VCs continue to bet big on legal tech. According to according to Crunchbase, companies have invested more than $1 billion in legal tech companies, up from the $512 million invested last year. Contract management vendors have particularly benefited from the increase in contract workloads; contracting teams at large organizations now manage an average of 19,000 contracts per year while the busiest organizations manage more than 50,000, according to to a 2021 EY survey.
To cash in on the gold rush, LexCheck, an AI-powered contract analytics platform, today closed a $17 million Series A funding round led by Mayfield Fund, the startup announced. Co-founder and CEO Gary Sangha says the proceeds will be used to help drive the expansion of LexCheck’s contract review technology, focusing particularly on R&D and sales and marketing.
“In a time of macroeconomic challenges, companies need a solution that accelerates key business processes,” Sangha told australiabusinessblog.com in an email interview. “My previous experience as an entrepreneur, along with LexCheck’s unique product development model, success and ease of implementation, enables us to address the potential technology headwinds head-on.”
Sangha, a law professor at the University of Pennslyvania and a New York State attorney, founded LexCheck in 2015. After practicing securities law at Shearman & Sterling in New York City and White & Case in Hong Kong, Sangha founded Intelligize, a registration inquiry platform that was acquired by LexisNexis in 2016.
“I have seen firsthand the complexity, heavy workload and time constraints faced by corporate legal teams, and how contracting can sometimes be more of a barrier than a business accelerator,” said Sangha. “I founded LexCheck to increase revenue by simplifying and accelerating commercial contracting processes across an organization.”
There is some evidence that AI can indeed make a difference when it comes to contracting. A study quoted by Onit, legal workflow automation provider – not the most impartial source, to be fair – found that contract review software can make human reviewers approximately 33% more efficient by performing tasks such as first-pass contract reviews and providing contract risk profiles.
LexCheck uses AI, including natural language processing, to support processes around contract redaction and negotiation. The platform seeks to standardize the contract negotiation process by providing organizations with digital playbooks that automate contract reviews by providing redlines (i.e. edits), comments, insertions, and deletions, and automatically escalating deviations from playbook preferred positions.
“These industry standard scenarios are immediately available for use. If custom scripts are required, LexCheck only needs between 24 and 50 sample documents to train the AI,” explains Sangha. “LexCheck’s products are built by practicing lawyers in collaboration with linguists and software engineers… Our mission is to create solutions that work the way lawyers need them to, and this staffing model helps us achieve this goal.”
LexCheck competes with a host of companies in the contract space, including Blackboiler, LawGeex, LegalOn, ThoughtRiver, Luminance, and Ontra. Developed at the Allen Institute for Artificial Intelligence, Lexion uses machine learning and AI to automate aspects of contract management. Terzo recently raised $16 million for its technology that automatically extracts important data from contracts. Not wanting to be outdone, ContractPodAi leverages IBM’s cloud AI technology to streamline contract management and (in theory) ease the strain on corporate legal teams.
The size of the segment is not very surprising given the opportunities it offers. Corporate lawyers already use contract tools more than any other form of legal tech, according to to a recent study by Bloomberg Law. More than half of respondents reported actively using contract management programs.
Sangha claims that LexCheck’s solution can be deployed faster than most others and uniquely requires only a small number of contract redlines to train the AI for custom playbooks. It also integrates with existing contract lifecycle management solutions, he notes, to complement — not replace — their capabilities.
Whether or not that’s true, LexCheck appears to have gained some foothold in the market, tripling its customer base that includes some of the world’s largest financial institutions, technology providers, and “top law firms” (although Sangha won’t name names). Sangha declined to disclose sales figures when asked, saying only that LexCheck continues to experience “significant growth” and is “optimistic” about future funding.
“Business leaders have four critical priorities that impact contracting teams – reducing costs, improving risk management, digitizing the business and enabling growth – all of which LexCheck can help with,” added Sangha. “Deploying contract management solutions can be time-consuming and challenging to implement, often requiring significant oversight and involvement from IT teams. Implementing LexCheck is fast and seamless, relieving the IT team.”
LexCheck, based in New York, currently has 32 employees. To date, the startup has raised $22 million.