In the largest Series A legal tech investment to date, Insight Venture Partners has taken a $50m minority stake in Kira Systems, which will use the funds to dramatically accelerate its ambitious growth plans. We talked strategy and growth plans with Kira founder Noah Waisberg, who deserves double congratulations because his wife had their third child yesterday (4 September).
$50m is an enormous amount, are there multiple funders or just one?
Just Insight Venture. We’ve never had any outside capital until now, we’ve just grown off our revenue and we continue to have a lot of room to do that: we don’t need to do this, but Insight is as good as it gets and for a company around our size I believe there is no one better.
It was interesting to note at ILTA the number of private investors – presumably you’ve been through an in-depth process to decide who would back you?
I get in a typical week three to five investors calling me. Today, September 4th, I have literally two cold call emails from potential investors and it’s 2pm in Toronto. Insight is the Freshfields of investing.
How is the investment structured?
Most of it is primary and some secondary. [Insight managing director] Peter Sobiloff will be joining our board. Peter has led at least two public technology companies and been on the board of a bunch of others. They will become involved in our lives, which I’m more excited about than the money. They are a high-quality investor with experience of taking a company of our size – which at 115 people is already pretty – and pushing them to the next level.
Why take investment, why $50m, and why now?
Essentially we have a big vision for what our product can do and we think there is a real value to executing on that quickly.
We’ve already been able to execute on it pretty quickly: in 2013 the first law firm started using us on a real project and in 2014 grew from four to eight employees. In 2015/16 we started to get the first really big law firms such as Clifford Chance, Freshfields Bruckhaus Deringer, Herbert Smith Freehills and DLA Piper. We’ve been able to do pretty well to the point where now if you look at the global top 30 law firms, the majority are subscribers. So we have been able to execute our plans well but there is a lot more we can do and by taking guidance, we’ll be able to get there faster.
We’ve already grown significantly: in January 2017 we were 30 people and now we’re 115. Literally the first ILTA that I went to we were a four person company in 2014 – I spoke at ILTA and I was the only person there. In the summer of 2015, we were up to about 15 people and there were two of us at ILTA: me and Steve Obenski. In 2016, we had the pirate cruise and there were about 30 in the company. And last summer we were about 55 people.
We’re grown massively without investment, but it gives us significantly more leverage.
What is the strategy and key priorities for spending the money?
First is to continue to take what we believe to be the market leading product and make it even better. Our view is that our software does everything we hope it can do right now but it’s going to be even more compelling and we’ll have an even better product. Getting there faster is going to help us.
Second is to grow out the company around what we think is going to be a really attractive proposition for our customers – if we build the product then we think we’re going to need more people to sell, so we’re growing sales and marketing. Another way to think of it is that we are consolidating our position in the law firm market where we are already doing well. We have a majority of the top firms as customers where our competition combined only have a handful. The big firms have overwhelmingly gone with us. We are also seeing increasing amounts of business coming from outside of legal. We are focussing on new markets, especially corporates, which have large pools of contracts. We are already doing a decent amount with corporates but the amount in 2018 is significantly higher than in previous years.
What we want the product to do is essentially be more accurate and more granular so that people can get closer to the answer and get the answer much easier than they can right now.
There are always improvements coming and in the next few months we expect to bring 100 new datapoints out of the box. Currently there are 400 data points out of the box and it will soon be 520.
In terms of expansion, we’re already up to around 10 in the UK and have people in New York and Toronto, where 70% of our people are based. We have a lot of users in Continental Europe, especially Germany, so Continental Europe is a focus as is Asia.
And will that take $50m?
We thought it was a time where the funding market was such that it was pretty attractive for us and it wasn’t that costly to raise more than we need.
Are we getting to the stage where the use of contract review software is expected and normal within BigLaw?
A majority of the biggest law firms in the land whether magic circle or global 30 firms use our software but do they use it on every deal? It depends. We see some firms where using the software is optional but we’re now seeing firms where it has become the default: you can come up with an excuse to get out of it, but you have to give that excuse.
Within that, there is a lot of opportunity for customisation. We see that off the shelf works well but a lot of places have been able to customise our software. Freshfields and Clifford Chance have been able to customise our software through the use of Quick Study, which teaches users to find new information.
To add to Noah’s fairly spectacular week, Kira was on the front page of the New York Times on 2 September in an article on legal immigration: https://www.nytimes.com/2018/09/02/business/trump-legal-immigration-h1b-visas.html