VCs continue to bet big on legal tech. According to Crunchbase, firms have invested more than $1 billion in legal tech companies, an uptick from the $512 million invested last year. Contract management vendors have benefited in particular as contracting workloads increase; contracting teams at large organizations now manage an average of 19,000 contracts a year while the busiest organizations manage more than 50,000, according to a 2021 EY survey.
Angling to cash in on the gold rush, LexCheck, an AI-powered contract analysis platform, closed a $17 million Series A funding round today led by Mayfield Fund, the startup announced. Co-founder and CEO Gary Sangha says that the proceeds will be put toward fueling the expansion of LexCheck’s contract review tech, specifically focusing on R&D and sales and marketing.
“At a time of macroeconomic challenges, companies need a solution that accelerates key business processes,” Sangha told TechCrunch in an email interview. “My prior experience as an entrepreneur, along with LexCheck’s unique product development model, success, and ease of implementation, positions us to take on the potential headwinds in tech head-on.”
Sangha, a law lecturer at the University of Pennslyvania and a licensed attorney in the State of New York, 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 regulatory filings research platform that was acquired by LexisNexis in 2016.
“I’ve seen firsthand the complexity, heavy workload and time constraints faced by corporate legal teams, and how contracting can sometimes be a barrier rather than a business accelerator,” Sangha said. “I founded LexCheck to increase revenue by simplifying and accelerating commercial contracting processes across an entire organization.”
There’s evidence to suggest that AI, indeed, can make a difference where it concerns contracting. A study cited by legal workflow automation vendor Onit — not the most impartial source, to be fair — found that contract review software can make human reviewers roughly 33% more efficient by completing tasks such as first-pass contract reviews and delivering contract risk profiles.
LexCheck uses AI, including natural language processing, to support processes around editing and negotiating contracts. The platform attempts to standardize the contract negotiation process, providing organizations with digital playbooks that automate contract reviews by delivering redlines (i.e. edits), comments, insertions and deletions and automatically escalating deviations from “playbook-preferred” positions.
“These industry-standard playbooks are available for use immediately. If custom playbooks are required, LexCheck only requires between 24 and 50 sample documents to train the AI,” Sangha explained. “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 work, and this staffing model helps us achieve this goal.”
LexCheck competes with a host of companies in the contracting space, including BlackBoiler, LawGeex, LegalOn, ThoughtRiver, Luminance and Ontra. Lexion, which was incubated at the Allen Institute for Artificial Intelligence, uses machine learning and AI to automate aspects of contract management. Terzo recently raised $16 million for its tech that automatically extracts key data from contracts. Not to be outdone, ContractPodAi leverages IBM’s cloud AI tech to streamline contract management and (in theory) reduce the burden on corporate in-house legal teams.
The size of the segment isn’t terribly surprising considering the opportunity it presents. In-house lawyers are already using contract tools more than any other form of legal tech, according to a recent Bloomberg Law survey. Over half of the survey respondents said that they actively use contract management programs.
Sangha claims that LexCheck’s solution can be implemented more quickly than most and uniquely requires only a small sample set of contract redlines to train its AI for custom playbooks. It can also be integrated with existing contract lifecycle management solutions, he notes, complementing — not replacing — their capabilities.
Regardless of whether that’s true, LexCheck appears to have notched some size of foothold in the market, tripling its customer base to include some of the world’s largest financial institutions, tech providers and “top law firms” (although Sangha wouldn’t name names). Sangha wouldn’t disclose revenue 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,” Sangha added. “Contract management solution implementations can be time-consuming and challenging to deploy, often requiring significant oversight and involvement from IT teams. Deploying LexCheck is quick and seamless, reducing the IT team’s burden.”
LexCheck, which is based in New York, has 32 employees currently. To date, the startup has raised $22 million.