Another legal tech startup coming out of the UK: Cognitiv+ is applying artificial intelligence to automate contract analysis and management, offering businesses a way to automate staying on top of legal risks, obligations and changing regulatory landscapes.
Co-founder Vasilis Tsolis might therefore be forgiven for viewing Brexit as a sizable opportunity for his startup — though he more tactfully describes it as a “legislative challenge that we can help out with”.
“There’s going to be a lot of changes in legislation, there’s going to be a lot of changes in regulation, and you really need to know what’s going to happen to your contracts and if you need to do any changes on your legal documents or not. So it’s going to be a huge challenge,” he says of Brexit.
“I think this is going to happen more and more often,” he adds, pointing to another incoming EU regulation that will be upping businesses’ compliance needs in the near future: aka the GDPR, coming into force (including in the UK) in May 2018.
“Because you see legislation changing so fast and it’s getting so much bigger that actually it’s impossible to monitor and impossible to read it. Who can read half million of pages?”
“This is about day-to-day contract management but we think that compliance is going to be more and more strict, and it’s going to be much more difficult — there are so many new regulations, about Slavery Act, about GDPR, MiFid II and so many other compliances that all this accumulated risk analysis from your contracts we think it’s not possible to be viable for humans anymore — you need to bring the robots,” he adds.
Cognitiv+’s data-parsing tool is not being designed to interpret legislation but rather to “monitor it in a structured fashion”, combining that tracking with analysis of a company’s own contracts with a view to flagging compliance risks and requirements.
The overarching thesis is that contract analysis space/legal process outsourcing has yet to be disrupted by technology. Tsolis has both an engineering and a legal background, as you’d hope give the nature of the startup. Other co-founder, Achilleas Michos’, background is in computer science.
“When you do contract analysis and compliance and when you do regulatory analysis there’s a lot of repetition, and the majority of the people spend a lot of time — perhaps the majority of the time — looking for basic stuff… Legal but also admin assignments. So the majority of those tasks can be accelerated by automation,” argues Tsolis.
Cognitiv+ is using what he describes as “a number of AI technologies” to perform the contract analysis at near real-time speeds, leaning on open source algorithms for the core tech. But he describes the IP as “the process and all the stages we take for analyzing a contract, the training” — so, in other words, the legal expertise needed to get a proper handle on compliance.
“We use machine learning, we use NLP [natural language processing], we use neural networks… We aim to be a risk management tool; we identify as much as possible that the machine can do,” he tells TechCrunch. “When it comes to [analyzing an area such as] limit of liability if the contract is not very well drafted then obviously we cannot help you on this one — but we can help you for the vast majority of the contracts that you have on your library.”
Presumably the tech might also be able to flag up a badly drafted contract.
Contracts are uploaded to the system for analysis and tracking, with examples of the sorts of critical information Cognitiv+ can extract including the parties of the contract; the limit of liability; renewal and termination information; and jurisdiction.
Users are delivered intel on an ongoing basis via reports, dashboards and notifications. The tool is generally being designed for use by in-house lawyers, commercial staff, procurement, financial and compliance departments.
The current industry focus for the team is procurement in the financial sector, but next year it plans to expand to target the insurance, real estate and engineering industries too. They’re currently also only tracking UK-related compliance, but are intending to add EU and US in the “coming months”.
Given the financial services focus, they’re also looking at how the tech could be used to help combat financial crime, according to Tsolis.
The early stage startup has been bootstrapping since being founded in late 2015, and has just gone through London’s Winton Labs accelerator for data-focused businesses. It’s also in the midst of closing a seed round, and is running pilots of v1 of its contract-parsing platform with a “small number” of UK companies.
Tsolis says the first version is a fairly generic analytical tool, but a more vertical-specific v2 is coming in September — for financial and procurement users — and another version planned for March 2018 will target the other three target sectors. The aim is to begin revenue generating this year, via a SaaS business model.
Could the tech also be applied for drafting contracts in future, not just analyzing them? UK startup Juro, for example, already offers both contract authoring and management, though it looks to have a bit of a different focus (on marketplaces and sales contracts).
“The legal world is a long lived world for centuries now, and it’s a very traditional sector. And actually I think you need to disrupt it step by step,” says Tsolis, emphasizing the need to”bring together all the stakeholders” to ensure buy-in.
“It’s not just the lawyers — a lot of people read contracts, like the financial people, commercial, procurement, compliance, so you need to bring all the stakeholders together to ensure that people understand what the machine does. And move on to new ways of interacting with the machine and NLP and new technologies.”