Author: Xiao Yan

Editor: Caiyun

Source: New Fire

In March 2023, OpeAI launched ChatGPT with great momentum, bringing revolutionary progress to the AI industry, shocking everyone. One test of ChatGPT caused quite a stir. At that time, the Kent Law School at the Illinois Institute of Technology in Chicago, USA, stated that GPT-4 had passed the US bar exam, and surprisingly, GPT-4's performance was excellent, surpassing over 90% of the candidates.

For a while, many legal professionals felt unprecedented pressure, worrying that the rapid development of AI models would take away their jobs. This concern turned out to be true. AI's evolutionary capability is already rapid, and the rapid entry of capital has further accelerated the evolution and rise of AI.

Legal AI startup Harvey raised $80 million in Series B financing, attracting significant attention from investors.

At the end of 2023, the legal artificial intelligence startup Harvey announced that it had secured $80 million in Series B financing, with a valuation of $7.15 billion, from investors including KPCB and Sequoia Capital's OpenAI Startup Fund.

It is reported that Harvey is based on OpenAI's GPT-4 series model, combined with proprietary legal data for pre-training and fine-tuning, providing lawyers with a deeply customized ChatGPT assistant. In addition, Harvey's products are widely used in legal service agencies, law firms, and consulting companies, making it a "hot cake" in the industry.

Harvey was founded in January 2022 and is headquartered in San Francisco, USA. Despite its short establishment and relatively young age, it has received widespread acclaim in the industry. It can not only complete professional tasks such as drafting legal documents, assisting legal research, reviewing legal contracts, and explaining legal terms, but also generate relevant recommendations based on data.

So, when faced with various tedious tasks, lawyers can use Harvey to solve problems more quickly, provide more cost-effective solutions to clients, and free themselves from tedious work, allowing them to focus on maintaining client relationships and other areas that machines cannot replace. In simple terms, Harvey serves as a more efficient assistant or intern for lawyers.

In fact, Harvey has deep ties with OpenAI. It is not only the fourth project supported by OpenAI, but also received substantial investment from OpenAI. In the seed and Series A financing rounds, OpenAI made consecutive investments totaling $26 million. OpenAI's founder, Sam Altman, has expressed great anticipation for the application of GPT-4 in legal scenarios.

Why are so many investors interested in Harvey?

So, in the current economic downturn, with investment strategies becoming more cautious and conservative, why are major capital players actively investing in Harvey?

The first thing that capital values is undoubtedly Harvey's ability to make money.

According to data provided by professionals, Harvey's Annual Recurring Revenue (ARR) has increased from $1-2 million in April 2023 to $10 million in December 2023. Considering the latest valuation of $700 million from the recent financing round, Harvey's ARR valuation multiple is approximately 70. In comparison, OpenAI's latest valuation reached $86 billion, with a valuation multiple of 66, indicating high expectations from investors for Harvey.

Furthermore, Harvey also has an inherent advantage in "creating customers." The number of customers using Harvey has significantly increased, including well-known institutions and large enterprises.

In February 2023, Harvey signed its first corporate client, Allen & Overy. Allen & Overy is one of the top 5 global law firms, and by partnering with Allen & Overy, all 3,500 lawyers under the firm will use Harvey's AI products. In April, PricewaterhouseCoopers became a corporate client of Harvey, and its 4,000 lawyers will also use Harvey's AI products. A continuous and high-quality customer flow is bound to provide sustainable momentum for Harvey's development.

In fact, Harvey is not the only popular AI legal company. EvenUp, a direct competitor of Harvey, is another typical representative. In April 2023, Silicon Valley's top VC BVP led EvenUp's Series B financing with a valuation of $350 million, with partial investment from Bain Capital. EvenUp's valuation has grown rapidly, more than quadrupling in just over a year, with a growth rate comparable to Harvey's.

Similarly, in June 2023, media giant Thomson Reuters acquired the AI legal company Casetext for $650 million, one of the largest AI acquisitions of the year. Casetext has been dedicated to the legal market for 10 years and later expanded into the AI field. In September 2023, Paxton AI, a legal tech company dedicated to providing automatic document summarization and drafting functions, announced the completion of a $6 million seed round of financing. In the same month, the legal tech company Darrow announced the completion of a $35 million Series B financing.

It is evident that current capital is highly favoring the "AI + legal" vertical track.

The development of "AI + legal" is booming, but will lawyers become unemployed as a result?

As mentioned earlier, Allen & Overy, one of the top 5 global law firms (also the largest in the UK), has become Harvey's first client. The fact that such a heavyweight law firm has chosen to partner with Harvey is sufficient to demonstrate the industry's high recognition of the capabilities of "legal AI assistants."

So, in the face of the impact and rise of AI, will real lawyers really face unemployment?

David Wakeling, a partner at Allen & Overy and head of the Market Innovation Group, stated, "Over time, not adopting generative AI will be a serious competitive disadvantage for law firms." He also emphasized that with the emergence of Harvey, employees can save several hours of time each week. Regarding the work results of "legal AI assistants," the only thing lawyers need to do is "careful review" to prevent any inaccuracies or misleading results. It is evident that Harvey can better assist lawyers, making them more efficient, intelligent, and cost-effective in problem-solving.

From the current development trend, AI and law are naturally compatible, but there is no issue of replacing lawyers.

Taking Harvey as an example, Harvey does not intend to replace lawyers, nor does it have the ability to do so. It acts more as an intermediary between technology and lawyers, assisting lawyers in completing higher-quality work and focusing more on high-value work. However, it cannot be denied that the new generation of AI has significantly higher capabilities and can fully perform the work of a legal assistant. "AI replacing basic positions" is becoming an inevitable trend.

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