Anthropic’s new tool raises bar for legal AI startups
A dramatic shift is underway in the legal tech landscape as AI advancements disrupt traditional industry leaders. This comes as the traditional research and analytics software businesses saw billions wiped out from their market share this week after Anthropic announced its new AI.
San Francisco-based AI giant Anthropic, the firm behind chatbot Claude, revealed on Tuesday that it would add a legal plugin to its systems.
The news led to declines in share prices for Experian, Pearson, Sage, and Informa. But one of the hardest-hit firms was information-based analytics firm Relx, which sees the legal profession as a key client area, as its shares fell by over 16 per cent on Tuesday.
But why the drop? Speaking to CityAM, Gregory Mostyn, CEO of Wexler AI, explained that the companies affected had been “priced as if AI wasn’t coming to their core business” and that the market is now waking up to that risk all at once.
Anthropic’s new tool will focus on in-house legal teams at businesses, helping with tasks such as contract review, non-disclosure agreements (NDAs), compliance workflows, briefings, and templated responses.
With costs soaring at big law firms and budgets for in-house teams tightening, AI tools such as Anthropic aim to save businesses hundreds of thousands of pounds a year.
But with OpenAI and Google expected to release their own legal plugins soon, we may see even more investors pull out of the traditional software market.
Anthropic’s new legal plugin, a spokesperson for Legora AI noted that it “is not a full legal AI platform. There’s a meaningful difference between offering a plugin and operating a robust legal AI platform.”
However, its move signals that “the legal tech market feels like it has reached a new baseline,” says Babar Hayat, head of technology and transformation at Konexo, a division of Eversheds Sutherland.
From boom to doom
The specialised legal AI sector is growing, with established firms expanding and new legal AI firms entering the market.
Unlike Anthropic and other tools focused on helping businesses, such as NDAs and easy contracts, the specialised market focuses solely on the legal market, with tools to improve lawyers at big City firms.
The giant in this field is the startup Harvey AI, which achieved an $8 bn valuation. Legora AI’s valuation increased dramatically, from $50m to $1.8bn in just two years. Wexler AI just completed a $5.3m seed funding round in September.
The giants are growing and with that expanding. Harvey AI is focused on Europe and has an aggressive strategy, and it plans to fulfil its financial targets this year. The US-based startup is set to open offices in Paris and Dublin this year.
This comes as law firm CMS is rolling out Harvey AI across all 21 CMS member organisations in more than 50 countries. On Tuesday, Eversheds Sutherland announced its strategic partnership with Harvey AI, which will roll out across its international business in May.
While European-based Legora AI is focused on the opposite side of the Atlantic, it launched in New York last March. The startup is now focused on its expansion across the US.
However, the bar for what looks ‘good enough’ in legal AI has risen. The market is becoming increasingly competitive, and lawyers are seeking sophisticated, up-to-date products to invest in. The legal startup needs to keep moving at an incredible pace and continue innovating as the market spins.
Back in October, Robin AI was put up for sale on an insolvency marketplace after its fundraising ambitions fell short, leading to staff redundancies. Last month, Robin AI was bought by AI-powered legal services provider Scissero.
Speaking to CityAM in December, Legora AI Max Junestrand said the problem with Robin AI was that it had “two parallel business models”.
To stay competitive, startups are expected to evolve with the ever-spinning AI market, but the key to growth, especially for funding, is not to overcomplicate the message. Mostyn said his motto for Wexler AI, which specialised in litigation, is that “we are a scaple, not a Swiss-knife”.
Eyes on the Law is a weekly column by Maria Ward-Brennan focused on the legal sector.