6%

Founders walk into rooms with conviction.

So do investors.

LegalTech and the ability to resolve disputes online has long felt like a promising prospect to me. It allows Indian debt collectors to mediate with defaulters at scale, moving away from the thugs and goons model.

Initially, my pitch felt obvious: India has a court backlog of over 50 million pending cases, a growing middle class with rising consumer debt, and a generation of borrowers who would rather resolve a dispute on an app than step into a courtroom.

Technology, I told myself, and truly believed, was the inevitable answer to a system that had been broken for decades.

But execution of that technology is something I initially failed to understand on a granular level.

What is the recovery rate for LegalTech companies in the OR space?

6%.

I had spent weeks building conviction around the elegance of the solution and not nearly enough time interrogating whether the market was actually, ready to use it. When I dug into the company's MoUs further, I realised that the 6% recovery rate detracts not significantly, but almost entirely, from the elegant solution I had been perceiving.

Here is what 6% translates to in reality.

For every 100 borrowers the platform attempted to reach through formal digital mediation, 94 either ignored it, rejected it, or defaulted anyway. The alternative, which nobody in a pitch deck ever mentions, is the agent who shows up at your doorstep. Uncomfortable, coercive, occasionally aggressive, and apparently far more effective.

That is where the harder underlying question emerges. If the formal, technology-enabled, legally sound solution recovers 6%, and the informal, blunt, deeply imperfect human method recovers multiples of that, what does that tell us about where the real problem actually sits?

It is not a technology problem. It is a deep rooted behavioural and trust problem. A problem of whether the people on the other end of a debt dispute believe that engaging with a formal system will produce a fair outcome for them. Until that belief exists, the elegance of the platform is irrelevant.

I still believe that in the long term LegalTech will play a key role in India's debt resolution stack. When, that is where my ambiguity lies.

The agents and goons, as uncomfortable as it is to write this, are solving for trust in the only language the market currently understands. The technology is solving for a world that does not yet exist.

The job right now is to build the bridge between the two. While this is a harder, slower, less elegant pitch, it is the honest one.

The bottomline?

Be it a founder or investor, finish your homework before you walk into the room.