When Shashank Bijapur, then a Wall Street lawyer, and Madhav Bhagat, who worked with Google, met at a Diwali party in New York some years ago, little did they know that they would come together to make a company together.
Both moved back to India a few years later (independent of each other), and Bhagat reached out to Bijapur for his opinion on a contract.
While the Harvard Law School alumnus helped out the by then ex-Googler, the two began wondering if there was a way to automate the more “common sense” errors in the contract.
Bhagat, an artificial intelligence expert, suggested using the technology and machine learning to understand legal texts. That was the genesis of SpotDraft, a legal startup that is automating simple legal contracts. It was founded in early 2017.
“We raised our seed fund of a little over half a million dollars, in August of last year. The round was led by Hunch Ventures & Investment Private Limited,” said Bijapur.
The Gurugram-based SpotDraft generates documents like contracts and invoices. It also tracks payments using artificial intelligence. Users can also upload existing documents on the website, where the software analyzes them and helps manage them online. So far, the platform has managed more than 3500 contracts.
Other investors backing the company are Spiral Ventures from Japan, US-based 500 Startups, Singapore Angel Network and Satyen Kothari (founder of Citrus Payments). “As intended, we used most of our seed fund for the purposes of building a strong team and scaling our business,” he added.
Focused on the micro, medium and small industries and enterprises, SpotDraft aims to expand in India for the next 12 months, and to more developed markets in the near future. The company, which gets monthly user charges from each customer, is also looking to be operationally profitable in the next 18 months.
The AI underlying the product is proprietary, and can “learn” the legal terminology across different sectors and industry verticals.
“The AI algorithm has been trained on millions of contracts as training data…it is able to understand and analyse almost any type of contract in any industry,” said Bhagat. “The platform is engineered in a way in which it is able to understand the context and the relevance of legal language. The current limitation is that the contracts need to be in English language,” he added.
A recent Catalyst Investors report identifies contract management as one of the fastest growing areas in the field of legal technology. Some market estimates peg the contract automation market potential as close to USD 80 billion.
The company works on the software-as-a-service model, and does not provide legal services, so notarisation and stamping have to be done through the existing channels.
The software helps reduce time, cost and unpredictability in legal contracts such as employment contracts and rent agreements.
Once the AI has learnt the industry specific language, users can just input the constraints or conditions in the required contract, and it will get generated.
“Our customers understand that this is a machine aided system that helps reduce time, cost and unpredictability associated with legal services and it is not intended to replace the lawyer in its entirety (especially with complex contracts). In cases where human intervention is required (about 20 percent of contracts), the platform makes that recommendation,” said Bijapur.