Imagine the expense of hiring junior associates at a law firm to pore over legal documents and paying them hundreds of dollars an hour to manually conduct due diligence on dense contracts. This could take several days, and many companies that are under tight deadlines on mergers and acquisitions don’t have the time or money to spend.
Many legal firms are experiencing pushback from companies because of the time and cost associated with hiring junior associates to conduct the manual labor. Under duress, attorneys may even produce inaccurate reports, which further adds to the inefficiencies.
“Clients are saying to law firms, ‘We don’t want to pay $300 to $500 an hour for the junior associates to do the work,” said Ned Gannon, CEO of eBrevia. “Companies may force law firms to write off some of that time. Say if a junior associate spends 10 hours a day on the contracts, maybe the firm can only bill the company for seven hours.”
In search of a solution, Gannon and his Harvard Law School dorm mate Adam Nguyen, who is the current chief financial officer and chief operating officer, looked at ways to develop a software system that could cut the costs while doing all the heavy lifting of extracting relevant data from lengthy contracts with the click of a mouse.
The software eBrevia uses artificial intelligence and machine learning to quickly peruse scanned hard copies of documents that are translated into readable text. The system searches for words associated with certain legal terms that a user can select in a checkbox-style menu. Once the user clicks the “extract” button, the software pulls up a separate document and lays out the information it extracted in an organized, systematic manner.
“Through the software, attorneys can log in and read through the files online,” Gannon said. “The purpose is to summarize the contracts and look for problematic provisions.”
In 2011, the founders spent months doing sponsored research under professor Kathleen McKeown, director of the Institute for Data Sciences and Engineering at Columbia University, where they met Jake Mundt, their current chief technology officer. The startup then spun out of Columbia in 2012, incorporating the artificial intelligence technology developed at the college. That’s when eBrevia’s journey into financing its startup began. The founders entered multiple competitions to earn grants, giving more investors and law firms a chance to see their idea and own a share of the rising company.
After Columbia, the eBrevia founders got involved in a ten-week program with Connecticut Innovations, a quasi-public venture capital organization. The program trained them to pitch their startup idea in a seven-minute presentation in front of potential investors. By the end of the program, CT Innovations, another institutional investor, and a number of angel investors decided to invest in the company and now own a share of eBrevia.
In the fall of 2012, eBrevia was one of four national winners at a Startup America DEMO innovation competition and asked to fly to Santa Clara, Calif., to present at a conference. Shortly after returning, they were selected as one of the top ten enterprises products by CIO.com, and when they came back to Connecticut, they received the Connecticut Technology Council’s “Most Promising Software Product of the Year” award.
Most recently, the eBrevia startup was one of eight selected from nearly 40 applicants to receive a $10,000 grant from CTNext, another Connecticut venture capital organization.
“We’ll be using those funds to include new features that our users have suggested,” Gannon said. “So the way we spend the money is in direct response to user feedback. We raised $175,000 in just grants, including what we got at the CTNext competition.”
Although the product can be sold on the market as is, the three founders of eBrevia are holding off on advertising it until they add more bells and whistles to the system.
“We’re iterating based on the feedback we’re receiving,” Nguyen said. “It’s helpful to get it into the hands of attorneys. And people who use it have different suggestions as to what features to consider. People have been very impressed by it and particularly excited about how to get at the complex concepts that wind their way throughout a document.”
So far, law firms and in-house legal departments throughout Connecticut, New York, Boston and Arizona have used the eBrevia software, Gannon said. Looking ahead, eBrevia plans to create a contract management system to help organize contracts.
“The way we frame it to our potential clients is, compare this to a human being using it without the software versus a human being with the software, and compare their productivity,” Nguyen said. “The human component is still needed.”