YC-Backed SimpleLegal Reduces Legal Bills With Machine Learning

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Nathan Wenzel and Patrik Outericky had a successful services business called Edge Solutions that helped enterprises — especially insurance companies with large portfolios of cases — sort out their legal bills. Although the business wasn’t sexy, it was profitable. But Wenzel and Outericky decided to wind that company down and go into Y Combinator to turn that review process into a scalable product instead. They are now emerging from the accelerator with a new company, SimpleLegal.

SimpleLegal takes as much friction out of the bill review process as possible. All a customer has to do is ask their law firm to copy SimpleLegal on each invoice, and then the magic starts to happen. SimpleLegal’s system ingests the invoice and parses each line item into its database. Natural language processing systems figure out who billed what and for how long — and then that data is run through a machine learning system that flags outliers. One example: the system flagged a line item where a professional billed a half hour for mailing. That might not be too unusual but for the fact that the system knew the thing being mailed was a one-page form. That’s pretty smart.

Overbilling is a serious problem in the legal industry, but Wenzel and Outericky say they aren’t out to get lawyers. They don’t think most lawyers overbill maliciously (although some do). There are many sources of waste and error: pressures on young associates to bill large numbers of hours; billing time in inappropriate increments (the industry standard is 0.1-hour increments, but some firms don’t follow that); insufficient training; and simple carelessness, like not entering time until the end of the week and then having to piece things together from memory. Smart lawyers will even like this product because it helps them have the inevitable billing discussions with their clients on the basis of data, and clients who understand their bills and feel good about them are more likely to pay on time.

So far, SimpleLegal’s customers are delighted because the system works and saves them money — 5%–20% savings are typical. Early customers include StripePebble, EasyPost, and MobileWorks, plus several others they aren’t talking about.

Wenzel says, “We think turning legal bills into data to bring transparency and cost savings to our customers is pretty exciting.” Whether you agree with that or not, it’s hard to argue with solid fundamentals: SimpleLegal charges customers less money than it saves them. The founders expect the company will be profitable by the end of the year.

It’s a good time to be unsexy in Silicon Valley.