Stanford Law School's comprehensive analysis reveals that while legal tech has attracted $700 million in AI startup funding since early 2023, structural barriers persist in law firm adoption. The report identifies technical solutions like retrieval augmentation and guardrails addressing accuracy and privacy concerns, but highlights fundamental challenges including billable hour models and incumbent dominance. For legal tech entrepreneurs, the key insight is positioning as partners rather than competitors to established players, particularly in specialized domains like IP and compliance where opportunities remain most promising.