How This 25-Year-Old Built A $675M Legal AI Startup (With No Legal Experience)

AI is revolutionizing the legal industry by providing powerful tools for lawyers to review, draft, and research legal documents. Lagora, an AI-powered workspace, is at the forefront of this transformation, offering an end-to-end solution that integrates seamlessly into existing legal workflows. The company has experienced rapid growth, raising $80 million and expanding its operations across Europe and the US, positioning itself as a leader in the legal AI space.

• Lagora offers an AI-powered workspace for lawyers, transforming tasks like reviewing, drafting, and researching.
• The company raised $80 million, led by Iconic and General Catalyst, with participation from YC, Benchmark, and Redpoint.
• Lagora's platform includes a web application with chat and tabular review features, as well as a Microsoft Word add-in.
• Previously impossible tasks for lawyers, such as redlining files against playbooks or deep research across thousands of judgments and legislation, are now achievable.
• Lagora emphasizes a collaborative approach, working with law firms to ensure they win in the AI transition, with a focus on rapid development and client-specific needs.

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The Evolution of Legal Technology

• Pre-Generative AI Era: The legal tech industry was characterized by "point solutions" for specific tasks like templating, translation, redlining, and research. These tools were often limited in their ability to handle unstructured text and legal documents effectively.
• The Generative AI Revolution: The release of models like GPT 3.5 significantly changed the landscape, enabling AI to process and understand unstructured legal text, which was previously a major hurdle.
• Lagora's Genesis: Lagora was founded in response to this shift, with a core observation of a lawyer friend spending four months summarizing court cases. This highlighted a significant inefficiency that generative AI could address.
• From GPT-3.5 to Enterprise-Grade: Lagora quickly moved from building simple proof-of-concepts, like a stock option reader, to scaling a compliant, enterprise-grade system serving tens of thousands of lawyers daily.

Lagora's Platform and Features

• AI-Powered Workspace: Lagora provides an integrated AI workspace designed to transform how lawyers work.
• Core Functionalities: It enables lawyers to perform tasks such as reviewing, drafting, and researching legal documents efficiently.
• Web Application:
  • Chat Interface: Allows users to chat with their own documents and files.
  • Agent Capabilities: The chat interface has evolved into an agent capable of complex, step-by-step workflows, integrating with other app endpoints and external tools. This allows for tasks like researching, conforming language to firm standards, and generating reports.
  • Tabular Review: A feature where users can input any number of files and queries to cross-run them, enabling large-scale analysis and insight extraction from documents. This includes handling scalability challenges, ensuring citation accuracy, and managing document intricacies like definitions and cross-references.
• Microsoft Word Add-in:
  • "Cursor for Lawyers": Designed to bring generative AI directly into the Microsoft Word environment where lawyers spend most of their time drafting and reviewing.
  • Real Estate Constraints: Operates within the limited space of Word's right-hand column, requiring creative design similar to mobile app development.
  • Edit Capabilities: Allows AI to create edits directly in the document based on user prompts, internal checklists, or playbooks.
  • Extensive Workflows: Supports complex workflows, such as negotiating contracts based on a playbook of 20 steps with defined starting positions and fallbacks.

Transformative Capabilities and Customer Impact

• Overcoming Pre-AI Limitations: Generative AI has made tasks like extracting insights from large volumes of documents and redlining against precedents or playbooks, which were previously impossible or extremely difficult, feasible.
• "Magical" Moments:
  • Legal Research: Demonstrating Lagora's ability to answer complex legal research queries perfectly by linking to Swedish legislation, creating an "aha moment" for a managing partner skeptical of AI.
  • Due Diligence: Transforming due diligence from a laborious manual process (e.g., reviewing hundreds of employment agreements) into a rapid analysis where AI can identify specific clauses (like IP protection) across thousands of documents in minutes.
• Cost Reduction and Efficiency: The decrease in the cost of AI intelligence allows for a higher volume of queries, enabling lawyers to create comprehensive memos by combining research from their documents, the web, court cases, and legislation, which was previously unaffordable or unfeasible.
• Democratizing Complex Tasks: Tasks like due diligence, once expensive and time-consuming, are becoming more commoditized due to AI's efficiency, allowing lawyers to focus on higher-value advisory work.

Selling to Law Firms and Adapting to the Market

• Historical Challenges: Selling legal software to law firms was historically difficult, with many companies shifting to selling to corporations instead.
• The Paradigm Shift: The emergence of generative AI has fundamentally changed this, making law firms more receptive to adopting new technologies.
• Lagora's Approach:
  • Partnership Focus: Emphasizing a "we win if you win" philosophy, aligning incentives and positioning as a long-term partner.
  • Client Pressure: Law firms are driven by client demand for efficiency and cost-effectiveness. When a technology like AI disrupts the traditional equilibrium of legal services, firms are incentivized to adopt it to remain competitive.
  • Client-Centricity: Law firms prioritize serving clients in the best way possible, which translates to adopting tools that enhance service delivery and build long-term revenue.
  • First Mover Advantage: Many firms aim to be first movers in adopting AI to gain market share by handling common tasks more efficiently.
• Addressing Market Equilibrium: AI does not necessarily lead to a "race to the bottom" in pricing; instead, it frees up lawyers to focus on more complex, high-value advisory work, such as intricate mergers or acquisitions.
• Customer Contracts: The rapid pace of AI development has shifted client preferences away from long-term lock-in contracts (e.g., five years) towards shorter terms (one or two years), allowing them to adapt to evolving technologies.
• Focus on Rate of Change: Clients increasingly value partners that demonstrate a high rate of technological advancement and can help them achieve specific goals, whether it's driving top-line growth or streamlining operations.

Lagora's Growth and Team Building

• Rapid Scaling: Lagora has experienced exponential growth, scaling from approximately 10 people to 100 within a year of exiting Y Combinator.
• Hiring Strategy:
  • Hiring Former Founders: A key strategy is to hire former founders, recognizing their entrepreneurial drive, problem-solving skills, and ability to scale businesses.
  • Ambition and Urgency: Hiring individuals with high ambition, a willingness to tackle large problems, and a fast-paced, results-oriented mindset, moving away from a traditional 9-to-5 Swedish work culture.
  • Expertise Across Functions: Building a team with diverse expertise, including hiring experienced professionals for roles like sales who have navigated significant company growth stages ($10 million to $500 million).
• Culture and Delegation:
  • Delegation as a Skill: A significant personal development for the CEO was learning to delegate effectively, teaching others to perform tasks rather than doing them all personally.
  • Maintaining Culture: Ensuring that rapid scaling doesn't dilute the company's core culture, urgency, and velocity, often achieved by sending top team members to establish new hubs.
• Building a Vertical AI Company: Advice for founders building vertical AI companies includes avoiding lock-in with providers, not competing directly with AI labs, and clearly identifying areas of unique value creation.

The Future of Legal Practice

• Lawyer's Day-to-Day: The future lawyer's role will shift from actively doing to reviewing and managing AI agents. Lawyers will instruct AI, oversee its work, and ensure it meets standards and is delivered effectively to clients.
• AI as a Strategic Partner: AI is expected to become a fundamental tool, and AI companies will serve as strategic partners helping law firms navigate this transition.
• Unpredictable AI Advancements: Predicting AI capabilities even a few years ahead is challenging due to the rapid pace of development.
• Competition from AI Labs: Large AI labs are evolving into platform companies, potentially creating competition. Companies like Lagora need to focus on adding value beyond the core models.
• Product-Market Fit Experience: The feeling of product-market fit is described as an "infinite pull" from the market, with demand exceeding supply, indicating that the product is essential for core business operations.
• Talent Magnetism: Lagora benefits from being in a small, interconnected ecosystem where talent flows between successful startups, fostering mutual support and growth.
• Market Expansion Strategy: Lagora intentionally stayed in Stockholm to establish a repeatable market entry strategy before expanding to larger markets like the US, building experience in various European countries first.
• Ambition and Continuous Innovation: The company's ambition is not just to solve current problems but to anticipate and address emerging challenges in the evolving legal tech landscape.