Legal services constitute an enormous industry, often characterized by repetitive and tedious tasks. This reality has positioned the legal field as a prime candidate for automation. In fact, a Goldman Sachs report estimated that a substantial 44% of legal work could eventually be automated. Driving this transformation is AI-enabled software, a trend that startup investors are enthusiastically backing.
Funding to companies in the legal and legal tech sectors has surged to levels comparable to the peak of the 2021 market. The following chart illustrates the annual legal-related startup investment over the past six-plus years. Quarterly funding, while experiencing more fluctuations, has largely remained robust.
The AI Influence
Notably, the overwhelming majority of recent funding in the legal tech sector is directed to companies incorporating artificial intelligence into their offerings. According to Crunchbase data, since 2024, approximately 79% of all legal-related startup investment, nearly $2.2 billion, has gone to AI-focused companies. This includes the two largest fundraisers: Clio and Harvey.
Vancouver-based Clio, a platform providing legal tools, is the largest recent recipient of funding in this space. It secured a $900 million Series F last summer at a $3 billion valuation, with New Enterprise Associates as the lead investor. Clio’s software enables law firms to automate processes such as client intake, accounting, and document management. Their generative AI offering, Clio Duo, further assists lawyers in completing routine tasks more efficiently.
San Francisco-based Harvey recently closed on a $300 million Series D financing round this month. Led by Sequoia Capital, the investment values the 3-year-old company at $3 billion. Harvey provides an AI platform for legal and professional services.
Other significant recent funding rounds include:
- EvenUp, a San Francisco-based provider of cloud and AI-based legal case management tools, which secured $135 million in an October Series D led by Bain Capital Ventures.
- Luminance, a U.K. company offering an AI-enabled platform for legal contracts, closed on $75 million in a Series C this month, led by Point72 Private Investments.
- Justpoint, a New York-based startup, raised $45 million this month for its business model of employing AI to identify harmful drugs that could be the basis for lawsuits.
AI: Saving Time
A primary value proposition of AI-enabled legal tech tools is their capacity to save practitioners valuable time. According to an analysis by Thomson Reuters, AI could free up an additional four hours of work per week for white-collar professionals in law and other fields within a year. Within five years, that figure could potentially reach 12 hours per week.
The potential impact of these new tools on legal employment remains to be seen. While law firms and in-house legal counsel departments may reduce their staffing needs, lawyers could also leverage these tools to work more productively, serve more clients, and potentially increase their incomes. Given that many innovative startups at the intersection of AI and legal tech remain in early stages of scaling, the long-term implications are still unfolding.
