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lighthouse-ediscoveryLighthouse eDiscovery started 20 years ago, copying and scanning paper-based legal documents so they could be searched electronically.

The Seattle company is still around, though the business has certainly evolved. It now provides electronic discovery products to some of the biggest law firms in the country as well as huge corporate legal departments at companies such as Google, GE, Microsoft, Cisco and Starbucks.

Brian McManus
Brian McManus

That client base, not to mention the rapid growth in recent years, attracted suitors. Today, New York-based private equity investor Spire Capital is announcing a $30 million investment in Lighthouse eDiscovery, money that will be used to cash out some of the early investors as well as provide growth capital for an East Coast data center and European expansion. As a result of the financing, Sean White of Spire Capital has joined the board.

Spire will become a minority investor, but McManus declined to say what percentage of the new capital will be used to grow the business, simply saying it is a “significant” amount.

Corporate legal departments and law firms love Lighthouse because it helps them save time and money, allowing lawyers to sift through mountains of legal documents related to complex litigation or government investigations.  As CEO Brian McManus notes, the Web-based service allows lawyers to determine what’s relevant and what’s “junk.”

For example, Lighthouse eDiscovery now offers a service that allows lawyers to automatically scan legal documents for personally identifiable information — phone numbers, credit card numbers or addresses. Typically, lawyers must go through the painstaking process of redacting much of that information from the legal documents.

“We’ve created a tool that automatically finds that personally identifiable information … and automatically redacts it across the whole document,” said McManus, a former InfoSpace executive. “And when you are talking about millions of documents, which can be the case on some of these big cases we are helping our clients with, it results in savings of hundreds of thousands and millions of dollars on legal fees in a given case.”

Lighthouse eDiscovery, which employs about 100 people in the U.S. and 15 in India, raised about $4.5 million in financing in 2012 from Columbia Pacific Advisors. That followed an acquisition of the business in 2007 by former InfoSpace CFO David Rostov, who bought out the original founders. Rostov now runs financial operations at fast-growing sales tax automation company Avalara, but remains on the board of Lighthouse.

McManus declined to comment on the company’s revenues, but he said Lighthouse is the fastest growing company in the eDiscovery field and continues to grab market share and large Fortune 500 customers.

Lighthouse competes with publicly-traded Epiq Systems, which boasts a market value of $661 million and has been the subject of private equity buyout speculation in recent months.  Other competitors include Kroll, FTI and DTI.

“It is a really fractured business,” said McManus. “There are hundreds of service providers in the space, because it started as a very local service. You had to be down the street from where the paper was. And now, of course, that’s not (the case). It is a very national and scaleable business.”

Seattle has a history of innovating in the e-discovery market, with firms such as Applied Discovery and Attenex. That has provided a solid base of talent that Lighthouse has used to grow, with the company planning to reach about 135 employees by the end of the year.

“We have been able to come into the market with the latest technology and we’ve been able to attract really experienced folks in e-discovery,” said McManus.

It also doesn’t hurt that the company is serving a growing market. After all, corporate litigation and government investigations do not appear to be going away anytime soon.

“While that is unfortunate for our clients, it is driving a lot of work for service providers like us,” said McManus.

 

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