The Legal OS team: Charlotte Kufus, Lilian Breidenbach and Jacob Jones.
(Photo: LegalOS)
Dusseldorf Before a new partnership agreement is drawn up, lawyers often have to research existing clauses in previous documents at great expense. Entrepreneur Lilian Breidenbach offers solutions for this: Her software creates contracts automatically. “At its core, it’s a rules engine that legal professionals can use to compose their documents with the utmost precision,” explains the founder of Legal OS.
In a second round of financing, the start-up has now collected the equivalent of 6.1 million euros in venture capital. The round is led by Google’s AI fund Gradient Ventures and the Munich-based investor group “10x”. The corporation HV Ventures and early-stage financier Speedinvest also participated a second time.
“We believe that artificial intelligence is the driver of all innovation,” says Darian Shirazi, Partner at Gradient Ventures. The potential in the legal market is still huge, as it has only just been digitized.
According to Gartner research, law firms invested four percent of their internal budgets in legal technology in 2020, compared to just 2.6 percent in 2017. However, Gartner predicts that spending will increase to about 12 percent by 2025. Legal Techs, as the start-ups in the legal field call themselves, want to benefit from this. One example is the Berlin start-up Bryter, which has raised $90 million so far.
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According to the Crunchbase database, legal techs around the world raised a billion dollars last year – a small volume compared to other industries.
Money mainly for the US expansion
Christian Duve, law professor at the University of Heidelberg, lawyer and angel investor, sees digitization potential in the legal market: “The development so far shows that legal techs are finding their place in the market and their importance will continue to increase.”
Legal OS specializes in creating documents using no-code processes. This makes things easier for complex processes: The tool asks the user questions and automatically builds an individual document from the answers. The software becomes more and more useful the more users work with it. At the beginning, the rules and specifications are comprehensively defined. This results in the data that can build a legally compliant contract, says Breidenbach. The idea is to reduce repetitive work for legal clients.
Legal OS’s customers include companies such as the transport group Alstom and law firms such as Lambsdorff in Berlin. In the medium term, the start-up is also planning a ready-made version for non-lawyers.
Founder Breidenbach studied anthropology and computer science and has already worked for other start-ups. Its co-founders Charlotte Kufus and Jacob Jones come from psychology and business consulting respectively. The source of inspiration was Breidenbach’s father: the law professor has been working on the digitization of law for 20 years. “What fascinated all three of us was that law is a huge market, but it is still mostly done by hand,” says Breidenbach.
Software cannot replace everything
Since every legal expert can feed the Legal OS system with their own rules, the software can be used anywhere – regardless of the country. The company, which now has 25 employees, intends to use the money from the round of financing for its US expansion, among other things.
Not all lawyers see the automation positively: In 2021, the Hanseatic Bar Association sued the contract generator “Smartlaw” from the legal specialist publisher Wolters Kluwer: Only lawyers themselves could carry out legal examinations. However, the Federal Court of Justice decided that “Smartlaw” may continue to use the data of the users to create purchase and rental contracts.
“We are pleased that such judgments create framework conditions and at the same time the industry is developing further,” explains Breidenbach. At Legal OS, she and her team made sure that the tool was always up to date with case law.
In complex cases in particular, however, it is important to talk to a lawyer, admits lawyer and start-up advocate Duve: “Those companies that offer contract generators should always point out that you can still contact them for individual topics needs additional advice.” There is still room for improvement there.
More: Contracts from the computer – lawyer as operator is unnecessary.