This AI Law Firm Helps Startups Like Cursor Sell Faster
Crosby, led by lawyer turned founder Ryan Daniels, has raised a $20 million Series A from Index and Bain Capital Ventures to expand its AI-assisted legal work.
The Upshot
Plenty of founders are building AI tools to help speed up sales at other startups. Few are like Crosby CEO Ryan Daniels: one who gets most excited about contracts and legal review.
A licensed lawyer, Daniels can wax about “the art and science” of contracts in impressive detail – which is thankfully no problem, since his AI-enabled law firm doesn’t charge by the hour.
“For startups that are growing really fast, the top thing that’s slowing them down is the contract,” Daniels tells Upstarts. “Everything else is over-optimized; they have AI. But the one thing that is still just humans is the redlining.”
Crosby’s solution: combine technology, including AI of its own, with in-house lawyers to speed up the review process. Customers simply tag Crosby on Slack or by email with a new contract, and the startup’s software figures out what it is, how urgent it needs to be handled, and routes it to one of Crosby’s own lawyers.
That staffer then combines Crosby’s context on the customer and its AI capabilities to mark up the document more efficiently, with their own time devoted to just the thorniest issues. What could take multiple days of back-and-forth for even the most hard-charging Silicon Valley startups now can happen overnight, or in less than four hours, and with fewer hands involved.
It’s working so far: since launching last fall, New York-based Crosby has shrunk its median turnaround time under an hour, to 58 minutes; Crosby now works through 1,000 contracts every three weeks.
Customers like AI code editor Cursor and go-to-market standouts Clay and Unify lean on Crosby to help sustain their growth; since its launch last fall, Crosby has grown the teams using it each month at a 30% clip.
And months after announcing $5.8 million in seed funding from Sequoia and Bain Capital Ventures, Crosby has now raised $20 million in fresh capital, Upstarts can exclusively report. Index Ventures and BCV co-led the round with Elad Gil, with Sequoia, global law firm Cooley and Stripe CEO Patrick Collison participating.
The funding will help Crosby to do more to speed up its processes, allowing its lawyers to move contracts to completion faster, while the startup tries to work its way into even bigger customers.
Crosby isn’t the first tech company to try to build a new-look law firm – SIlicon Valley has had at least one prominent flameout in recent years. But this time is different, Daniels and co-founder John Sarihan believe, thanks to the benefits of the current AI boom enabling a twist to a classic business model.
More on that – and how customers like Cursor are growing faster with Crosby – below.
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Legal Lego blocks
Like for many other founders, the release of ChatGPT was a wakeup call moment for Daniels.
The son of two law professors, the Canada-born Daniels had worked at a talent management startup before going to Stanford for law school, then as an associate at Cooley for a year before rejoining another startup, A.Team, as its partnerships lead and in-house lawyer.
He had first-hand knowledge to believe that the $1 trillion global legal services market would see major changes through generative AI. But playing around with the copilot tools that launched from new startups like Harvey and existing ones like Clio, he wasn’t impressed.
“A lot of lawyers weren’t using them all that much, or they were just limited in what they could actually help you with,” he says.
Last spring, an investor at Bain Capital Ventures, where he was tinkering with startup ideas as an entrepreneur-in-residence, connected him to Sarihan, who had worked as an engineering leader at Ramp on projects close to legal on the regulatory and licensing side.
As they brainstormed what opportunities remained for AI in law, Daniels visited India to look at how the $18 billion legal outsourcing market handled document review, litigation diligence and contracts. It led to a “weird” idea: what if they sold a service, not a tool?
If they could use AI to break down contracts into something like a Lego block, the same process could speed up working with a bunch of different ones. Contracts couldn’t be fully automated, Daniels believed; but payment terms in a simple two-page agreement would look similar inside a complex 50-page one. Speed up one, and you’d create a head start for the next.
“They liked that more than changing New York law to Delaware law 50 times a day.”
Fellow founders said they’d be interested in a tool that sped up the contracts process for their early sales. So after meeting with more than 100 lawyers and shadowing some, they got to work: Daniels handling the legal review himself, Sarihan automating as much as possible of what he did.
Crosby’s big unlock wasn’t so much AI taking over the redlining process itself, but how to triage it. Customers today will typically Slack (they can also email) Crosby’s ticket platform, called Bailiff, when a new contract comes in for review. Bailiff ingests it and determines its priority and turnaround time, then routes it to the right lawyer in seconds.
The startup’s AI software then gives those lawyers suggested changes or flagged exceptions, allowing them to focus on the bigger ones. What might usually take hours is often cut to 30 minutes of review; Daniels hopes more automation reduces it to three to five minutes of deeper thought.
Lawyers who work at Crosby make less cash compensation than they would in Big Law; as they work through contracts faster, handling more per hour, they’re also serving as data labelers, marking up where the software hits limits and training it on what to do.
If that sounds tedious in its own right, Daniels argues that the lawyers on Crosby’s team of two dozen or so are bought into the mission to minimize contracts busywork – in the office, they sit alternating with engineers to work closely on the product – and that the time they spend on a contract’s edge instances is intellectually more stimulating.
“The lawyers here are pretty mission-driven,” Daniels says.” One lawyer on staff recently noted to him that they’d spent 30 minutes thinking about how to troubleshoot a sticky limit with a liability issue.
“We’d gotten stuck and needed to get creative. They said they liked that more than changing New York law to Delaware law 50 times a day.”
‘Oh my god, go back to your wedding’
If Crosby didn’t do any more with its product, it would still make money as a better boutique law firm, Daniels claims – one with different incentives because it’s priced per project, not billable hour, but still one leaning on human experts.
So low-tech services are still key to Crosby’s success, and that hustle starts with its CEO. A night owl, Daniels still responds directly to customers, sometimes late at night (with Upstarts in the Bay Area this week to host a founder event, he hopped on an unscheduled call to fact-check this story last night at 2am in New York).
“The next thousand contracts will always be easier than the last.”
Cursor is Crosby’s crown jewel customer today, its use of Crosby to help manage the contracts underpinning its hyper growth a major door opener. So when enterprise go-to-market specialist Grace Kneapler writes to Crosby with any issues, Daniels himself typically scrambles.
Over Labor Day weekend, Kneapler pinged Daniels with a request; he wrote back an answer while noting that he was in the process of getting married, she says. “I was like, ‘Oh my god, go back to your wedding!” Kneapler says.
Behind the scenes, Cursor is also already benefitting from test use of one of Crosby’s next product launches, a tool to better route parts of a contract review to each stakeholder in an organization who might need to weigh in, such as the security or marketing teams.
“As a first year associate, that’s pretty much all I did. I was chasing people all the time,” Daniels says.
For someone like Kneapler, who doesn’t have any legal background, the more Crosby can take off her plate, and the less requests to Cursor’s busy commercial counsel she has to make, the more she can sell. “Time kills all deals, so it’s really important to get quick responses,” she says.
At BCV, investor Christina Melas-Kyriazi goes so far as to describe Crosby more as a sales enablement tool than a legal one. (Per that late-night call, Daniels doesn’t agree, but sees the logic.)
She’s excited about another feature that Crosby’s working on to pool aggregate, anonymized data from its customer work to better predict how a counter-party will react to contract terms, meaning that Crosby can be more proactive in its redlining, hopefully reducing the number of rounds of back-and-forth negotiations required.
“With their benchmarking data, the next thousand contracts will always be easier than the last,” Melas-Kyriazi says. “If you know what your counter-party would agree to before you start, it becomes a great flywheel.”
Won’t Crosby face cutthroat competition, like in Big Law? Daniels and his investors argue that it is mostly competing with outsourcing companies and small, boutique contracts-focused firms today, not the typical legal AI startups that have also raised substantial VC dollars like Harvey, Clio or Legora.
It would be “tricky” for those companies, which sell to law firms, to add Crosby-like features that would undercut those firms’ client contracts, says Jahanvi Sardana, who led Index’s investment. “You’d end up competing with your end customer,” she says.
One big question for Daniels and Crosby: how much they want to expand within a customer’s workflow themselves. The startup is adding capability to handle phone calls to help wrap up negotiations; customers like Jacqueline Wibowo, head of business operations and finance at AI startup Cartesia, say they’d pay extra for Crosby to function more like an account manager, operating more like an outside counsel across more kinds of legal work.
Crosby’s lawyers already effectively do that, Daniels says, answering client questions like whether a question requires regulatory review, but the startup has no interest in replacing general counsels or the need to work with a bigger law firm altogether.
“I’m happy to be the knowledge base, a second set of hands,” he responds. “We like to think of ourselves as leverage for lawyers, not replacements.”
Ok, this tool is perfect for commercial legal help. I’ve seen so many times deals that require very minor legal edits that get stuck in the endless queue of the single or a couple of commercial legal team members. Unlocking their capacity by offloading some of these mundane edits can be such a major boost to the deal velocity of many SaaS companies!