Summary List Placement
Contracts — typically seen as dense blocks of boilerplate text for corporate lawyers to deal with — are having their moment in legal tech.
Ironclad, which digitizes and automates contracts to streamline the end-to-end contract process, said on Thursday that it raised $100 million in Series D funding, bringing the company close to a $1 billion valuation. Its lead investors include BOND’s Mary Meeker, previously dubbed “Queen of the Internet” by the New York Times, and its roster of existing investors also include VC titans like Sequoia, Accel, Y Combinator, and Emergence Capital.
Contract lifecycle management, or CLM, software has become one of the buzziest areas in the legal tech market. Major players like DocuSign, an e-signature and cloud agreement company, are making strategic investments and acquisitions of contract-related startups, while venture capitalist investors are pouring cash into the pockets of newer entrants like the CLM platform, Contractbook.
The global CLM market is projected to have an annual growth rate of 13% to 20% over the next four years, bringing the total market to $3 billion by 2024, per several industry reports. Ironclad itself grew its annual recurring revenue by 192% from around $10 million 2019 to a projected $20 to 25 million in fiscal year 2020, which ends in January.
Unlike some other legal tech companies that are looking to grow their businesses through strategic deals in the market, Ironclad plans to use its fresh capital to turn inwards and hone in on its product innovation, including the first AI contracting tool that uses Google Cloud’s machine learning technology, Cai GoGwilt, chief technology officer and cofounder of Ironclad, told Insider.
Ironclad was founded in 2014 by Jason Boehmig, an ex-Fenwick & West lawyer, and GoGwilt, a former software engineer at Palantir.
Ironclad’s growth strategy has been accelerated by its partnership with Google Cloud
With its new $100 million Series D, Ironclad plans to double down on its “relentless focus” on contracting, said GoGwilt, expanding its AI contract tools to help advance its mission of utilizing contract data to help businesses and legal teams. As part of its growth, Ironclad will be hiring more people across all teams, including engineering, sales, and legal.
While it has no plans to grow its platform through strategic acquisitions or investments, GoGwilt said that they’ll consider that route if some solution to an unforeseen problem were to arise down the road.
Another crucial component of Ironclad’s growth strategy is its partnership with Google Cloud, which was announced in December.
“Even with the funding, we wouldn’t be able to field world-class solutions without Google Cloud AI,” GoGwilt told Insider. Ironclad is the company’s only official partner, and, in December, released the first Google Cloud-based AI product for contracting.
Ironclad’s team-up with Google is an example of the role that established tech behemoths can play in cultivating the broader ecosystem of innovation.
“Large institutions are absolutely necessary for fielding a credible AI solution,” said GoGwilt. A “world-class” natural language processing system can cost $5 million in computing power alone — let alone the costs for research and data needed to build a model, he added.
By employing the technology built by Google Cloud, Ironclad has been able to save on these costs. Plus, while other AI-powered CLM competitors are using pre-2019 technology, the new algorithms created by Google have an accuracy rate in the low- to high-90s, accelerating Ironclad’s AI roadmap by at least two years, according to GoGwilt.
‘A new way to think about software’: preserving and using data to speed up contracting
Ironclad’s aim is to provide an end-to-end contract solution fueled by artificial intelligence.
“Bit for bit, contracts have some of the most valuable information that any enterprise has,” said GoGwilt. “Having AI extract that information and provide the legal department with the data they need to make great legal judgments will allow them to be more proactive.”
That “valuable” data, however, is often being lost because there isn’t a comprehensive platform that focuses on contracting.
“Contracting has always been a second-class citizen,” GoGwilt said, because existing solutions are built in a way where their main focus isn’t contracts. Instead, contracts are “associated, but not central.” For example, sales agreements are made on sales platforms, while agreements related to accounting are made on another.
Even if a company does use contract-specific software, these are often point solutions that only offer e-signature or contract storage capabilities, only adding to a “disjointed” contracting experience and further data loss, explained GoGwilt.
By providing users with an end-to-end contracting platform that uses AI to locate important clauses and information, Ironclad not only minimizes data loss, but also speeds up the process.
“General counsel don’t have to be involved in every contract, which means you can close contracts way faster because the GCs aren’t bottlenecks,” said Jake Saper, general partner at Emergence Capital, one of Ironclad’s investors.
Instead, a lower-level salesperson can approve certain contracts using Ironclad’s AI, accelerating the process by 20%, Saper explained. Rather than targeting a specific person — such as an in-house lawyer — Ironclad targets a specific job: contracting.
“It’s a new way to think about software,” said Saper. “I’m extremely excited to see where Ironclad goes. There’s so much opportunity to unlock.”
NOW WATCH: What candy corn is actually made of