VCs continue to bet big on legal tech. According to Crouchbase, firms have invested more than $1 billion in legal tech companies, up from $512 million invested in the previous year. Contract management providers have especially benefited as contract workloads increase. Contracts teams in large organizations now manage an average of 19,000 contracts, while the busiest organizations manage more than 50,000, according to a 2021 EY study.
In an attempt to cash in on the gold rush, LexCheck, an AI-powered contract analysis platform, today closed a $17 million Series A funding round led by Mayfield Fund, the startup announced. Co-founder and CEO Gary Sanga said the proceeds will be used to expand LexCheck’s contract review technology, focusing primarily on R&D and sales and marketing.
“In times of macroeconomic challenges, companies need solutions that accelerate key business processes,” Sanga told TechCrunch in an email interview. “My previous experience as an entrepreneur, along with LexChek’s unique product development model, success and ease of implementation, positions us to catch wind of the potential in the technology.”
Sanga, a law professor at the University of Pennsylvania and a licensed attorney in New York State, founded LexCheck in 2015. After practicing securities law at Sherman & Sterling in New York City and White & Case in Hong Kong, he founded Sanga Intelligence. In the year A research platform for regulatory documents acquired by LexisNexis in 2016.
“I’ve seen firsthand the complexity, heavy workloads and time constraints that corporate legal teams face, and how contracts can sometimes be more of a hindrance than a business accelerator,” Sanga said. “I founded LexCheck to increase revenue by simplifying and accelerating business contract processes across the organization.”
There is evidence to suggest that AI could indeed revolutionize contracting. A study cited by legal workflow automation provider Onit — not a very independent source to be fair — Contract review software can make human reviewers 33% more efficient by completing contract reviews as a first pass and providing contract risk profiles.
LexCheck uses AI, including natural language processing, to support processes around drafting and negotiating contracts. The platform attempts to standardize the contract negotiation process, delivering redlines (i.e. editing), comments, insertions and cancellations, providing organizations with a digital playbook that automates contract revisions and deviates from “preferred playbook” positions.
“These industry-standard playbooks are immediately usable. If custom playbooks are necessary, LexCheck only needs 24 to 50 sample documents to train the AI,” explains Sangha. LexCheck’s products are developed by practicing lawyers in collaboration with linguists and software engineers… Our mission is to create solutions that work the way lawyers want them to, and this staffing model helps us achieve that goal.
LexCheck competes with many companies in the contracting space, including Blackboiler, Logicx, LegalOn, ThoughtRiver, Luminance and Ontra. Developed at the Allen Institute for Artificial Intelligence, Lexion uses machine learning and AI to automate aspects of contract management. Terzo recently raised $16 million for its technology that extracts key data from contracts. Not to be overlooked, ContractPodAi uses IBM Cloud AI tech to streamline contract management and (in theory) reduce the burden on corporate in-house legal teams.
Considering the opportunity it offers, the size of the room isn’t too surprising. In-house lawyers are using contract tools more than any other legal technology, according to a recent Bloomberg Legal study. More than half of those surveyed said they actively use contract management programs.
Sanga says LexCheck’s solution can be implemented faster than most and uniquely requires only a small set of contract redlines to train AI for custom playbooks. It can also be integrated with existing contract lifecycle management solutions, he notes, complimenting – not replacing – their capabilities.
Be that as it may, LexCheck appears to have made some headway in the market, tripling its client base to include some of the world’s largest financial institutions, technology providers, and “top law firms” (although Sanga won’t name it). Sangh would not 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 contract teams – reducing costs, improving risk management, digitizing the business and enabling growth – all of which LexCheck can help with,” Sanga added. “Implementing a contract management solution 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 burden on the IT team.”
Based in New York, Lexcheck currently has 32 employees. To date, the startup has raised $22 million.