the phenomenon where all business-critical information naturally flows into and lives within their platform.
Once you own the control point, you gain an unfair advantage for cross-selling additional products. Clio leveraged this position to expand from one product to seven, with each new offering building on the foundation of trust and integration they’d already established. Law firms don’t just use Clio’s software; they depend on it for their entire operation.
The control point strategy works because it solves the fundamental challenge of software adoption in conservative industries like legal services. Rather than asking customers to change multiple systems simultaneously, you become their single source of truth and then gradually expand your footprint from that position of strength.
Inspired by Marc Benioff’s success with Force.com at Salesforce, Newton launched Clio’s open platform in 2013—just five years after founding the company. Today, Clio supports 300 integration partners building applications that connect to their core system.
“It’s such a powerful thing when you look at something you want to add on like Marketo, and the first and often only integration point they might have is Salesforce,” Newton notes. “We wanted to do that in legal.”
The platform strategy delivers benefits beyond ecosystem lock-in. It provides perfect intelligence for mergers and acquisitions opportunities by offering visibility into which third-party applications gain traction with Clio’s customers. “The cheat code that gives us from a corp dev perspective is you can see exactly what kind of product is getting traction with your customers,” Newton explains.
This approach allows Clio to observe retention rates, customer satisfaction scores, and usage patterns for potential acquisition targets—intelligence that would be impossible to gather from arm’s length market research. When a integration partner demonstrates strong product-market fit within Clio’s ecosystem, the company can acquire them with confidence, knowing exactly how customers use and value the solution.
Rather than building a random collection of features, Clio systematically mapped the complete client journey for law firms and developed products to serve every stage. This journey-based approach starts with Clio Grow, their customer relationship management (CRM) system for client intake, progresses through Clio Manage for practice management, and extends to Clio Payments for billing and collections.
“We looked at that whole journey and mapped out the series of products that we can build out to really eat up that entire customer journey,” Newton explains. Each product serves a specific stage, but they all integrate seamlessly to create comprehensive digital transformation for law firms.
This strategy recognizes that law firms—like most small and medium businesses—struggle with multiple disconnected systems. By owning the entire workflow, Clio eliminates the friction and data silos that plague businesses trying to coordinate between different software vendors. The result is higher customer satisfaction, increased retention, and natural expansion opportunities as firms grow their practices.
The journey-mapping approach also helps Clio frame the digital transformation conversation for their industry. “We’re framing what this digital transformation needs to look like in this industry—to take what is a lot of bricks and mortar and analog pen and paper processes and pull that into the cloud.”
Clio Payments now represents more than 20% of the company’s annual recurring revenue, with customers processing tens of billions of dollars in aggregate billing. However, the impact extends far beyond revenue generation for Clio.
“Payments is probably one of the single biggest win-win-win propositions that any vertical SaaS player can deliver,” Newton emphasizes. The benefits create a virtuous cycle: dramatically increased retention for Clio, dramatically reduced accounts receivable for law firms, faster payment collection, recovery of previously written-off bills through frictionless online payment, and improved client experience at the final touchpoint.
Newton shares a compelling example of this dynamic in action: “Last time we asked you to pay this, we asked you to pay by check. We know that you probably don’t know where your checkbook is. Can you just pay online with credit card?” Within minutes, clients pay bills that have been outstanding for a year or more.
The embedded payments strategy works particularly well in vertical SaaS because industry-specific software companies understand the unique payment challenges their customers face. Generic payment processors can’t optimize for the specific workflows, compliance requirements, and customer expectations that define each industry vertical.
When Clio launched in 2008, Newton admits, “even 5 years into the journey, we had no idea what a huge opportunity payments represented, but it certainly turned out to be one of the most important drivers of our growth.” This revelation highlights how vertical SaaS companies often discover their most valuable opportunities through deep customer engagement rather than upfront market analysis.
When Clio raised their $900 million Series F funding round, investors posed a direct question: “Legal is near the top of the list of industries that’s going to be disrupted by AI. Is this a threat or is this an opportunity for Clio?”
Newton’s response frames AI as a massive market expansion opportunity rather than a zero-sum efficiency play. Goldman Sachs ranked legal services as the second-most vulnerable industry to AI disruption (after administrative work), but Newton sees this vulnerability as the foundation for unprecedented growth.
The data point that shapes his entire perspective: 77% of legal matters go unresolved with the help of a lawyer because legal services are too expensive, inaccessible, or lawyers are too overwhelmed to handle the demand. “AI will dramatically lower the cost of delivering legal services,” Newton explains. “The amount of demand and the number of people that can then access those goods is dramatically going to expand.”
He draws parallels to historical industrial revolutions: “It’s in the same vein as what the mechanical loom did to textiles or what the assembly line did to automobiles.” These technologies didn’t shrink their respective industries—they made products more accessible and expanded total market demand.
The legal services market currently represents approximately $1 trillion annually worldwide. Newton believes AI presents an opportunity to “double, triple, or quadruple the size of that total addressable market (TAM)”—the total revenue opportunity available for a product or service within a specific market.
Newton envisions AI transforming legal work across three categories: tasks that humans will continue to perform exclusively (strategic decision-making and client relationships), work that will be augmented by AI (legal research and document review), and processes that will be fully automated (routine document generation and intake qualification).
“In the very near future, you’re going to call a law firm and you’re going to speak to what sounds like a human being helping qualify you and see if you’re a fit for the law firm,” Newton predicts. “A lawyer is going to be sitting down with a cup of coffee in their hand in the morning, interviewing potential clients that that AI intake agent has helped set up meetings with.”
This transformation requires Clio to evolve from building tools that support workflows to actually performing the work itself. Newton references venture capitalist Sarah Tavel’s concept of companies needing to “do the work” rather than simply sell software. “We’re selling work rather than software in the age of AI,” he explains.
The shift demands deeper customer understanding than traditional software development. Instead of asking how to help personal injury lawyers manage their to-do lists more effectively, the question becomes how to automatically draft demand letters with intelligent extraction of appropriate settlement amounts.
This evolution from supporting work to doing work represents a fundamental change in product management philosophy. “The job of a product manager, the job of your product organization in general, has radically changed over the last couple years if you want to capitalize on that AI opportunity,” Newton notes.
As thousands of AI-native startups target the legal industry, Clio faces an interesting strategic tension. As the platform, they want to encourage innovation through their ecosystem. However, as the control point with comprehensive customer data, they possess unfair advantages in many AI-powered workflows.
“Our value prop to anyone innovating in legal—whether you’re AI native or more of a pure play SaaS tool—is you don’t need to reinvent the wheel of what Clio as the operating system for legal does,” Newton explains. “You can tie into our APIs and you can focus on the really specific point value you’re delivering to customers.”
However, Newton acknowledges the need for more strategic thinking about data access: “We need to be more deliberate and more strategic about how we’re opening up certain aspects of our data to those partners, because frankly, there’s parts of that AI workflow that we’re going to want to own.”
The reasoning is twofold: Clio is uniquely positioned to deliver maximum value because they have complete context about each law firm’s operations, and they need to control both the customer experience and the data that supports it. This creates inevitable tension between platform openness and competitive advantage.
Newton’s journey with Clio wasn’t without significant missteps that offer valuable lessons for other vertical SaaS companies.
Underestimating the payments opportunity for too long
Newton admits that when Clio launched in 2008, “even 5 years into the journey, I’d say we had no idea what a huge opportunity payments represented.” The company treated payments as a nice-to-have feature rather than recognizing it as a fundamental driver of retention, customer value, and revenue growth.
This mistake cost Clio years of potential growth and competitive advantage. In vertical SaaS, embedded fintech capabilities aren’t just revenue opportunities—they’re strategic imperatives that can transform the entire business model by creating stronger customer relationships and higher switching costs.
Not embracing the “doing the work” philosophy early enough
For years, Clio focused on building tools that supported legal workflows rather than understanding and automating the actual work itself. Newton reflects on needing to “get way closer to our customers” and “understand how they do the work” much earlier in the company’s development.
The real opportunity—especially with AI capabilities—lies in actually performing tasks rather than just facilitating them. This shift in thinking should have happened sooner, as it represents the difference between being a helpful tool and becoming truly indispensable to customer operations.
Building too open of a platform without strategic data considerations
While creating an open platform with 300 integration partners established a powerful competitive moat, Newton now recognizes they should have been more thoughtful about data access policies from the beginning. As AI-native competitors emerge, the question of who gets access to what data—and under what conditions—becomes critical to maintaining competitive advantage.
The lesson: Platform openness must be balanced with strategic control over the most valuable data and workflows that define your competitive position.
Waiting too long to address enterprise customers
For 17 years, Clio focused almost exclusively on small and medium businesses, specifically targeting the 80% of law firms with 10 lawyers or fewer. While this strategy enabled deep market penetration in the SMB segment, it left the enterprise market (firms with 1,000+ lawyers) completely unaddressed.
Only with the recent acquisition of ShareDe has Clio opened access to enterprise customers. The lesson: Don’t let your initial ideal customer profile become a permanent constraint. The most successful vertical SaaS companies eventually serve entire markets, from individual practitioners to large enterprise organizations.
Clio’s transformation from a pioneering cloud-based practice management system to a $3 billion vertical SaaS powerhouse demonstrates a replicable blueprint for industry domination. The strategy centers on owning the control point, building platform ecosystems, expanding through complete customer journeys, and positioning for AI-driven market expansion.
Newton’s most powerful insight challenges conventional thinking about AI’s impact on professional services: rather than replacing professionals or shrinking industries, AI will expand markets by dramatically reducing costs and increasing accessibility. The companies best positioned to capture this expansion are those that already control the data, workflows, and customer relationships within their verticals.
“I think there’s a flavor of this pattern happening in many other verticals in SaaS that is going to really dramatically reshape the competitive landscape,” Newton observes. The vertical SaaS winners of the next decade won’t simply offer the best software—they’ll be the companies that use AI to perform the work itself while expanding the entire addressable market in the process.
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