St. John’s-based Spellbook, the maker of artificial intelligence-enabled contract-drafting software, has raised a US$10.9 million or C$14.8 million seed round from investors including Thomson Reuters, the Toronto data and publishing giant that controls a massive percentage of the legal software market.
The company originally did business as Rally. Spellbook was the name of one of several products in Rally’s lineup, launched last September. Its success led CEO Scott Stevenson and his team to adopt it as the name of the company. Spellbook is currently used by 600 law firms, with another 54,000 waitlist signups.
Other investors in the round included San Francisco’s Moxie Ventures, led by former Twitter executive Katie Stanton, as well as Montreal-based Inovia Capital, Miami specialist venture capitalists The LegalTech Fund and Bling Capital, likewise from Miami.
In 2019, the company closed a $750,000 funding round from a group of investors that included Venture NL (the fund managed by Pelorus Venture Capital), St. John’s-based Killick Capital, Halifax-based Concrete Ventures and Toronto-based Good News Ventures.
Stevenson said in an interview the money will go towards doubling the size of Spellbook’s team, which now stands at17 people, scaling up across essentially all departments in an effort to capitalize on its recent traction.
“We launched the Spellbook product as an experiment around Sept. 1 — so this was before the ChatGPT craze,” said Stevenson. “And it just completely exploded in usage and revenue.
“We had 8000 lawyers sign up to our waitlist last month and we do not have a team to support that.”
Spellbook's round represents a bit of a rebound for the venture capital market in Newfoundland and Labrador. Canada's Venture Capital and Private Equity Association recently found no NL deals when it released its first-quarter VC data (though SiftMed, which is officially based in St. John's, raised $2.7 million in February). Already in the second quarter, Pasadena, NL-based Swiftsure Innovations has raised $2.3 million and now Spellbook has added a round worth almost $15 million.
Thomson Reuters is an important strategic investor because its customers include 97 of the law firms on ALM Intelligence’s prestigious Law 100 list of top-performing law firms in the United States.
“They are used by tons and tons of lawyers and are a super trusted brand,” said Stevenson, referring to Thomson Reuters. “They’re one of the most trusted legal data sources in the world.”
Spellbook’s system can auto-generate contract clauses in response to user-inputted topic prompts, with the company so-far sourcing its training data from the numerous examples of contracts accessible online, along with law firms’ own archives.
Over the next few months, the company will merge its other Rally products, which offer lawyers a range of document-sharing, communication and collaboration tools, with the main Spellbook software.
The product consolidation will also give Stevenson’s team the opportunity to add new AI features to the platform that were not previously possible, such as giving lawyers the ability to ask the AI questions about legal data rooms, automatically sort the large volumes of documents legal work generates and cross-reference disparate data sources.
“Overall, our approach will be continuing to develop what we call Assistive AI,” wrote Stevenson in a blog post. “We are not replacing lawyers, nor do we allow users to ‘delegate’ full legal tasks to Spellbook.
“If a lawyer's current work is like riding a bicycle, we are an electric bicycle helping them do what they are already doing, only faster, smoother, and easier. And that will remain core to our approach.”