Eye On AI: Legal Tech Funding Getting AI Upgrade

This column is a look back at the week that was in AI. Read the previous one here.

Late last week it was reported ​​artificial intelligence startup Harvey was looking at raising $600 million at a $2 billion valuation.

Of course, news of a nine-figure fundraise at a billion-dollar-plus valuation is nothing new in AI — just look at some of the news over the past couple of days.

However, it’s what Harvey does and what such a round could do to its industry funding that caught our attention.

Harvey’s platform helps with research and analysis of legal documents, and is one of a growing number of generative AI startups in legal tech looking to take some repetitive, time-consuming and mundane tasks off lawyers’ plates.

Legal tech startup funding is slightly down this year compared to last, per Crunchbase data. Through nearly half the year, legal tech startups have raised only $356 million, compared to the $871 million VC-backed startups raised last year in the sector.

Obviously, Harvey’s round — if it comes to fruition — would completely flip that funding trajectory, showing the growing pull AI seems to have in the legal industry.

Some of the largest rounds raised in legal tech this year have been from other AI startups looking to get a foothold in the industry, including:

• London-based Robin AI, a legal assistant designed to automate and expedite the drafting of contracts, raising a Series B worth approximately $26.7 million.
• New York-based DraftWise, a contract and negotiation platform for law firms, raising  a $20 million Series A.
• Toronto-based Spellbook is a legal software startup that develops a generative artificial intelligence contract drafting tool for lawyers, raising a Series A worth approximately $19.6 million.

Of course this trend of AI-related legal tech startups receiving funding actually started last year — including with Harvey itself. The San Francisco-based startup raised an $80 million Series B just last December led by Kleiner Perkins and Elad Gil that valued the company at more than $700 million post money.

In addition, other AI startups like Darrow, LegalMation and Powerlaw AI all raised solid rounds last year.

That investor interest that began incubating last year for AI-related legal tech seems to only be growing — and now the space may be about to see its biggest raise ever.

For years legal tech funding has ebbed and flowed as the sector has been a notoriously slow adopter. However, AI, as it has done in so many other industries, seems to be slowly changing that funding dynamic.

Things that caught our eye and other stuff:

• Another industry seeing a good amount of disruption thanks to AI is healthcare. This week saw yet another startup get a good-size tranche of cash. New York-based Anterior, an AI healthcare administration platform, locked up a $20 million Series A led by NEA at a reported $95 million post-money valuation. The company’s AI co-pilot helps with insurance approvals and reduces denial rates for care. Its initial offering is in prior authorization automation.
• Another financial services startup using AI also collected some cash. Salt Lake City-based Jump, which uses AI to automate repetitive tasks like notetaking and sifting through data from previous client calls, raised $4.6 million in a funding round led by Sorenson Capital.

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Illustration: Dom Guzman