Money pours into AI startups that save countless hours of legal paperwork

Spellbook, an AI “copilot” for lawyers, is raising $11 million in a fundraising round led by Moxxie Ventures and includes Thomson Reuters, owner of the legal research giant Westlaw.

The investment is the latest in a wave of money flowing into generative AI products, including many in the legal profession. Spellbook’s product cuts down the work of analyzing, drafting, and negotiating legal documents by quickly digesting and automatically drafting potential changes, saving lawyers time. The company calls each legal task a “spell” and says lawyers use, on average, 280 spells per month.

Alex Roetter, a general partner at Moxxie, exclusively told Semafor his firm wanted to lead the round, in part, because of Spellbook’s growth. It has 600 legal teams (mainly small and medium-sized practices) using the product around the world, and there are 35,000 lawyers on a waitlist as the company hones Spellbook for wider distribution. A subscription costs around $180 per month.

“They clearly are solving a real need for lawyers who want to turbo charge their practice,” Roetter said.

Scott Stevenson, Spellbook’s co-founder and CEO, said he went into legal software because he was stunned by how expensive the legal fees were while launching a previous startup.

But it wasn’t until late 2021, when Microsoft’s GitHub released Copilot, a software development aid that uses OpenAI large language models to autocomplete code, that Stevenson started thinking about how to apply that technology to legal software.

LLMs seem particularly well-suited to take on legal work. New models from companies like OpenAI and Anthropic are able to consume lengthy documents and quickly offer summaries and insights.

That capability, combined with fine-tuning that uses legal-specific data, makes the technology a powerful tool for attorneys.

Businesses are only recently figuring out how to turn these new advances into products for lawyers and the general public.

Companies like DocuSign, for instance, have troves of data that they can use in conjunction with services like ChatGPT to create new consumer products that were not possible a year ago.

DocuSign earlier this month announced “Agreement Summarization,” a tool that gives users the ability to upload complicated contracts and have it explained in plain language. Essentially, it translates “legalese” into English.

Another example is the human resources startup Deel. According to a person familiar with the matter, the company is working on a generative AI chatbot-like assistant, trained on Deel’s global data, that can answer compliance questions the same way a legal expert might.

None of these new tools are an attempt to replace lawyers altogether but they may reshape the legal industry. For instance, there is already some evidence they’ll allow smaller teams of lawyers to compete for business against bigger law firms.

Generative AI tools could end up being a necessary ingredient that entices tech investors to create new kinds of law firms that modernize legal transactions, allowing ordinary people access to services from their computer in the same way they might sign up for a streaming service. Already, Arizona and Utah have changed laws to allow non-lawyers to take ownership stakes in law firms.

For attorney Brittany Ratelle, AI has meant having the time to take her four kids to the water park. She runs a private practice in Idaho focused on legal work for online creators. Since she signed up for Spellbook a few months ago, she’s cut the time it takes to get through documents by half.

Ratelle, like many small firms, charges a flat fee for legal work instead of billing by the hour, so becoming more efficient gives her more free time.

According to a Goldman Sachs research report, AI could replace 44% of the work that lawyers do. That could lead to a fall in how many people are employed in the legal industry.

The EU has been ahead on this issue and helped fund a project, starting in 2020, called AI4Lawyers. The program studied the benefits of AI in law as well as the drawbacks, like relying too heavily on computer-generated legal work without enough human oversight.

• The AI industry has had lawyers in its crosshairs for a long time, as this New York Times article points out. But it’s never been able to make much of a dent in the legal workforce.