LegalSifter recently closed an investment round that should propel them to new milestones through funding and synergy effects. Seeing this news, I remembered my first contact with their team (shout-out to Laura Taylor and David Heyman) and this discussion with Marko Porobija, one of their users. It was a fitting opportunity to catch up on their journey.
For those new to LegalSifter - they provide an AI Contract Management system that helps their customers navigate legal risks. According to their website, they serve customers in eighteen countries - a challenging feat given linguistic and cultural differences. I found their Combined Intelligence™ approach particularly intriguing and asked them about it - you will see more below.
Kevin Miller, the CEO of LegalSifter, was kind with his time; we hopped on a call and discussed LegalSifter's story thus far, insights, entrepreneurial struggle, and lessons learned. I hope you will enjoy it as much as I did; fingers crossed for their plans to pan out!
Photo by Eriksson Luo on Unsplash
Q: Kevin, for starters, would you tell us more about your concept of Combined Intelligence™? What is it, and how does it work?
Kevin Miller: To provide some context, I should mention our “before you sign” and “after you sign” stages. Our products and services solve our customer base's challenges in both phases.
In the “before” stage, we help our customers review and negotiate contracts and navigate legal risks. And we do so by combining artificial intelligence and human expertise. We call that Combined Intelligence™. You’ve seen our software, our SaaS component, but did you know we also offer services on top?
To elaborate, we’ve developed a hybrid approach that combines the best of both worlds: the SaaS and concierge services. Here’s an example to illustrate how it works from the customers' perspective:-
Think of a small business needing to negotiate and sign an agreement. This case could be something the business owners are accustomed to (if they tackle similar arrangements frequently or have built internal capacity), or it could be an entirely new subject.
In the former case, they may opt to use our software component and “sift” through documents by themselves, assisted by our AI-powered product. They would reach their result nearly instantly and continue with their day.
Alternatively, the subject matter might be unfamiliar to them, and they might feel more comfortable having an actual human expert looking at their proposed transaction. In such a scenario, clients could involve law firms, but we all know this tends to be a costly option. Hence, we have decided to offer services where our team of experts would look at their documents and suggest changes and text reinforcements if and where necessary. We will return results within the same or the next day at the latest.
Commercially, this works as follows: customers buy credits, which we call “sifts.” If you are a gamer, you might be tempted to think of it as an in-game currency. Circling back to the previous example, you would spend one sift if you used our AI solution by yourself. Conversely, if you asked us to jump in, that might cost you two, four, or six sifts, depending on the issue's complexity.
Q: Amazing, I love your “gamer” analogy. How did you come up with an idea, and why did you decide on the “sifts” approach?
Photo by Chris Lawton on Unsplash
KM: According to many sources, the most significant resistance to change in the legal industry comes from resource and capacity issues. It seems intuitive to call out lawyers as tech-averse. Still, most critics don’t consider that lawyers might be too busy to invest considerable time trying out so many options.
Therefore, our proposition is simple - don’t buy software, buy results.
This line brings me back to movie rental days. We were used to going to video stores and browsing titles until we found what we wanted to watch. Successful video streaming services understood that people wanted to watch movies; everything else was friction. It was necessary before video streaming services existed, but friction nonetheless.
Netflix and others have removed the friction, and that made them successful. Similarly, we aim to remove the objection of time, capacity, and implementation cost. Just buy results instead.
I explained why we took the approach we have nowadays. As to how we came to it, it is another story. We ran through many iterations while searching for the product-market fit, and the business model was a part of this discovery.
Q: You have recently closed a fundraising round (congratulations!), which is yet another validation of your product-market fit journey…
KM: Indeed! Some entrepreneurs take the technology they devised and try to find problems to solve along the way. Successful ones, however, know it takes just the right blend of people, processes, and technology to spot and address problems worth solving. We have been growing year over year, sometimes by double digits, at other times by triple digits. It wasn’t easy, but all said and done, I believe we have found our sweet spot.
Q: According to the PR, you plan to use the capital to expand your product/service palette and ramp up operations. Any specific plans that you’d like to share?
Now that we have reached the product-market fit, we will use the capital to strengthen product management, marketing, and sales. We must ensure our products and services continually satisfy the highest industry standards while getting out there with our story. Likewise, we need salespeople to help with closing deals successfully.
Q: Speaking of the PR, you mentioned it wasn’t entirely smooth sailing due to, well, everything in the past few years. How did the global macro influence your plans, and what did you have to go through?
KM: Over the last fifteen months, I have been in almost constant fundraising discussions. It wasn’t easy, but we had to get our story across. Moreover, the story had to resonate on a few different levels; we had to show that our people and culture were great, our offering had to make sense, and the growth had to be there.
Regarding our people and culture, our research has shown that our customers would love to continue working with us. This is critical, as you can always find room for improvement with your products, but people and their values are indispensable.
While we were happy to have found the PMF, our approach didn’t always fit the investment thesis. Some investors had the mandate to invest in pure SaaS solutions, and, love our business as they might, they couldn’t subscribe to our story. Traditional VCs were mainly in this basket, and I had to turn to PE investors, who tend to look at businesses from a more holistic perspective. Then again, it took us a while until we reached metrics at which they were comfortable investing in our company.
With Carrick Capital Partners, we’ve got our revenue just above their threshold, and they were willing to commit. But as I said, reaching the product-market fit took us a while, then showing the required growth level. We were lucky to have had the support of some angel and venture investors along the way. I am happy they believed in us.
Q: Factor is also an investor in this round. I presume everyone hopes to tap into synergies. I appreciate it is early, but is there anything you are willing to share there?
KM: Yes, Factor is an exciting organization that relies predominantly on human resources to tackle service needs. Of course, they use software solutions to streamline their services, just nothing proprietary.
LegalSifter, on the other hand, predominantly leverages the power of our AI-enabled products. I mentioned we have our concierge team; however, our primary focus was mainly on the product side.
With this investment and Factor as our sister company, I can now approach larger customers who need SaaS and human-delivered service in large volumes. I can always refer to Factor’s resources in such cases. On the other hand, Factor can use our AI-powered systems to enhance their services. Also, Factor can empower its customers to use our products independently, where that makes sense.
Q: Your offering is already present internationally. Is there any particular message that you would like to send to European lawyers and leaders of legal service providers?
KM: Yes - we are finally coming to Europe. Look for the news in the coming weeks; we will open an office in Poland, and we already have some team members in the UK. Factor already has people throughout Europe, so it made sense to strengthen the LegalSifter presence there, too.
Kevin Miller serves as CEO of LegalSifter, a position he has held since 2015. Kevin's previous experience includes serving as COO at Industrial Scientific Corporation. Kevin also spent nearly six years in various roles at FreeMarkets and Ariba.
Kevin holds a Juris Doctor degree from the University of Cincinnati College of Law, a Master of Business Administration degree from the Mason School of Business at the College of William & Mary, and a Bachelor of Arts in History from Davidson College.
