Spellbook, which likes to be known as ‘the Cursor for contracts’, has raised $50m in a Series B funding round led by Keith Rabois, Managing Director at Khosla Ventures. The capital raise values the company at $350m post-money and brings total funding to over $80m, the company told Artificial Lawyer – (See In-depth AL Interview with CEO, Scott Stevenson, below.)
The new funds will fuel Spellbook’s expansion ‘beyond contract review into the full scope of transactional work, and scale its go-to-market teams to capture more of the $1 trillion transactional legal services market’, they said, as well as enhance their AI capabilities with ‘deeper contract intelligence grounded in realtime market data’, the Canada-based company explained.
Other investors included Threshold Ventures, and existing investors Inovia Capital, Bling Capital, Moxxie Ventures, Path Ventures and Jean-Michel Lemieux.
The new cash comes as Spellbook said it had surpassed 10 million contacts reviewed on its platform, with customers including Nestlé, eBay, and law firm Kennedys, among others.
They added that they are ‘on pace to triple revenue this year’, and are serving nearly 4,000 law firms and in-house legal teams across 80 countries, ‘more customers than any comparable AI contract review product’, they claimed.
CEO, Stevenson, commented: ‘We’re at the spreadsheet moment for lawyers. Just as spreadsheets transformed accounting, large language models are transforming law after 20 years of technological stagnation. With $30 trillion running through contracts annually in the US alone, even small efficiency gains create massive value. This funding accelerates our mission to make contracts move at the speed of commerce.’
Rabois, Managing Director of Khosla Ventures, who will join Spellbook’s board of directors, added: ‘Spellbook is using technology to make law faster, better, and more transparent. It’s the Shopify and Square democratization story for lawyers.’
And here is the In-depth AL Interview with CEO, Scott Stevenson.
Congrats on the new raise, what does this investment mean to you on a personal level? It must make you feel very proud to have got to this stage so quickly.
The validation makes me extremely proud of our team. I think we have a pretty special group of people. It has been an incredible 3 years since we launched Spellbook. But it’s actually been a 7-year journey in Legaltech for myself and my co-founders, we launched a doc automation product called Rally back in 2018. We have never wavered from wanting to make transactional legal services more efficient. We thought the problem was big enough to keep hammering on. But the technology to really solve the problem didn’t exist until 5 years into our journey! It’s shown us the value of lean perseverance and open-mindedness in entrepreneurship. It’s hard to anticipate exactly how things will work out, but if you believe there is a problem worth solving and you keep hammering on it – hopefully you’ll figure it out.
Stepping back, how much has the arrival of genAI changed your direction and the opportunity for business growth for you?
It changed everything. Large language models will be for lawyers what spreadsheets were for accountants. Everyone thought lawyers were just bad at adopting software. No, the problem was that software just wasn’t that useful to lawyers until LLMs broke through with GPT2. Spreadsheets take in a lot of numbers and output a lot of numbers. LLMs take in a lot of text and output a lot of text.
What will the money be spent on?
One, we want to build the most data-backed contract-review tool in the world. We’ve launched a new Market Comparison feature in beta, and are beginning to integrate realtime market data into everything we do. Lawyers are sick of ‘AI slop’ contract negotiation. They need to be able to point to data like: ‘This clause has not been seen in 98% of similar contracts in NYC real estate, in Q3 this year’. It’s not useful to say: ‘AI told me this isn’t market’, without a citation.
Two, we’re going much deeper on individual and org preference learning. Contract review suggestions are more like Youtube video recommendations than a math equation. They’re highly subjective. The more we can tune systems for lawyer/org preferences, the happier users will be.
Three, we’re expanding into the full scope of transactional legal work, continuing to build out our agent, Spellbook Associate. We launched it last year, and now in terms of user growth and usage, it’s already rivaling our core Word Add-In product. There are a lot of other parts of the transactional workflow for us to capture.
Four, we’re doubling down on support for large enterprises and firms. We’ve seen huge takeoff from enterprise in-house teams and large firms. We’re investing heavily in building out the support and product features that make these customers happy: CLM and DMS integrations, granular security settings, world class support across timezones, to name a few things.
On the product side, how significant a step forward are these new capabilities?
I think making market standards transparent to everyone will fundamentally change negotiation dynamics. Previously pools of market data were siloed at large firms, and often spotty. A world where every party knows what is ‘normal’, and can point to the data on it, will be much more efficient for everyone.
Lastly, how do you see the legal AI market developing now, especially for contract AI tools?
I think we will see massive growth, and people will start to realize how big the contract market really is. We have many legal teams rolling us out across procurement, HR, sales. It reminds me of Figma, which is the design software every tech company uses. People thought that Figma couldn’t be that big, because there aren’t many designers. But it turns out CEOs, engineers and marketers all want to collaborate in Figma. Now it has a $24B market cap.
I think we will see a lot of consolidation over the next couple years. The market has matured very quickly, making it hard for new entrants to get a foothold, and we hear from a small contract AI company looking to get acquired every week or two. We are likely raising additional financing to support acquisitions.
When we launched AI contract review in early 2023, our suggestion acceptance rate was 5%. Today it is nearly 60%. There is a real advantage to seeing more feedback and data from users, to improve the quality of products. It’s hard for new entrants to hit the same level of quality.
Thanks and congratulations on the funding, new capabilities, and continued growth!
You can find more about Spellbook here.
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If you’d like to stay ahead of the legal AI curve then come along to Legal Innovators New York, Nov 19 + 20 and also, Legal Innovators UK – Nov 4 + 5 + 6, where the brightest minds will be sharing their insights on where we are now and where we are heading.
Legal Innovators UK arrives first, with: Law Firm Day on Nov 4th, then Inhouse Day, on the 5th, and then our new Litigation Day on the 6th.
Both events, as always, are organised by the Cosmonauts team!
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