Can you explain exactly what LegalSifter does and what problem it solves?
Contracts are the most important document in global commerce, and they are universally difficult to read, negotiate, and keep track of after signing. Legal Sifter relieves that contract pain by offering software and services supported by Combined Intelligence® (a combination of artificial and human intelligence) to address “before you sign” and “after you sign” pains. As a result, our clients can confidently sign contracts faster with less risk at lower cost, and they can retrieve those signed contracts at any time in a matter of seconds.
How did the company get started?
The company was started in the summer of 2013 when a local VC who was also an adjunct professor at Carnegie Mellon, said "Hey, Natural Language Processing Machine Learning has arrived. It's going to automate routine cognitive tasks. There are a bunch of those in legal. Go figure something out.” So, the co-founders took the investment and built a demo product called the Freelancer Scorecard, which was the first AI contract review tool. After a promising launch followed by a shutdown when the company was accused of “the unauthorized practice of law,” a VC stepped in as the CEO and took them down the path of extracting and organizing data and documents for a Global 500 bank.
Around this time, about a year after that launch, I learned about the business and the product. I was so impressed that I joined as the CEO and invested in the business.
Tell me about your team and approach?
The team at LegalSifter is a group of software engineers, data scientists, lawyers and paralegals, and business operators. Many of us have worked together in past lives. Some were together 20 years ago at FreeMarkets before it became part of Ariba and then SAP. Another small group of us worked together in my last company, Industrial Scientific. Our team shares a common set of values that are important to the culture at LegalSifter. Alignment to these core values -- speed, security, humility, intelligence, boldness, and balance – is part of what we look for in people we recruit to the team.
We believe that good financial performance is the result of doing the right things for our clients, partners, shareholders, and people in balance. We also talk about being servant leaders here. We draw the org chart upside down. So, I'm at the bottom and the team are at the top. That sense of flexibility and service permeates through our culture and into our brand promise to our people and our clients.
What trends are you seeing in this market / how is LegalSifter differentiated in the market?
The first trend that we're seeing globally is the shift in the veracity of artificial intelligence that started at the end of 2022 and has continued into this year. Every industry is talking about large language models, generative AI, and how to apply these more advanced techniques and technologies to business problems.
The second trend is the commoditization of the CLM (contract lifecycle management) software provider. There are many software providers who can deliver a repository, some workflows, some reports, even some AI inside of that. Because there are so many CLMs that have been overfunded, they have developed the same feature sets. As a result, it's difficult for a buyer to understand the differentiation.
The third major trend is that clients are seeing the shortcomings of CLM. They are recognizing that they can’t manage the CLM software, and that they need to outsource the curation of their contracts to an expert like LegalSifter.
What are some of the specific challenges you’ve faced and how have you successfully addressed them?
The market is very muddy. It hasn't consolidated. The result is that clients are being bombarded by numerous messages at once. Our approach is to leverage our combination of human expertise as well as AI. We are the only company in our space that provides AI and human expertise and offers software and services on the same platform. That combination allows us to create unique solutions to our clients’ problems. As we continue to overcome this challenge we need to cut through the noise of a crowded marketplace and raise awareness of our exceptional product suite and the unparalleled contract expertise of our team.
What attracted you to Carrick?
Carrick has unique expertise in tech-enabled managed services, so there is an incredible alignment with their operational expertise and objectives. What we're trying to accomplish resonates with the principals at Carrick, and they have unique insight into how to grow and scale a business like ours. We picked Carrick because of the cultural alignment. After many meetings and a competitive review, we felt confident that their core values aligned the most closely with ours and that our views of how to run a business fit hand-in-glove. It felt natural to us. If you're the type of company that wants to be run professionally for the long term, Carrick can help you build businesses with staying power.
What are the benefits of working with a group like Carrick Capital Partners?
We bought two companies in August 2023. We could not have done that without Carrick. We needed somebody to believe and have enough conviction about our story to enable us to put all the pieces in place. We needed to close some gaps in the contract story, and Carrick shared that view. In the first six months they have already helped us close the gaps, to identify an acquisition, and to support us through the process of two acquisitions with advice, negotiation, and financial support.
What is your advice for other growing businesses considering private equity?
I got great advice from one of our top shareholders early on. He said, "When you evaluate a partner / investor, there are only three things that you need to think about. The first is whether they can write a big check. The second is if they bring something unique and helpful to the table relative to your business. The third is if you would want to have dinner with them.” Carrick checks all three boxes.
Tell me about your road map. What is next for LegalSifter and what are your long-term goals?
I think we're a billion-dollar business. We have demonstrated that this software and service approach is going to work. Our mission is to bring affordable legal services to the world. Contracts are the first step. If we can do this and show affordability and speed and quality with these techniques and this strategy, we can apply it to other parts of the law. The legal industry is a trillion-dollar business, but it should be a $2 trillion business, and all the prices should be lower. The only reason this hasn’t already happened is that lawyers in the industry haven't had technology and techniques to scale. But AI is now uniquely positioned to help them scale because unlike previous technology it can do much of the reading and writing work that lawyers do.
The future of the law is that companies that offer software and services are going to be the "winners". They are going to drive the pricing down and the service levels and quality up, and we are going to help make that possible.