Contract review solution provider LawGeex , which employs "artificial intelligence" to automate much of the review process, recently announced the closure of $7 million in a Series A funding round. Leading the round was Indeed.com owners Recruit Holdings Co. Ltd. Also participating were LionBird and Lool Ventures, both of which previously invested in LawGeex.
The funding represents investors' awareness of the growing interest from corporate legal departments for automation in contract review. AI, as applied this way, uses machine learning to understand large datasets of contracts in order to parse and search specific clauses and terms.
As one of many contract solution providers leveraging AI, including Seal Software Ltd. and Apttus Corp., LawGeex is trying to differentiate itself with its ability to employ automation to " review and approve contracts before they're signed ," Shmuli Goldberg, LawGeex's president of marketing, told Legaltech News.
"We handle everyday contracts, which can be reviewed and approved automatically, as you are able to teach the AI your specific legal preferences and criteria," he said.
However, while many AI contract solutions providers differ, they are all vying to capitalize on the burgeoning need for more cost-efficient contract review.
"The demand for contract AI is definitely growing," Goldberg said, noting the costs of implementing an AI contract solution in-house are "small compared to the fees of outside counsel" and hiring human reviewers.
Ulf Zetterberg, CEO of Seal Software, previously told Legaltech News that such solutions are becoming pivotal to respond to the growing "outside pressure on the legal department" to cut costs by turning to technology to do more with less.
The demand for AI contract solutions is also fueled in part by the increasing ease with which they can be implemented. Goldberg noted that the challenges to bring such solutions in-house today "are much less than they were in the past, given that more contracts exist in a digital format."
This digitization is the basis for every contract AI platform. Before any AI solution can be implemented, "you have to have clean data and make sure that all your contracts are searchable and readable," Zetterberg said.
Those most receptive to AI contract technology "are medium to large companies that have small legal teams," Goldberg added. "When you have a relatively small legal team of three people, five people, 10 people, they really feel the pain. They are often overwhelmed and feel understaffed, and can be perceived as a bottleneck to the business that hold deals up."
Not all corporations, however, are looking to bring aboard third-party AI contract vendors. According to Bloomberg , JPMorgan Chase & Co. recently launched its own proprietary AI contract solution in-house to analyze commercial-loan agreements, which saved it an estimated 360,000 hours of work annually by lawyers and loan officers.
Asked if such in-house initiatives where a threat to third-party providers, Goldberg said it made sense for JPMorgan Chase to create a proprietary solution in-house as " they had a very specific part of the contract to look at, and a very specific type of question they had to answer, certain financial questions within a financial contract."
But, he added, building out a more agile AI contract solution to serve a broader set of contracts is a large investment, given the need to "teach" the AI solution the differences in certain contract terms and types.
"For that, you would want an AI that has seen hundreds of thousands of everyday business contracts," Goldberg said.
Getting to the point where most of a teams' contract review can be fully automated, he added, is where contract solutions meet their full potential.
"The vast majority [of] the time, the only question [our customers want us] to answer is, 'Can I sign this contract?'"