Clio and Harvey, two fast-growing startups selling software to legal professionals, have raised a combined $1 billion in funding to expand their presence in the market.
Clio revealed this morning that it had closed a $900 million Series F round at a valuation of $3 billion, at the same time that Harvey announced it had secured $100 million from a consortium of investors led by Alphabet Inc.’s startup fund GV, with participation from OpenAI.
Improving the efficiency of law firm operations
Clio’s funding round was led by New Enterprise Associates, which raised more than $500 million of the $900 million, with the rest coming from Goldman Sachs Asset Management, Sixth Street Growth, Alphabet Inc.’s startup fund Capital G and Tidemark. TechCrunch reported that the raise included a “substantial” secondary financing component, allowing employees and investors to sell some of their shares.
Clio (formally Themis Solutions Inc.) sells a suite of cloud applications that law firms use to manage their practices. One of those applications, Clio Accounting, helps law firm finance teams run their day-to-day operations more efficiently. Clio Draft is a tool that turns legal documents into templates that can be reused across multiple projects.
The company also sells software for law firm marketing teams. Clio Grow can be used to create a law firm’s website, promote the website with search engine ads, and measure which marketing methods are most effective at attracting clients. The application also incorporates a customer relationship management system that legal professionals can use to store data about sales opportunities.
Rounding out Clio’s software portfolio is an application called Clio Manage. Like Clio Grow’s built-in CRM system, the application is designed to help law firms manage their internal data, with an emphasis on case-related information rather than sales opportunities. The application can store all documents related to a case in one place and keep a log of which employees changed which records and when.
Clio generates revenue not only from software subscriptions but also from payment processing. The company offers client billing capabilities as part of its application portfolio and charges law firms a fee for every transaction they complete. Clio says it has processed billions of dollars’ worth of transactions since 2022.
The company’s payment processing business helped drive annual recurring revenue to more than $200 million ahead of its latest funding round, a milestone that Clio achieved with positive EBITDA (earnings before interest, taxes, depreciation, and amortization), according to TechCrunch.
The company plans to use the new funding to expand its international operations. At the same time, Clio also plans to strengthen its application portfolio with a focus on payment processing and artificial intelligence capabilities.
AI-assisted legal debate
Harvey competes in a different market than Clio: its namesake cloud platform uses large-scale language models to help lawyers review legal documents faster, while also automating some related text processing tasks.
Harvey’s LLM can extract key information from court records, draft answers to legal questions posed by law firm clients, and review contracts for errors. It can also help legal teams find legal documents to support their arguments in court. Harvey’s platform includes citations with each prompt answer to help users verify the accuracy of the information provided.
The $100 million funding round announced by the company today includes investments from Alphabet’s GV Fund and OpenAI, as well as Kleiner Perkins, Sequoia Capital, Elad Gil and SV Angel. Harvey is now valued at $1.5 billion. The company claims to have tripled its annual recurring revenue and doubled its employee base since its last funding round in December.
Harvey will use the new funding to continue adding employees, with a focus on expanding its engineering team. The new developers will support the company’s efforts to integrate more LLMs into its platform. As part of the same development initiative, Harvey will collect training data to drive the development of new AI models optimized for legal work.
Image: Clio
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