ArbiClaims brings arbitration to the sharing economy

The seed-funded legal tech startup won the "runner up" prize at Vator Splash LA 2016

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At Vator Splash LA 2016 last month, eight startup finalists took turns delivering quick pitches and answering questions from a panel of judges and venture capitalists, including Mark Cuban (Owner, Dallas Mavericks), Brian Lee (Founder & CEO, The Honest Company), and Binti Yost (Principal - Economic & Valuation Services, KPMG).

ArbiClaims was the runner up winner in the startup competition!

Currently composed of three full-time employees, three part-time employees, and 12 arbitrators, the Los Angeles-based company has stepped up to help users of sharing economy platforms settle small claims disputes. According to the company:

ArbiClaims is an online dispute resolution platform. We use court enforceable, binding arbitration to resolve disputes under $10,000. From filing to collection. All for $79-159/party. Typically within 3-4 weeks.

Founder and CEO Stephen Kane went to Stanford for college and law school, and in between the two worked at a couple startups. Today, he has over a decade of experience in sales and business development from working at various companies (including legal tech company Lex Machina, which sold to LexisNexis last year); and he has served his own clients for the past six years.

The idea for ArbiClaims came to Kane while working as a small business and startup attorney: “I kept getting calls from people with small disputes,” he told me over the phone, “but it didn’t make sense for them to hire me” because his attorney fees would end up costing around $1,000.

One of the most common disputes that would land on Kane’s desk involves disagreements between landlords and tenants around security deposits. Other disputes include small breaches of contract or unpaid invoices.

When claims are made for just $2,000-$3,000, hiring an attorney could cost as much as the claim itself.

Kane would suggest parties go to small claims court, but many had a “bad reaction” to that, so he started exploring different options. When he realized options were severely limited, he founded ArbiClaims.

ArbiClaims today

ArbiClaims is an online dispute resolution platform hoping to change the way people think about and resolve disputes.

“The mission is to increase access to justice for a lot of people,” said Kane. “We’ll be successful if we’ve impacted the world in that way. It’s world that’s more free of disputes and disputes that drag on, so you can more quickly put it behind you”

While ArbiClaims’ platform could technically be used by anyone with a small claims dispute (see: landlords, tenants, and roommates mentioned above), the company has decided to start with enterprise as a way to grow more quickly. Today, ArbiClaims has a dozen customers and partners: customers include a major professional services marketplace, Turo, and Spinlister, while partners include Better Business Bureau, US Legal, and Expedia-owned HomeAway.

After crunching some numbers across their customer base (including the ones they can’t publicly name), Kane told me ArbiClaims currently covers up to 10 million people.

ArbiClaims sees great promise in the professional services industry, which will always require dispute resolution, but the company has struck a chord by also playing in the sharing economy sector. Asset marketplaces like Airbnb and Uber leverage hundreds of thousands of drivers and hosts to support their vast platforms, and they play middlemen between those asset providers and regular consumers who need a ride or a place to stay.

You can apply the ArbiClaims template to any of companies. If the TaskRabbit worker messes up the job, the customer might not want to pay for it. If the Airbnb traveler damages a host’s apartment, the host will want compensation. If the Turo host’s car lost its value in an accident, they may want to pursue that lost value. And on and on.

Some sharing economy companies, Kane explained, already have specific policies and teams (with names like “Marketplace Integrity” or “Trust & Safety) in place to resolve disputes. Others, including some ArbiClaims customers, take a hands-off approach and simply refer parties to the ArbiClaims platform. The rest take a mixed approach, trying to resolve disputes internally and then sending tougher problems to ArbiClaims.

The future of ArbiClaims

ArbiClaims is still young, so right now it’s focused on signing more enterprise users and perfecting its settlement engine so that more cases get settled before moving to an actual hearing.

In terms of growing its customer base, Kane pointed out that working with sharing economy companies is a great first step because it also opens up traditional service-based industries, like hotels and rental car companies. And any general contractor, from plumbers to freelance writers, could have a need for the platform.

After the enterprise, there’s also opportunity in the consumer market:

“It’s going to take some time to figure out which niche works for consumers the best, and to do things like have more and people put ArbiClaims arbitration clauses into their agreements and leases,” said Kane. “Right now you can invite someone to arbitrate, and that works a certain percentage of the time. But we know it’s going to take some time to build a reputation and brand in the consumer market.”

So the company’s still listening to the market and making important tweaks. One interesting change early on was the shift in business model. ArbiClaims today charges each party a flat rate of $79-$159 depending on the amount in controversy, but an earlier iteration of the platform actually tested a revenue-split as part of payment. Feedback from customers said there was a perception of bias there, however, so the company switched to a flat rate after just a few months.

As of today, ArbiClaims has raised just $135K in seed funding from angel investors Kfir Gavrieli (co-founder and CEO of Tikes), Dan Murillo, and Billy Ku. The company is currently targeting a new $100-300K seed round—new funding that could help fuel the company’s scaling efforts while staying lean.