# AI could help niche firms compete beyond their local markets

Markdown copy of https://realalpha.app/s/ai-could-help-niche-firms-compete-beyond-their-local-markets/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

- Speaker: [Jay Madheswaran](https://realalpha.app/people/jay-madheswaran/) · Jay Madheswaran is cofounder and CEO of Eve.
- Host: [Erik Torenberg](https://realalpha.app/people/erik-torenberg/) · General partner, Andreessen Horowitz · Helped build Product Hunt; founded On Deck, Village Global and Turpentine.
- Show: a16z Podcast
- Episode: [Why AI Could Turn Small Law Firms Into Billion-Dollar Businesses](https://realalpha.app/v/iRMmPjunm3Q/), Oct 30, 2026
- Moment: 36:15 to 39:16 of the episode (3 min), playing on https://realalpha.app/s/ai-could-help-niche-firms-compete-beyond-their-local-markets/; the episode from there: https://realalpha.app/v/iRMmPjunm3Q/?t=2175

## Quote

> “about half of it goes towards labor spend, **30% goes to marketing**, and the rest maybe is profit”
> — [Jay Madheswaran](https://realalpha.app/people/jay-madheswaran/) at [36:44](https://realalpha.app/v/iRMmPjunm3Q/?t=2204) · a16z Podcast

## Takeaways

1. A third of a $25,000 settlement is about $8,000 for the firm.
2. Jay estimates half goes to labor and 30% to marketing.
3. Smaller firms could specialize in narrow case types and reach more markets.

## About this segment

Jay Madheswaran says a typical $25,000 settlement leaves limited room to reinvest after labor and marketing. Firm-specific data could help smaller practices build an edge in narrow case types and expand nationally.

From “Why AI Could Turn Small Law Firms Into Billion-Dollar Businesses”, Oct 30, 2026. [Watch the full episode](https://realalpha.app/v/iRMmPjunm3Q/)

## Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

[36:28](https://realalpha.app/v/iRMmPjunm3Q/?t=2188) I think the transformation that's going to happen is a lot of these law firms are going to look more like software companies. I think they're going to finally participate in the software revolution that's been happening for the last 30 years they've been left out of, right? And if you kind of deep dive, you'll understand why. Let's say you have a $25,000 settlement. The attorney gets maybe a third of that. Let's call it 8,000 for simplicity. And, you know, like out of that 8,000, about half of it goes towards labor spend, 30% goes to marketing, and the rest maybe is profit, right? Like that's kind of the business as it exists today because of that business it is so difficult to reinvest back into servicing your next client better right like the only way you can really do that is by hiring a better attorney today right what changes is now they can actually accrue a database and

[37:22](https://realalpha.app/v/iRMmPjunm3Q/?t=2242) data set that is unique to them that gets them results that is better than their competitors for a subset of law, right? And this is kind of specialization. And historically, this industry already been through that. You know, like 30 years ago, there was a, you know, your neighborhood lawyer that handled everything, you know, from employment cases to IP to what have you. Yes, exactly, exactly. And now what we have are specializations of practice areas.

[37:50](https://realalpha.app/v/iRMmPjunm3Q/?t=2270) You have someone that's really good at IP, someone that's good at employment, and now it's getting even more specific, right? Like someone that's good at, let's say, nerthing bird defects or something along those lines. And I can anticipate that to go even another level where now someone could get really good at soft tissue injury cases that involve X and Y fact patterns. And advertising for those cases might be a lot more cost-effective than some other larger firm like Morgan & Morgan just showing their billboard everywhere.

[38:21](https://realalpha.app/v/iRMmPjunm3Q/?t=2301) So get good at something locally and then expand just across the entire country because you have such high competence around that one field. That's exactly right. And so I think we're going to see that type of specialization. And I think we're also going to see the opposite where some of the large, we're also working with some on the scale of Morgan Morgan, like some of them actually are coming together.

[38:40](https://realalpha.app/v/iRMmPjunm3Q/?t=2320) So those ones that got us big are actually going around buying other law firms because they realized with EVE, they can very quickly consolidate what used to be a very painful reintegration process. Now it can be done on exactly what the client wants, which is, hey, the client wants a legal outcome. And EVE is made just for that. Yeah, so by doing that, they get to largely work away from a lot of the change management,