Filevine raises $400M Series E as AI workflows now generate more revenue than its core SaaS

well, we have our next guest in the in the uh reream waiting room. Let's bring them on in. Before we bring, let me tell you about linear lineage purpose-built tool for planning and building products built meet the system for modern software development, streamline issues, projects and product road maps.

Ryan, great to have you. How you doing, Jordy? Great to be here. Thanks so much. Uh big big day for you. It's it's really huge. We're excited about it. Feels like a long time coming, but it's awesome. Give us the news. Yeah. Get thatong get that gong ready, John. We better get the gong ready.

Today we are announcing our series E. There we go. [Music] He did the meme. Yeah, we are so excited. 400 million. That's a big congratulations. I mean, we're we're throwing down, guys. This is serious stuff. This huge Yeah, it actually is. It actually is.

I think it's a really big deal because companies like ours, I think, have kind of been ignored a little bit uh in the revolution. So, for us, it's a really big deal.

Thank you for saying that because a lot of founders love to come on and say and downplay it, but like, you know, once you're getting into the multiund million dollar fundraises, it is a big deal and uh it's important uh it's important to acknowledge that. uh first time on the show.

Maybe give us quick I'd love a kind of quick background how you got to building the company and then kind of the key milestones to get to this point. So look, I was just a lawyer with a problem. Too much to do, too many assignments, didn't want to make mistakes.

Uh I would assign something to like a parallegal or a junior associate and come back a week later and they would say like, "I don't know what you're talking about. You never gave me that assignment. " Uh that absolutely terrified me.

And so I got together with some very smart people and built a system first and foremost just to make sure I didn't screw stuff up. So that was that was like the initial insight is when did you when did you actually start the company? Yeah. So we launched in 2015. Uh I can tell I remember the day it was in Palm Springs.

Yeah. Amazing. Yeah. What were the first questions? Was there did you have uh AI wasn't really on the road map uh for a lot of people at all at that point? You were just building good oldfashioned enterprise SAS. At what point did did kind of the opportunity click?

Look, I would love to tell you it was kind of within our line of sight all along.

I mean to some extent we were doing some predictive analytics earlier on but no I mean none of it really clicked until November of 2022 and then I couldn't shut up about AI and pretty much I I don't think I've thought about much else since then uh to the chagrin of my wife and kids like that's all I talk about now.

I know how that goes. Uh what's it like uh uh on the on the sales side? I talked to a lawyer a couple months ago and he said something that was kind of interesting.

Uh, and this is just one anecdote, but he said something to the effect of like AI is great, but I don't want to adopt too much of it because our our billable hours might drop.

Uh, and so it's kind of an interesting I don't know if you guys have run into that at all, but it's kind of this interesting um tugofwar where obviously lawyers that are are uh have too much work are are looking for more efficiency.

Clients obviously want efficiency, but at at the end of the day, uh the sort of economic model for a lot of law firms means that just the more they the more they build, the more they make. There's no question there's tension there. Of course there is. Uh two things. Number one, ultimately the client makes the decision.

We actually had a bunch of our customers just reach out to us and say, "Oh my gosh, this insurance carrier, who also happens to be a Filevine customer, has sent out a note saying their coverage rules now require us to use AI. So now we've got to take a look at your other products.

" Uh because they want to save money, right? So the clients care, the clients care a lot. Uh but that that requirement to use AI, is that is that about accuracy or cost savings or both? I I get the feeling was letter wasn't shared with me. It was just told to me by a by a customer by multiple customers.

Uh I get the feeling it was more about cost savings. Interesting. Yeah. Client says, "If something can be done by an AI legal tool, I want you to use it and bill me accordingly. Don't take the simple task and put it to your most senior partner and bill me $1,000 an hour. " Yeah, that's what's going on, right?

That 100% that's what's going on. Makes sense. Um yeah, walk us through uh sort of the day in the life of a customer. How does the product actually plug in? How often are they using it? What are the different end points for the product? Uh h how are people getting the most use out of it today?

So, I do think this is where we have a big differential like a a huge moat compared to our competitors sort of bolt-on AI products. Every single day 100,000 legal professionals log into Filevine. Something they basically have to do to get their job done.

All their notes are there, all their tasks are there, their cases, their deadlines, their calendar, it's all sitting right there. So like a normal habitual thing, they're going to log into a file line every day. Our average customer uses the platform a 100 times a day. Uh now I'm not even talking about like keystrokes.

Like they actually have to move a case forward for us to count an action. So they're using it a ton. And we've just layered AI into almost every single thing they do. Uh we have a chat agent that is incredibly popular, but we also have a drafter.

Um, we have kind of more bespoke AI tools for certain practice areas, but yeah, it's it's right within the system. There's a a case chronology tool that actually runs automatically.

We're we're classifying documents via AI um and just showing them a chronology of their case automatically without them even having to ask for it um because we sort of already know so much about what they're doing in their day. Wow. Uh h how do you think about um the foundation model partners that you work with?

I imagine you're not training your own models, so you're kind of drafting off of the the big labs. Do you want to be multi-tenant, multicloud, multi-lab? Like what's the trade-off there? What are you seeing that's working? We have just found they tend to leaprog each other quite a bit.

Uh I'm negotiating deals with I think all of them right now. Uh they all very right. They all very You're in a good You're in a good spot. I hope they're not listening. Uh they probably are.

Uh, and this is going to hurt me in these negotiations, but uh, yeah, I mean, there's just no question that certain ones are better at certain things than others. The price differences can be pretty astronomical depending on which models uh, you're going with.

Uh, I don't want to call out anybody specifically, but it it's wild. Uh, some of the differences in price and sometimes that makes a lot of sense. So, for certain tools where the throughput isn't that high, we can, you know, go all out, use the most expensive model, uh, just kind of, you know, uh, redline it.

And for others, we can say, "Oh, no. This doesn't make as much sense, and we'll go with a model that's much more economical. " So, we're we're using a lot in in the future. I I have no real sense for how many different software tools a you like a a law firm is running on today.

Is is your long-term vision and pitch that Filevine just like runs the entire firm and you just kind of eat into all these different categories or do you think there do you think a law firm will be using a bunch of different AI tools for different use cases? Uh kind of give us give us a lay of the land.

Yeah, I mean our my speech last year to our user conference was we want to be a single pane of glass for pretty much all the legal work you do. So, uh, generally, yeah, they have a bunch of tools. In fact, most law firms have a document management tool. They'll have a time and billing tool.

They'll have an accounting tool. They'll have a case management tool. Uh, and then they're using some AI tools on the side. So, we just don't think any of that makes sense. It's always been our view that we should have a wall-to-wall single pane of glass for all legal work.

We don't have every single workflow in a law firm today, but we have a lot of the big ones. uh we have doc management, we have uh timekeeping and billing, we have case management and now we have significant AI workflows uh which actually now bring in more revenue uh than the the core enterprise SAS system.

And what uh was this the year of like pilots law firms saying let's try a number of different AI tools and do you think we're going to see consolidation over the next 12 months? I do I do uh we hear it from a lot of our customers. our customers have gone out and tried uh other tools.

They'll come back to us and say, "This just doesn't work for us to be on two different platforms. We don't want to take our data outside. " I mean, think about it for a minute like the calendar's here, the deadlines are here. There's so much.

And so, if you're going to go outside, just to recreate, I mean, I'll give you a quick example. I don't want to take too long, but if the question is, hey, just what's going on in this case? I want to triage my work on this particular matter.

The first thing you need to know is like what appointments do I have and what are my deadlines? Well, how does an experimental AI tool that sits on the side even know that? Um, and yet it's like a really important question for a lawyer to answer before they even start prioritizing their work.

So, our customers have all said, "Look, we really want these tools inside of Filevine. " And they've been really clear about that and and it's showing up in our revenue. Uh, but yeah, we think law firms want to be on a single pane of glass just like every other vertical does.

I'm I'm interested to know about what makes for the correct positioning in this particular market like there's something interesting about your position 10-year-old company lot of groundwork already done AI comes at the perfect time it's this accelerant um but we're not seeing a 40-year-old company accelerate as fast that I know of and also the company that just started a year ago might not be able to get past the trial phase and So I'm wondering about what the nature of like the stickiness what the what the like what type of integrations did you have to have in the law firm?

Um we've talked to some folks about like the idea of like cursor for bio and and the problem with that analogy is that uh cursor of course is built on VS Code and GitHub. These are very interoperable products. Some of them are open source. You can fork them and build very quickly.

in legal that I know of, there was no VS Code that was just open source, just sitting there to fork. And so you kind of had to go do that eight years of groundwork. Um, but but what what else has led like where else have you needed to plug in to set yourself up to really take advantage?

Like how does the modern law firm work these days? Yeah. So look, different law firms work differently. So, I don't want to paint with too broad a brush and I don't want to overstate the case here, but every law firm, every single law firm has a document management system for sure.

They're all going to have a timekeeping system of some shape or form. Um, some kind of accounting system, and then some system for running conflict checks, taking notes, managing deadlines, a calendar, like those are those are sort of the basic core apps that every law firm is going to have.

Uh, you know, fortunately, we've spent eight years building out all of those applications, and it was a pain in the ass, guys. It took forever. Uh it's really hard. Uh the uh tolerance for one mistake is basically zero.

I mean Favine went down three years ago for I don't know an hour and you know we had customers telling us it we were at a hearing and we couldn't get our work done. Like I mean they're they're screaming at us over the phone, right? Like this is really serious stuff.

Um it's been a very long time since we've had something like that, but just to give you a sense of like the criticality of what we're doing. Um, and so yeah, it was really hard to build all that stuff, but now it's all sitting on one platform.

So ideally, they're with us, but if they're not with us, they're using, you know, some doc management system, some accounting system, some case management system, and if we weren't in the situation we're in today, we would have to go bring those all together. And it would be hard.

I think, you know, if you're hate to mention a competitor, but like I mean, if you're if you're Lorra or Harvey or or any of those folks, like you've got to have that conversation. How do we get at that data? Um, I think it's a challenge.

Are you bullish on uh on new law firms that are leaning into AI and and kind of changing uh maybe the uh the the sort of uh kind of business model around? We've we've heard we've we've had uh there's a company called Crosby that that's doing like just a just contract uh kind of like man man just contract legal, right?

And so they're able to be more aggressive around pricing, give fixed pricing, things like There's also Atrium years ago and then Clear Spire before that. The actual law firm bolted on an LLC bolted to a technology company CC Corp. Interesting model. Yeah.

Or just or just a couple lawyers lit leave big law and band together and say like we're going to just leverage AI better than anyone else and try to get ahead of this trend. Um but I'm curious what you're seeing. I'm not bullish on it. Uh it's never worked.

Uh maybe it someday will uh but this has been tried multiple times and hasn't worked.

There's a hubris in Silicon Valley that uh I think kind of says, "Hey, uh we can do this better because we're smarter and we know how to use all these tools and so we're going to leverage it and we're going to totally change the economics. " Uh maybe, but like it this stuff is actually really hard.

It's really challenging. It takes years of good judgment to be able to make legal decisions.

And I just haven't seen AI be able to do that kind of long firm a long form agentic work over the course of many kind of multiple action or or not carry you know the weight of a specific firm which is a key asset if you're if you're suing somebody or you're getting sued the firm that you choose matters a lot.

It sends a message in terms of kind of how you know how serious of an opponent you're going to be. I'd send a dramatic message. You the minute you send off a demand letter or yeah an intent to sue or anything like that, you are telling the other side how serious you are by the name on that letter head. No question.

So I think it's going to be a long time. And then there's like a practical matter. So are are AI tools going to carry like malpractice insurance? I mean the cool thing about a lawyer is the lawyer's taking on the liability. Like they're to blame.

If it goes wrong and they made a mistake, they pulled the wrong case, they missed a deadline, it's their fault. uh you actually are sort of buying that too when you hire a lawyer. Uh and then the last thing I'll say is like who's to say all the amazing lawyers that work in the country today, all 1.

4 million of them, like are they so dumb that they can't use AI tools too? Um I mean come on, like of course they're going to use them just as well.

like maybe really smart people from Silicon Valley are going to be 10 20% ahead of the curve on their AI adoption, but maybe uh but I'll tell you a lot of our customers are pretty freaking smart.

Uh they know what they're doing with this stuff and they've done some incredible uh things already with RAI and with other uh LLMs and other tools. So, you know, I'm I'm bullish on AI and law, extremely bullish. Uh I I'd say I fade the ability of like a UD or somebody like that to come in and start taking this over.

Well, thanks so much for hopping on the show. Appreciate all the insights. Congratulations to you and the whole team on the milestone. We will talk to you later. Cheers. Numero sales tax on autopilot. Spend