Legal AI gains traction as U.K. startup targets U.S.
(Bloomberg) -- Artificial intelligence companies have been busy trying to replace lawyers with code, with dozens launching software packages designed to do everything from drafting contracts to helping law firms assess their chances with a specific judge.
Now there’s some evidence these efforts are gaining traction – at least with investors. Luminance, a London-based company whose software helps law firms review contracts and other documents ahead of mergers and acquisitions, has secured $10 million to help fund its expansion, particularly in the U.S.
As part of the investment, Luminance said it was opening an office in Chicago as it seeks to expand in North America.
Talis Capital, a London venture capital firm that previously invested in Luminance in December 2016, led this investment round. Global law firm Slaughter & May, which acquired a five percent stake in Luminance in the spring, and Invoke Capital, a London-based investment firm that helped set up the legal AI company, also invested in the current round.
Invoke was founded by Mike Lynch, the co-founder and former chief executive officer of U.K. data analytics software company Autonomy Plc., which Hewlett-Packard purchased for $10.3 billion in 2011. HP later wrote off $8.8 billion of that and Hewlett Packard Enterprise, an HP successor company, and Lynch have been embroiled in a legal battle ever since.
Luminance has hired George Tziahanas, a lawyer who is also an Autonomy alumnus, to lead the North American expansion, it said. The current investment round values Luminance at $50 million, the company said, up from the $20 million valuation the company said it achieved when Talis first invested a year ago.
There have been 17 equity funding rounds so far this year in the legal sector involving AI startups, according to data from CB Insights, up from 13 last year.
IManage, a Chicago-based tech company that helps companies such as law firms manage documents, purchased RAVN, another London-based legal AI company, in May 2017 for an undisclosed amount. RAVN, founded in 2010, was one of the first to offer a product that automatically read and sorted legal documents.
Luminance Chief Executive Officer Emily Foges said the company would use the new funds primarily to hire additional people. The company currently employs 40 around the world, a number that Foges said would “grow significantly” in coming months.
Luminance is currently being used by 50 organizations in 15 different countries, the company said. Its software is mostly used to help lawyers categorize and review contracts and other legal documents during the due diligence process of M&A transactions, when time is often of the essence. Large law firms traditionally performed these reviews by using large teams of paralegals and junior lawyers working long hours.
Luminance’s software automatically categorizes documents, regardless of the language they are written in, grouping them by type and identifying possible anomalies for further review by experienced lawyers. Foges said customers report that using the software speeds up the time it takes to do document reviews by as much as 75 percent after a few weeks.
Still, Foges stressed that Luminance wasn’t trying to take lawyers’ jobs – just make them more efficient and allow them to spend more time on analysis.
“You get all these time-savings in doing document review and you lose nothing,” she said. “You are gaining more thinking time.”
She said Luminance was beginning to expand its customer base from big law firms to corporate legal departments, consultancies and the insurance companies that often underwrite the due diligence process in big M&A deals.