Crosby co-founder Ryan Daniels on building an AI-powered law firm where agents will eventually negotiate contracts

we'll get them on ramp, free and capitalist, we will are happy to go over there and and spread the good word. Get everyone on ramp. Anyway, we have our next guest, Ryan from Crosby coming in the studio. Ryan, how you doing? There he is. Welcome. Big, congratulations. Yeah.

Kick us off with an introduction on the company, yourself, the news, everything. Amazing, guys. I'm so happy to be here. Thanks for getting me on. Are we ringing the gong? I mean, you got to tell us. Is there something wrong worthy to ring the bell? We're uh we're announcing Crosby today.

We've been in Stealth since uh about the fall, and we're announcing that we raised our $5. 8 $88 million seed for congratulations. There we go. Incredible. Massive. Congrats. Incredible. Congrats. Uh, so break it down. What What are you building? And then give us some differentiation.

How do you see the market playing out? We'll we'll dig into it all, but give us the Yeah, 100%. I'll give maybe like a few seconds of my background and how I got here. Yeah, this is a live tracker, by the way. I'll get to that in a second. Yeah, I want to hear about that for sure. Janky way under these boxes for today.

So uh my background is have been between tech and law for like a decade early at a couple of startups that did well and also for various reasons ended up going to law school practicing.

My last company we grew really quickly from like 10 to 100 people in about a year and the only thing slowing us down was contracts and because I was the only person there who knew anything about legal.

It was like my problem and obviously I tried out every legal AI thing I could get my hands on um over the last few years. such an interesting space, but I kept feeling like something was missing.

A lot of the legal AI tools, plugins, word add-ons on the market made me a little faster as a lawyer, but I was still doing so much manual work. And so I started working with my co-founder John Sarah really early at RAMP. So we're celebrating twice today. Let's go. Really interested in like the RAMP alumni day. Yeah.

John's big post of the day is that finance agents could walk so legal agents could run. Oh, that's great. That's as good as we did. Yeah. Yeah. So, we got, you know, John like he was obsessed with helping um, you know, fast growing businesses grow faster and save money and save time. Like that was his thing.

And I was obsessed with this contract problem.

We started jamming idea last summer and really quickly we came up with the idea of just starting our own law firm like what would that look like full you know starting from scratch um hire lawyers try to replace their work agentically like what work can actually be done with agents what can't how do we get the speed of AI with the you know expertise of lawyers and you know we we had this feeling like contracts are the API of business like anytime there's any economic growth transaction between two parties there is a contract and we should make that faster they haven't changed in 50 years the way we review them.

So that's what we're doing. That's Crosby. Okay. Yeah. I have been very upset with uh with No, no, no. Well, well, that uh that uh I love our lawyer, but uh you know, it's it's you know, it's definitely a cost center.

Um no, but I've been I've been kind of interested to follow, you know, the fact that that uh we haven't adopted more AI. We we're an SMB, right? Um, we use AI all over the place. We use AI across the entire business from content generation to management, transcription, sorts, transcription, research, all this stuff.

And yet, uh, you know, when it comes to actually generating and, you know, going back and forth on contracts, it's still very manual and it just feels like a place that uh, that we already should be have have picked things up. So, yeah. Can you talk about um the different tiers of legal work?

Like my my mental model for this is like there's like form filling which did actually get somewhat commoditized by just CRUD apps in the web 2. 0 era. You have companies like Legal Zoom. If you need to just fill out a form to form an LLC, they'll do that.

uh Stripe uh uh Stripe Atlas for example doesn't use didn't use AI but was able to advance a lot of things.

Then on the far other end you have someone who looks more like a legal artist like the top tier of lawyers who are thinking really creatively about how to construct all sort I mean whoever came up with the open AI or chart clearly that person's not getting displaced by AI anytime soon because that was a work of art.

It's like a It's a monument to big law. Exactly. Yes. I mean, I'm sure the legal bills there is probably in the hundreds of millions of dollars.

Um but but but it seems like every year as we chip away at better foundation models, more agentic reasoning, longer longer test time inference, longer uh reasoning agents, we can move things from one bucket to the other.

and and and so so talk to me about the flow of of like the the the road map of moving more and more uh into the AI world. What's what's you know today? What's in six months? What are you tracking on the foundation model side looking forward to an unlock?

Yeah, I mean these are like I mean these are like the fundamental questions that John and I were playing with back last fall when it was like me sitting there doing legal work and him looking over my shoulder trying to convince me he could automate the things I was doing and me being really skeptical and like we did this for weeks and um I think I mean you I think you nailed it.

There's sort of like we we kind of mapped out and there's probably thousands of SKs of legal work from like sure reformatting a word document to you know writing an appellet brief for for a court. I think as you go from more least complicated to more complicated, the work gets slower.

It gets more expensive and it looks more like an art and like there's a real craft to it. It gets more sophisticated. And I think part of what's going on there is that part of legal work is fundamentally like a dialogue between humans, right?

It's a lawyer to a judge um or to a jury or two contract, you know, like parties negotiating with each other.

And there's like nuance and subtlety that we we had a really hard time like like the difference between the words reasonable and commercially reasonable are like and a betting sort of concept almost the same but but actually quite different. So like so this is what we're struggling with.

I think look we obviously have a long bet on where the models will get to in terms of like getting better and better so that we can have a fully agentic law firm. Like that is where surely this will go. And so the idea that we started with like a word add-on. Yeah.

As like the packaging for this is kind of str like no lawyer has ever or nobody's ever gone and said, "I want a word add-on. " They just they want a lawyer. They want to throw it over the fence and not think about it. So that's what we're doing here today.

And right at like we call like right at the sort of cutting edge like of where the machines sort of stop and the human intuition or judgment or just accuracy has to come in. Um that's kind of what we've been trying to model like from a workflow perspective where lawyers will jump in. That's where we are today. Yeah.

Um to be more precise on the like where what kind of what SKS like where do things land. I think right now we're focused on contracts. It's crazy. It's like there's $40 billion or so that we map spent on contract review in the US. These are like contracts that are like a lease to like a merger agreement that's 80 pages.

And so we just focus there. And so our our goal is to move up the complexity scale. We're with these commercial agreements now that are like let's call it you know first quartile you know not the easiest things but but still needs some human in the loop.

talk about um uh I want to give you an opportunity to talk about maybe how so we we recently moved into this new studio the typical process you wait a long time to get a lease when you finally get the lease you know I I take a a quick skim throw it over to our lawyer they're like cool it's going to take us a while to review this right it's variable maybe they're busy maybe they're not they turn it around you get through these issues um how much uh do you already feel like you're an order of magnitude better than the traditional process?

Like, can I basically immediately send a contract to Crosby and you guys can just like basically go line by line almost immediately and and you know cuz cuz the typical process is like, okay, you have a lease, maybe there's 15 or so places that you might want to push back or change or or things you want to add.

Uh, and you're basically just going through and and talking through those things. And it and it feels like that could be done. I I imagine I I don't know how far along you guys are.

It feels like you could already be at a point where the speed the the the sort it's almost like it's almost like I want a an agent on my side and I want them to have an agent on their side and I want the two agents to fight it out and do two weeks of fighting in two minutes because like really I want representation and they deserve representation but I just want things to go faster because what kills me is not that they're pushing back on is it $2,000 or $5,000.

What I hate is that it's two weeks in between a turn of documents. Okay.

Like I like honestly like the the first thing about the mapping out legal complexity was like the first slide in a pitch deck and then like the last slide was this this is this elucory but crazy idea but it's like it's getting more real that there's a professor that was doing research I think at Stanford Law School that like if you have two law students doing mock negotiations for divorce negotiations.

So it's very like stylized. It's like who gets the kids on these days and that date and then you give their same bottom lines to agents. the repeated agentic negotiations, they simulate that that that process. They always get to better outcomes for both parties in minutes, right? So, it's it's simple.

There's not that many things to negotiate. So, John and I were thinking like, okay, there's like about 50 main sticking points in a commercial agreement. This is like if you're any startup, you were selling software, you were negotiating MSAs constantly. 50 sticking points.

What if we could map like Adobe's preferences and like Microsoft preferences and rather than having months of back and forth just agentically simulate it and in minutes say guys this is what you're going to get to. And so that's like that's like maybe a few years out but that's the goal of this company.

We want to be the API for businesses to connect with each other from a legal and risking standpoint. Um where we are today how it works like in terms of because we got money now we're signing a new office and we're doing that same thing to the commercial. It's been three months. Exactly.

we need office, but we we like these commercial agreements, right? Like you do a few of them every week. We're we're actually I would say and like I think for the fastest growing companies, these are the things that really slow them down. So we're specifically working with the fastest growing companies on the market.

Like we've been working with Cursor and Clay and Unifi, we've now done this is over,200 contracts since we launched and so and they look similar, right? So they're kind of like they're you see patterns, you see their preferences.

And so the way it works today, and this is like it's like all the pain that like I hated was like when a lawyer sends you something back, it's going to be an hour or two days, you don't know, and they're going to ask you questions, you have to clarify and kind of solve things, and then you send to the counterparty.

Today, the way it works is a salesperson at Cursor or at Clay will just slack us a document, tag our bot, we ingest it, we do review obviously with some AI, some human oversight, send it back within an hour.

Our median time is 58 minutes and the salesperson sends it right back and we have a knowledge base for everything those clients care about. So, we know the things that Chris is like, I don't care. We don't need to worry about that. We can let it go.

And the things that really matter and our our our like our driving insight here was we can unlock sales teams to be so much more, you know, fast at their jobs. The things that really matter because of this. Uh you mentioned that you're building a uh a word a Microsoft Word plugin.

Microsoft's obviously built co-pilots into a few of their products. Are you worried about getting paper clipped if Clippy comes back and Clippy gets a law degree? Clippy with a Harvard law degree. That is dangerous. I I I'm I'm joking, but I'm somewhat serious.

Like uh it feels like the le the last thing on Microsoft's roadmap, but they do have GitHub Copilot. They do have a product for software engineers. Is there any risk of of Microsoft going into this market just generally, even if it's not directly? This is the question everyone wants to ask. What if Clippy does this?

What if Clippy does this? Are you going to get paper clipped? Yeah. Wow. That's uh I don't think that much. All right. So, I think that so you know the first thing that like every founder in legal tech is like I'm going to build a better text editor. Like I'm going to build a better Microsoft Word.

And and it's like this pipe dream and like it never work. Like it's just you like you can't it's impossible. If you move the image the whole document always goes. That's just the nature of word docs. I can't even tell you how much time. So like I don't know. We're I'm bullish on Clippy.

Like I think we're we're like we're working heavily on top of word but we're not compet like we the better that we do and the more documents we review the more the more word licenses that we need to buy for our law. Yeah.

And also I mean you have you have a flywheel and it's a completely different market but we're not sell we will never sell against Microsoft Word. Yeah. Yeah. Would you ever would you ever release a a B2B to B type you know product in terms of like a co-pilot?

It feels like a very distinct decision to say we are our own law firm, tech enabled law firm. We are not you know just just allowing other law firms to build on top of this.

So like I think lawyers I mean I am one right like I think that we appreciate I mean I say this sincerely like there's an art to what we do but I think it makes us really ambivalent about AI like we like even if the work it does not all that we we you know we talked to so many lawyers and some of them are like the most AI pills but most are like I'd rather write it my way like I think the way that I drafted that sentence like even if our tools like I always thought that there would a cursor for legal by now that lawyers would just like use the way our whole team is obsessed with you know with with um you know better ID but I don't think it's manifested which is which is all to say I think part of what we're innovating on here is not just the software and the AI sort of workflow tools we're building but also the way that we train lawyers that we upskill them it's a skill issue the way that we get them better at what they do to use AI the way that we want them to now if we can fully automate this service one day and it's basically like selling software which I think we will do.

I still want to package it like a service. I don't want people like opening up a software platform to deal with this. Like lawyers, that's just not how people think about their lawyers. It's just a problem you want to throw to someone else. And so I'd love us to feel more of that like service experience always. Yeah.

Like as an agent in Slack and you can get that experience that you have with a great lawyer of of um you know just talking through things. Last question.

Uh for me at least um I don't know how much you've studied the history of like legal tech but uh Atrium's like the popular story that everyone knows but there was actually a company before. Do you know Clear Spire? Have you heard of this? Okay. So lessons from Clear Spire and Atrium.

I'd love to know how you tell the story to maybe investors who are asking about those companies and what lessons you've learned and how you're differentiating. Well, what's interesting is like those companies were all like sequentially sort of staggered by like I'm amazing about Clear Spy. That's like niche.

There's this great book about it. Do you know what I'm talking about? I I I haven't read the book. I I But there was like a Harvard business case study on it that I read. Yeah. PDF. I read the PDF. Yeah. Okay. Fascinating. Yeah. Yeah. Yeah.

So, it's like So, it's like So, like I think they they came up with a really clever innovation which was you have a it's just an it's it's a regulatory thing, but you have a Ccorporation, you know, typical startup and your PLLC and then a binding contract. Right. Exactly.

And so, we we've done that and then Asia did that. They took it a little farther. They but and and they and they took it a little farther and focused on types of work that were maybe more automatable. They focused on startup law. They were like WC's law firm. Yep.

And I actually haven't spoken with maybe I spoke to one person from Clear Spire, but I've spoken to all the co-founders now of Adrian and almost all of them except for one said right idea, wrong time. Like we just spent all of our money on NLP and now that's a solved problem. Totally right.

And so and so that that's the and so like that's the story is like it's a really really good idea. Yeah. you go after specific types of law that can be automated that like you don't care the lawyer's name. There's types of work where you're like, I need to know my lawyer's name. I want to know their resume.

But for other work, you just need it fixed. And so I I I really think like they they figured out the hard things for us and they set the stage. And yeah, I mean the series A branding was like we'll do your series A super cheaply.

It was like it was it was great wedge, but it just didn't expand that much cuz like you only do one series A and then for the B it's like way more complicated and you just bring in a traditional. Totally. And that's a loss leader for like that.

It doesn't feel like a loss leader when I get a six figure bill, but uh but I guess it is. Anyway, this has been fantastic. I'm super excited.

I mean, there's so many different types of contracts that don't make sense to that that are important that need to be done well, that don't make sense to, you know, you you don't need to, you know, spend tens of thousands of dollars on. So, anyways, very excited for you. Excited to follow the journey.

Uh you can be one of our new uh legal AI experts and residents. So, uh, come back on when there's news and, uh, congrats to you and the team. Congratulations. Cheers. Talk to you soon. On. Bye. Great. Well, that's been a fantastic show. Let's check in with Tyler on his review of Windsurf. Did you get it installed?

How's it going? Yeah. So, I mean, it's it's pretty good, I think. Um, I So, I haven't used a lot of these like IDEs yet. I I've used Cursor like a little bit. So, you have like your code's like handmade like farm to table. Yeah. Yeah. I like to actually like to I usually I write it up by hand and then I just scan it in.

Sure. I think it's more of a Yeah, I feel I feel closer to the code base then. Fantastic. Um but I I think it's it's really useful. I mean it's great for like front end stuff. Um I think and obviously I've only been using it for like you know an hour and a half. Yeah, I'm sure there's a learning curve.

Um but I I think when you when you start to have like okay now I I have this function that runs on server. It's like how does that connect? It might not be in the exact same codebase. It's hard to integrate these things. Um, but I think for small like it's just running locally, but it's like super great. Okay.

Uh, did you have to was there a model selector because there was that drama about anthropic uh like pulling the plug on the windsurf connection so that uh when you set it up? You used to just give windsurf your credit card and then you'd have access to claude and they would handle the billing internally.

Now it seems like you have to bring your own claude API if you want to use uh sonnet which is the popular one I believe. Yes. So, I'm looking right now. What's your experience like selecting a model? Um, so so I'm on the like uh free tier, but I think I have it's like a free trial. Um, but I I can choose uh 3.

5 sonnet, but yeah, it's bring your own keys. Got it. So, so I would have to go to the cloud website and then do like export keys or just paste it in. But even then, I mean, I'm sure it's like pretty easy still.

Did you notice any The original question we had was like if Microsoft got their hands on this intellectual property that would be incredibly valuable like does that feel like a reasonable narrative to you or or are we leaning more like this is more about data aggregation in the front door to AI?

I mean if I had to guess I assume it's the latter like I I I think there were some rumors at some point about OpenAI trying to build their own kind of IDE and that it failed. Interesting. Um, and that was like maybe the reason for the acquisition. Yeah. Um, but I I mean I can't imagine that it's really the the IP. Yeah.

Um, because I mean at some point it's like just it's kind of a at some point it's like a VS code fork, right? Yeah. Yeah. I mean Microsoft owns VS Code Code. So yeah, you'd think that they would be able to iterate towards like the best and practice UI patterns essentially if that's what really makes Windsurf stand out.

I'm wondering like there was a ton of heat on Windsurf on Axe for a while. It was really popular and yet I saw that uh at uh the AI dev world fair uh that Swix put on. Uh they had everyone raise their hands and it was like 80 or se 70 80 90% cursor users.

So cursor is clearly broken through in a really meaningful way into just like broad adoption. Um, and that seems really really valuable because you're getting all that training data that then can be used in reinforcement learning contexts and uh and derive better AI models.

So, um, yeah, it seems like it it it's kind of unclear to me exactly how much of a real issue this is. We'll have to ask some more people. We have some other uh AI folks coming on the show later this week.

we'll we'll try and dig into you know is Microsoft after just the cash flows or the equity or the data or the IP or the models because they have like different claims on different pieces of open AAI and uh all of those are probably negotiating points as they kind of separate these two entities out and so um it's a certainly a unique situation because most investors if you get them on your cap table maybe you give them a board seat but they're not getting access to your GitHub they're not getting access to your code or your IP can you imagine if that was like, oh yeah, like uh you know, I took money from this tier one VC and then they just gave all my code to a competitor that they invested in.

Like that would be a wild deal. It really it really is a wild deal in hindsight. I mean, it it was a wild deal at the time, but the sort of 49% profit share. We don't get equity. We don't have a board seat, but you know, we have sort of a right to um IP here in the individual models.

So, it's going to take a long time to shake out. And Sam is fighting wars on on at least a couple fronts. Yeah. Uh I mean we we we didn't get a chance to dig into the full Ben Thompson article on on this, but uh he says the Wall Street Journal doesn't indicate who its sources are, but there is little doubt in my mind.

They too are on the OpenAI side and I get why. And he says his biggest takeaway, this is Ben Thompson writing a stratey which you sub should subscribe to. Uh he says, "My biggest takeaway from this story is that I have underestimated the amount of leverage that Microsoft has over open AI.

I mostly wrote about this slow motion train wreck last month. I still think that his his take is broadly correct and note that the right to make OpenAI models available to other cloud providers is one of the points of contention in the story.

But the fact that OpenAI seems to be reduced to issuing fantastical threats through press suggests that the decision about the end point of these negotiations is almost entirely up to Microsoft. To that end, I can understand if the company is pushing for more than I suggested.

Indeed, if anything, these threats through the press might make Microsoft want to hold on to more since they probably have uh since they'll probably have to fight OpenAI again in a few years.

I still think however this that this is all the more reason to give more ground now in exchange for an ironclad agreement securing Microsoft's exclusive Azure access to OpenAI models in perpetu in in perpetuity.

Uh that is a fascinating uh thing because if OpenAI somehow compounds and runs away with it like they they have this massive consumer engine that could be so it it feels like right now Anthropic and and OpenAI on the developer side are neck andneck and Anthropic even seems a little bit ahead on codegen and just developer adoption.

But if you if it winds up being a capital fight, if it winds up being biggest data center wins and we need to build the trillion dollar data center and Stargate becomes extremely real and extremely material, well then having a consumer app that's printing $10 billion a year is going to be way easier to underwrite as an investor to go and build the next model and then you might get higher scale which could make the developer API more valuable.

And if Microsoft has exclusive right to resell that that and they are the B2B player they're the B2B front end to open AI models that is extremely valuable extremely valuable. So yeah I I was not I was not aware of that. He also talks about his his interview with uh cursor co CEO Michael Truel.

It is it is it is the the the perfect irony with uh with OpenAI is that it's it's one a YC company run by Sam Alman who uh was president of OpenAI and if YC was advising a startup that came to them and they said we're going to enter into this like really complicated commercial agreement and we're going to structure as a nonprofit.

We're going to take all these donations and then in the future we'd like to go public. They would be like, "You should just try to not add too many people to your board. You know, take as little dilution as possible. You should you should basically run like a dictatorship. " Yeah. And talked about this.

I would not take my I would do not do as I say, not as I do. Yeah.

So, so to h to to create one of the most important new companies of of of uh a generation and then to have it just be ins snared in in all of this uh drama from the nonprofit stuff and the battle with Elon all the way now to a battle with Satia is just absolutely brutal.

Well, the last story we should we should close it out with is uh the Trump phone. The Wall Street Journal says Trump's smartphone can't be made in America for $499 by August. That's because we got Tyler over here assembling iPhones in America. If Trump gets a hold of him, I think all bets are off.

But Trump's mobile phone shows some specs that would be that would beat Apple's biggest, priciest iPhone models. Doesn't want to just make it in America. Uh he wants to release a gold Android phone that will be proudly designed and built in the United States. Um fascinating development.

This is the first time I heard about it was when the Wall Street Journal was saying it can't be done. Um but uh yeah uh apparently Trump's son told the podcaster Benny Johnson on Monday morning, you can build these phones in the United States. So we'll see where how got to dig into that.

Uh the the display is going to rival Apple's two uh $1,200 iPhone 16 Pro Max in Nobody Nobody ever thought to turn the White House into an incubator. It's happening. Nobody ever I mean it was surprised hundreds of years of presidents.

Nobody thought I'm going to turn this into Jimmy Carter had a venture studio venture studio. Jimmy Carter had a peanut farm but he divested an idiot before he took the presidency because he didn't want he wanted his hands clear. He didn't want any conflicts of interest.

So he sold his peanut farm and we are now in a different era building 50 megapixel iPhones. The the hottest new venture studio is the White House. The White House.

Anyway, I mean the velocity of new C corps and LLC's that they just firing out of out of an absolute cannon canon is Bitcoin treasuries and social networks and crypto. We didn't really cover the story of of this uh of the Tron IPO. Yeah. Not enough people are are are which Eric Trump is now denied having a role. Okay.

Um I mean this is the first CEO founder of a unicorn company in the White House. Yeah, it's huge. People talked about Zuckerberg maybe running for president. They never say unicorn tech founder Donald Trump. Yes. Yes. They never they never introduce them that way. Maybe they should really put the focus on what matters.

Social network truth trading at truth. Figure it out. Oh, wild times. Wild times. Uh a cool 5. 1 billion. 5. 1. That feels down off of a off of a little bit of a high. Yeah, I mean it it it's been generally down and to the right. Um in uh in 2022 it peaked at 92 90 92 Well the the intraday high was $99.

It's sitting at $18 now. Okay. So it was like a $30 billion stock at one point something like that. Yeah. You know, if if if you sell enough Trump mobile devices who knows and then maybe it's catalyst. Maybe Trump media DJT true social is just pre-installed and maybe they they have their own search.

They build out their own search. I think they should get into foundation models. Really really take a run at the big labs. Hire some researchers. Start doing some reinforcement learning. Let's see it. I want I want I want some some research papers. Maybe they should do an open source model.

I want some I I want some thought leadership on on artificial intelligence AGI. We've suspected that he's AGI pilled, but we haven't seen it in the research papers. Let's make it happen. Anyway, that's our show, folks. Thanks for watching. We had some range today. George was wild. You had some spicy takes. That was fun.

I wish we had another 30. We went all over the place. We went over to Chinese history. We went into the NFL. technology investor Saquon Barkley, some series A's, some series B's. Really good range. Fantastic show. I think that's exactly what people come here for. Thank you for watching, folks. Focus.