S14E3: Ryan Daniels, Founder & CEO of Crosby, on Legal Services in the Age of AI

using ChatGPT for the first time, it was almost emotional. GPT-3 at that point wasn't amazing at legal work. It was probably 3.5 where I was like, this is really going to change the way legal work happens.

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Thank you so much for being a part of the community and welcome to season 14 of The Room podcast. Rippling is one of those tools I wish I had even earlier when I was building my startup, Pryve. If you're building a startup, every minute matters, but it's surprisingly easy to lose hours to onboarding, paperwork, fixing payroll issues, or setting up laptops for new employees. We've ran into this constantly, and it's not hard work, but it's constant and it adds up. That's where Rippling comes in. Rippling is a unified platform that lets startups run HR, payroll, IT, and finance in one system from day one. Rippling's startup stack replaces disconnected tools that don't sync now with a fully connected platform. It lets you get back to the real reason you started your company. Right now, venture-backed startups can get 6 months of Rippling's startup stack for free. Head to rippling.com/theroom and sign up today. That's R-I-P-P-L-I-N-G.com/theroom to sign up for 6 months free today. Focus on what you're building. Leave the rest to Rippling. Rippling.com/theroom.

Perkins Coie supports the most innovative entrepreneurs and investors in fast-moving and high-growth sectors, addressing their myriad of legal needs. But the firm doesn't just provide end-to-end legal and business counseling to its startup clients. It also facilitates introductions to key advisors and sources of capital. Perkins Coie's interactive website, Startup Percolator, offers access to programs, resources, and rich dynamic content designed to assist entrepreneurs on their startup journey. To learn more, Go to startuppercolator.com and perkinscoie.com. Welcome back to The Room Podcast. Today we're stepping into the future of legal. Ryan Daniels is the co-founder and CEO of Crosby, an AI-first legal service company that pairs elite attorneys with purpose-built agents to deliver a smarter, faster, and more accessible alternative to the traditional law firm experience. Ryan's path to a founder market fit cuts across multiple worlds. He grew up surrounded by lawyers with his dad as a law professor and his mom mom, a human rights attorney. He went on to study at Penn, work as an associate at Cooley, before ultimately spending a lot of time thinking through AI policy at a think tank at Stanford post his own legal degree. Years before ChatGPT made any of this feel urgent, he was thinking through the moment in which legal work could be redesigned and reimagined through the agentic experience. Since founding Crosby, he has assembled a team of contrarian lawyers and world-class engineers backed by some of the best firms in the industry with Sequoia, Benchmark, and Index. Today, they have an impressive client roster of breakout companies from Cursor to Clay, for whom deal velocity and contract quality are mission critical. In this episode, key insights and themes include building trust in a high-stakes service business, why rethinking the billable hour changes everything, and ultimately how to scale legal quality in the age of AI. Ryan, hi, how's it going?

Hello again.

Good to see you. Happy Saturday. We're recording this as an addendum to the episode, which we, uh, had so much fun recording a few months ago, but I was excited to hear hear from you this week. Some exciting news is coming out just in time, actually today at the point of releasing the conversation. So what's been going on with your company since we last spoke?

Yeah, it's such a good coincidence in timing. Uh, we are announcing our $60 million Series B, which is so exciting, and it coincides with the release of the episode. And we were running some numbers last week, and the other big milestone that we realized is we have now closed— we're a law firm, we close contracts for our clients— over $1 billion in revenue for our clients since our seed announcement in June. So that's like 270 days. And when we announced our seed and came out of stealth in June, I think we'd done about $20 or $30 million maybe. So it's just really taken off.

That's incredible. Congratulations on like the dual milestone of having such an incredible level of impact for your customers and then also on your side. So tell us a little bit more about the raise and how it came together. What gets you excited about who's joining you on the journey?

Every startup, every company, in order to generate revenue, needs to negotiate contracts. That's the moment that matters most. And to build an experience that speeds us up, in some cases we've seen by like 70, 80%. It's just like we've just had so much interest from different companies as we started to get more publicity. With this round, we're partnering with Lux for the first time. They're, you know, pretty deep tech fund. They have a team here in New York we spend a lot of time with. And so we're doubling down a lot of the research we're doing, you know, and kind of just trying to basically predict the way two parties negotiate an agreement. And so partnering with them now really allows us, I think, to just lean more heavily into the research side of the business over the next basically year. Is going to be a major focus.

Incredible. Well, awesome to have them joining the journey. I've met a few of the Luxe team members and they're great. It's so fun to see this incredible group of, you know, AI-native innovators building. And, and thanks for trusting us at The Room with your story.

I loved recording the original story with you guys and the timing could not be more perfect. So I can't wait that this is going to be a big part of our launch.

Perfect. Well, let's open the door.

Let's do it.

Ryan, thank you so much for joining us in The Room today.

Guys, it's so great to be here. I'm so excited.

We're stoked to have you. We love to start at the beginning with all of our guests. So first of all, where did you grow up and how has that shaped your view of the world?

I grew up in Toronto in Canada, and I've been now in the States for almost 15 years, and I'm now a US citizen as of a few years ago. So I'm probably now American than Canadian. I, the question of how it shaped my view of the world is a great one. Canada's funny because the truth is it's a lot like here, but you also feel like you're from a different place. Our words have a slightly different letter in that we have an extra U here and there. It like took me years to figure out why that was, but it's not obviously glaringly different. So everything looks just slightly askance. And I think over time it just makes you question things just a touch, but maybe I'm just over-editorializing.

That's great. Having any sort of slight shift in worldview does make you question how you would think about this or that. And even for me growing up on the West Coast and then going to undergrad on the East, there's just like slight differences in how you perceive things. And I believe that I read you grew up in a legal household. Is that correct?

Oh yeah. My extended family with our cousins, I think we have 7 or 8 lawyers. So, there's a lot of us. My, the story goes back a long time. My grandfather fled to Canada from Eastern Europe prior to the Holocaust. And I think felt that the legal system was a really important way to have some more agency in society. You can have access to the institutions that govern rules and govern your sort of rights and responsibilities. And this isn't like an abstract thing. We heard this all the time growing up. The legal system is really important. My dad is a law professor. My mom was a human rights lawyer and then now teaching law. So, it's everywhere. And then, the obvious impact for me is again, feeling this really profound sense of the importance of law and lawyers and judges and how they can truly shape our lives. My grandfather and their family was able to get into Canada based on the ruling of a judge. And so, this is part of our family lore. I was always really ambivalent about ending up in law because I loved tech so much. I had a lot of admiration for it, but I didn't really want to be a lawyer myself.

There's definitely a really large value placed on the overall legal system and its ability to add structure to our lives. I think oftentimes it's misunderstood, perhaps, in terms of you only see lawyers sometimes when you don't want to see them, but behind the scenes, this system is making all of us able to just live our lives peacefully as we do. It's cool to have that vantage point of the value of the legal system, whether you're in Canada, the US, or globally. Did that always make you think you were going to become a founder?

I always was extremely energized by building things, whether just like a couple of friends working on some project or some contrarian idea together. I was getting maybe in some trouble as a kid. I always found a lot of joy and energy in like rallying people around some idea. I have a twin brother and he often reminds me like, this was always something you were doing. As a kid, I was very much in the cult of Apple and obsessed with tech and computers, and I was always the IT guy in the family. And so, I had these interests. It was just like, I liked running after crazy ideas and motivating people around some cause. As I got more into computers, I started really being enamored by just the power of what technology could do. You could take this thing that required a lot of humans and had a huge marginal cost to do before variable cost, and now you can just do it at scale as you have computers do this task. And that always like really wowed me when I'd see a website do something for the first time. And then in the background of it all was this like sense that law is the most virtuous thing you can do. And so they were a little bit incompatible for a long time.

No, absolutely. It's hard to marry all of these passions in one place. And you definitely followed first the experience of legal, both having gone to Penn undergrad and then being an early employee at a company, HiredScore. But then from there, you went on to Stanford Law and then had a stint at Coulee. Tell us a little bit about some of these early career decisions.

HiredScore was, it was not super planned. I met the founder. I got totally caught up in her energy, her name's Athena. And the thing, the problem they were trying to solve. The company was about 5 people. I thought I would do like an internship with them for a summer after college and then move to a big tech job in San Francisco. And I never ended up starting at that company. I stayed at that company because we just kept taking off. We were working on an AI for hiring concept back when it was ML and data science. And as a result, the EEOC and federal regulators were poking into what we were doing. And I just ended up spending a lot of my time writing these long policy memos. To the federal government trying to explain the way that I thought our system should be regulated and how liability should work. And I realized that this is actually really interesting stuff. And there was a think tank at Stanford that does a lot of AI policy and just tech policy. And I wasn't sure that I wanted to be a lawyer, but ended up finding myself there and doing some of that research. The interesting thing, this was many years before GPT-3. I think it was around the GPT-1 days, so nothing was really known, but this think tank was starting to talk about, okay, we know how, like, policy changes will impact the way software gets developed. At some point, software changed the way lawyers work. And it was very theoretical, because nothing was really that useful. But, like, to me, I started to get a really strong sense of looking at the data and actually getting some exposure in different legal jobs and things I was working on. That, wow, like, lawyers are, I mean, like, an unbelievably important part of society, especially U.S. society. And it's overwhelmingly manual, the work we do. And so, yeah, this makes sense. At some point, probably technology will really change the way this staple of society works.

And technology very much did. Fast forwarding a little bit, this is why you founded Crosby. It was to build an AI-first law firm, not just legal software too. I'd love to dig a little bit into what was going on at the time where you said, okay, I'm going to build this business full-time. I'm so passionate about it. And also what the core insight that made you believe selling tools to lawyers wasn't going to be enough, that you needed to actually become that full-stack law firm?

I suspect a lot of people you talk to have this lightbulb moment, which was using ChatGPT for the first time. It was almost emotional. I genuinely started seeing these things and it was GPT-3 at that point, wasn't amazing at legal work. Really quickly you could see, and I may have used probably 3.5, where I was like, this is really going to change the way legal work happens. And I remember this was, I'd already left Cooley where I was a corporate associate, but I remember at that point realizing I was probably working the same way my parents were more or less, maybe just with email from so many years before. And this was the first moment where I just thought, this is it. Like the thing that we've been talking about at law school is really going to happen. And again, I suspect a lot of people had that kind of aha moment, but it was hard to put it back in a box. All I could think about from that point forward was This is going to change a huge fraction of society. I'm weirdly positioned to have some legal understanding, and this is what I want to spend my life doing. And after that, I've never felt such a sense of, I can't do anything else. So that's how this started. I left a company I was working on, a startup that I was working at the time where I was a GC and working on like a handful of issues. And I just started talking to lawyers and it was really easy with my law school network. I think I probably spoke to 100+ over a 9-month period, which is not that many over that many months. And just trying to figure out like, how are you guys using this? Trying to understand, are there pockets of law that are not obvious that we might be able to focus on? And then to get to your second question, I started seeing the psychological role that a law firm plays to their buyers, right? Whether the buyer is a lawyer, whether buyer is a non-lawyer at a company. In other words, when people have some sort of legal issue, their instinct is to go to a trusted advisor. That's what lawyers really do. Not necessarily to like an AI system. And I think that will probably change, but like a couple of years ago when we started working on the company, we were like, well, let's just meet people where they are. And the idea was Farfetch, and a lot of the investors we talked to said it's a cute idea, but like it wouldn't really work. Let's just be a bit more software oriented. But the deeper we dug, we learned about this whole market for alternative legal services, which is basically like a sort of alternative to law firms, mostly offshore. I ended up spending a little time in India digging into this, and we saw that it's a bigger market for legal software and growing 4 times as fast. So we thought, okay, this is— there's something really interesting here. And that's what tipped us off to start your own legal services company.

That's incredible. And I think as a founder myself, when I was first engaging with legal help, one of the things that always gave me pause was how many hours is this ask going to take? So there, it was a high trust relationship, but there was always the question of how is this scope creep going to impact how much I'm paying as a startup with limited revenue, for example. And Legal has traditionally operated on billable hours, which always incentivizes inefficiency, but you're changing the game there. What gave you conviction that startups were ready to pay per document, like for a contract instead, and that this mindset was in fact changing? At my startup, Pryve, Rippling helped us avoid a lot of the operational drag that comes with scaling a team. With most tools, something as simple as onboarding a new hire involves multiple systems. Payroll, apps, hardware, and it can take weeks, quite frankly. With Rippling, those workflows happen automatically in one place. That means fewer distractions and more time focused on building. Over 15,000 startups rely on Rippling to scale fast without adding additional ops and HR headcount. So if you or your startup wanna move as quickly as you can and focus on what really matters, like your product and your customers, You need Rippling. Right now, venture-backed startups can get 6 months of Rippling's startup stack for free. Head to rippling.com/theroom and sign up today. That's R-I-P-P-L-I-N-G.com/T-H-E-R-O-O-M to sign up for 6 months free today. Focus on what you're building, leave the rest to Rippling. rippling.com/theroom.

So I talked a second ago about how we sort of looked at what were buyers of legal services? What do they do when they need legal help? And so then we had this idea, let's start our own law firm. And everything started to come together from there. So one of the things we started to notice was in order to get really serious about offloading a lot of the work that lawyers do onto different AI systems, and mostly now it's just different agents that we're building, we had to have lawyers working with us, for us, under one roof. And we had to get really serious about the incentives to actually, like, month over month, week over week, change the way we behave. Change the tasks that we do as lawyers, which we're so trained to do and we do really well, to offload onto agents. And the way we thought we could do that is by getting rid of a billable hour. Because if you think about it, if you do 10 tasks in an hour, 100 tasks in an hour, you're still billing an hour. And bill by the piece of work we do. And we knew that we'd actually run the risk of being margin negative on some pieces of work, but the incentive would be really profound for everybody in the company to just rally around this goal of we need to find a more productive way to work. That was where we started. And then we started going around to everybody who might want to use this document-driven law firm. And we obviously started with bigger companies who have enormous legal budgets, like in the hundreds of millions of dollars. We were working out of an investor's office and all the other founders, they were like, no, like, we need this. We'll pay you for it today. And so, it was actually a very organic way of finding your place to start. And that's where it happened.

When I was running my sales team back as a startup founder, one of the biggest bottlenecks was contracts for deals, MSAs. And I would definitely cut corners in terms of how airtight our contracts were in order to to make sure that the deal was moving quickly enough. Tell us a little bit about some learned insights around how your customers actually wanted to use Crosby once you had launched that might have differed from your initial assumptions when you started the company.

The first year is just so fascinating because you have this morsel of an idea and then you expose it to your users and it's just, it's so gratifying because you see how people react. Having a really good, responsive, and thoughtful lawyer at your disposal is truly the difference between hitting your revenue goals this quarter or not. That's basically it. And we did a lot of surveys and that's like the main factor. It just, things slip. They don't usually die. I think the other thing that we were less in tune to is we thought, what is the real downside risk doing a bad job with legal? And often it comes up in a fundraise. Investors start to diligence your company and look at your contracts and realize you guys are not buttoned up. And so I think for us, the big milestones we've had to really prepare for a lot of our clients doing multiple fundraises. And seeing that everything we've done is good enough quality. A main thing that we've gotten really thoughtful about over the last few months that we've learned is these sales agreements, I would say only about 30 to 40% of the expertise is legal expertise, is really understanding what are the nuance of like an identification agreement and like the things you can do or limitation liability. And 50, 60% is just about all of the business context. What is the company selling? How does their technology work? Where's the data stored? Like, these things you have to answer. And then also getting a feeling, and it's very visceral, for like, who is your client and what do they care about? Like, is it a CEO who's like, just get these things signed no matter what? Or is it somebody who's a bit more thoughtful and disciplined? And, they're in a certain industry where like regulations really matter. So what I think we're really focused on now are building interfaces for our clients to help us get all this context as fast as possible. And so when we go back to our mission, which is reimagining the law firm, building the best legal service experience that's been imagined before. The best law firm should have a mind meld with their clients, right? If you get a new insurance policy, they should know it that week. If you launch a new feature that has different data requirements, they should know it that week and be able to negotiate on your behalf. And so empowering our clients to give us all the information so that we're an extension of their business. We're not like an external service, but we feel embedded in their company as a mix of agents and lawyers. I think that's the thing that we were missing at the beginning, where it was a generic contract review service.

That totally makes sense. The legal space for so many is very foreign, it's intimidating, and by design it sounds serious. Like, if things are legal, I, I want it to be correct. I don't want to go to jail. So, even just the energy around legal sometimes feels intimidating, and I love that the specific slice of where you guys are playing is more like the business side of legal that feels like a little bit more approachable, but also needs that level of rigor.

Yeah, that's totally right. One of our missions is just making legal feel more accessible and less intimidating. And what I always said to John, my co-founder, he was really early at RAMP, brilliant engineer who really understood deep workflows. And every time we'd get together and look at some new legal tasks, I'd say, look, it's just English. If you sat here for long enough and read it, it's just English. And I realized that's not exactly right. I mean, there's just too many things, but at the end of the day, Like, if we make things really explicable, and this is what AI is amazing at, is just like summarizing and adding context, our clients should feel really confident in the work they're getting, and it should not be a black box. And that's a really big challenge.

No, completely. Recently, I was putting all of my home documents into v0 so that I could just generatively ask v0 the answers to the questions on all of my legal documents for my home. And I was literally like, All real estate agents like need to be offering this to their people. I cannot be in this Google Drive. Like, this is insane.

No, truly. On an unrelated note, like I needed to write a demand letter and I just got ChatGPT to write a demand letter. Seemed right to me. And so now my bottleneck is how do I find a lawyer who will send the demand letter so it's not coming from me?

But like what you guys just said is so obviously where this is heading, right? And the fact that we have, there's about a million, 1.3 million lawyers in the US. And there are obviously things that we learn as a result of going through that bar certification. The same way that you don't want a doctor who's not licensed, like, cutting into you, you don't want a lawyer going to court. But there's just so much that's legal-related that we don't have enough lawyers to do that you don't really need to be— you don't really need to be licensed to do. And like, writing a demand letter, there's probably like a little nuance, maybe, if things are really complicated. But if we can do our jobs right, we should have lawyers on hand when we really need them. But otherwise, you should be really empowered. And our job is just getting all the data there at your disposal. And again, in my opinion, the best law firm would feel like that. It's really empowering and you feel like you know what you're doing and you can be in charge.

One of the incredible things around founder market fit is that you have legal experience. You are a lawyer. Your co-founder was an incredible engineer at RAMP. And I'd imagine there's a lot of hesitations by customers around, okay, how accurate is this maybe AI-generated contract? And thus the importance of a lawyer in the loop, especially in this phase of AI and law. Tell us a little bit more about how you divide and conquer with your co-founder and how your legal background is really helping you build a better product.

John, my co-founder, there's a reason, like, of all the people we were working together with, we just clicked really quickly. You know, he has this intense empathy for users. And so here now we have a room, I think we have about 12 lawyers in this room, and John just like loves learning all the things they're working on and what they're doing. And I think that came from this incredible product obsession at RAMP of just, let's just find ways to obviate even the things that don't seem like that needs to happen. And that bond started with us. John would literally watch me for hours reviewing contracts and just say, I bet I can do that with AI. We'd compete and we still try to do a bit of that. And so I think that like deep concern for our end user, which is our lawyers here, as well as our customers, is extremely important. I don't know if I was a rebellious lawyer. I just was questioning a lot of things. And so I think it set me up really well here to be like, do I really need to do that for like 9 months? That just seems like I could figure it out. And I think it definitely allows us to push the limits. And now we've hired much more senior attorneys who I'm actually learning a lot from. But I think we have a culture here of these really contrarian lawyers. And this is why we want to be in New York. This is by an absolute number is the largest concentration of lawyers in the US, maybe in the world. So we find these really contrarian AI-pilled lawyers who all want to question the status quo. But I think also have a great deal of respect for the fact that law is complicated and there's a lot of judgment and nuance and Sometimes you do need a lawyer who has 15 years of experience to like really tell us what to be doing.

I love that. So many of my good friends have been going through law school recently, like two of my best friends, one at Harvard, one at Stanford. And thinking through like some of the things that come to mind, I've seen that too, where there's just so much of this decision-making criteria that is actually more gray than you'd think. It's not how I, as a non-legally trained person, think about law.

And I tell people all the time, I think law school is still valuable. It's fascinating to look on a very granular basis. When we review a contract, you're thinking, okay, how complicated can this be? It's a sales agreement. We've done almost 10,000 of them today. Why do you still need a lawyer to review things when we have such a great dataset? And there's just still these, like, issues that we've never seen before, where a counterparty is asking for some obscure law in Europe, and we have to think about it and be like, wait, how would this work here? It happens at least 2 or 3 times a day. And our point to our lawyers is, this is all you should be doing. Like, you should really be thinking about the work you're doing. We're not there yet, but the promise that that could be their jobs is really enticing, and I think that's what gets lawyers to want to work with us.

I think so too, because it's a little bit the thing that's happening with the evolution of the developer experience, where a lot of the really boring code that you used to have to write, that's just not what true developers love. They love the creativity aspect of how could we architect this? How could we build this differently? And you're going into that space too, unlocking this creativity for lawyers when they don't have to be bogged down in the minutia.

I love that you brought up that comparison, and especially you being at Vercel. A lot of our engineers play a lot with v0, which is, or sorry, our lawyers, not our engineers, which is really cool to see them, like, trying to vibe code. I think where LLMs have gone for cogén is just so far ahead of any other type of work in terms of the way that it's improved on, on different benchmarks. I do think it just provides this bit of a window into where legal will go. When you look at some of the data, it seems like the service area second only to cogén where LLMs will have the biggest impact will be legal work. It's just so much unstructured qualitative text that is so reliant on humans to parse through and create it and edit it. So, what's really interesting is in the room here, like, seeing the engineers, it's just like a sneak peek to where lawyers might go. Like, obviously, we talk all the time about lawyers vibe reviewing, like vibe redlining. That's like the biggest topic here. But at the same time, we like fight like crazy to hire incredibly good engineers. And the question is, if vibe coding is so prominent, like, what are we doing? It's like, they make extremely complicated calls on our architecture and how we build things. And so, you're totally right. You see just, you see where it's going for lawyers.

That's incredibly exciting. I don't think we're the only ones who are bullish on this. Of course, you've recently announced fundraising from a incredible firms like Sequoia, BainCap, Index Ventures, and amazing angels like the co-founders of Ramp, the Collison Brothers, and Cooley itself, a law firm. First of all, congratulations on all this incredible traction.

Thank you so much. Yeah, we feel very fortunate.

Who was the first person to say yes to investing in you and Crosby?

Oh, good question. Early on when I was just working the idea of Crosby, I was going through all my old network and I happened to work years ago at Cooley with the current GC of Sequoia. Her name's Cindy. Hi Cindy. And I just picked her brain on a few of the ideas that I've been working on, because I was writing down a couple. When we first started talking to Sequoia and like kind of spending time with them and explaining where the idea had evolved to, they were like, all right, we just need the GC to kick the tires on this a little bit. And it was this amazing moment where she gets on the call and she's like, wait, I know, I know exactly what's going on here. That was just a great kind of example of total full circle and Cindy really giving incredible feedback and helping steer the direction of the company. The fundraiser went pretty fast for the seed. It was a little over a year ago.

That's incredible. And so cool to hear about the momentum during the early days of fundraising. Sometimes founders feel, especially with seed raises, that the fundraise is an easy part of the journey, but there's so much going on in the background that is not going as planned. We know founder journeys are not always up and to the right. Maybe tell us a story where something was not going quite as well as you expected, or something unexpected happened as you were scaling the business.

Oh, good question. I have two things that come to mind. I really should caveat and say we're so early. I know real startup pain. We haven't really had real startup pain yet, and it will come. We've had some hard days. As these things go, I think we've just— it's been smooth, and we don't take it for granted because it won't last. One thing that was a little hard, there were a few months where we weren't totally sure if like AI would upskill cheaper offshore lawyers or even paralegals. Or the alternative would be like hire really good lawyers and AI can leverage them. And the difference would be like you hire fairly inexpensive, maybe not even lawyers, and just give them a lot of AI tools and then they can do higher quality work versus hiring pretty expensive lawyers from like big law firms and they can just hand off a lot of things they don't want to do and just use strategic stuff. This was a pretty open question that we just really didn't know the answer to. But the easiest thing to do was to hire on like a 1099 basis, lower skilled legal talent. Mostly paralegals and a lot of folks offshore. And then we were building a lot of tools for them. And the quality bar was just not there. And at that time, a few of our design partners who were like incredible companies were just starting to ramp up the volume they were giving us. And it was just like, the timing of it was like poetic because we just onboarded these legal folks. We trained them, we got them on our system that we built. And like contracts started pouring in and we really wanted to honor our like 3-hour SLA. And so me and this one lawyer on the team were just like, I was doing hundreds of contract reviews. I had no time to even like interview other lawyers. And it was obvious at that point that our thesis was wrong because the other lawyer and I, who had a bit more legal experience, we were way more productive with just like the basic AI tools we built back then. Whereas like the folks that we were onboarding, we weren't really seeing the quality improvements from AI that we were hoping to get. And so it was obvious that we just had to get rid of that attempt and just double down on high-skilled legal talent and really leveraging them. There was like a 2-month period there where it was just like, hoping we could land the plane, like not churn any clients, not compromise quality, not compromise SLA, but still bring on a lot of lawyers. It happened to be the month leading up to my wedding, so it was just like a crazy, just painful. And then we got through it. There were a few weeks there where like everybody joked there was a lot of bus factor. Like I was doing a lot of contract reviews and it would've been bad if I stopped.

Those things happen, right? Where you're like, okay, I knew I was doing things that don't scale, but this is a next level not scaling and we actually can't. Pull this off, uh, totally, which obviously means something's going right eventually, but need to land the plane on the process. It sounds like you have, right? Today you have incredible customers, household names now, like Cursor, Clay, other ones, Unify, GTM, where deal velocity is of course mission critical. These companies are not getting to a billion in revenue without moving quickly. Legal overall is of course a trillion-dollar-plus industry with a lot of entrenched players. Frankly, since the dawn of America, celebrating 250 years this year, shout out, there have been some form of lawyers. So, how have you guys thought about and come other legal AI copilots and how you're looking at the landscape around you.

I'm so glad you brought that up. I will say as an aside, I spent a lot of time in law school doing like weird, what's called comparative law research, where I spent time in other parts of the developing world working for judges and seeing how their legal systems function and developing a really strong sense of, wow, the legal and judicial system in the US is unparalleled. It's so developed. But again, like, you know, I'm not a lawyer. Access to the judicial system is, even with an enormous legal industry, is so difficult because lawyers are expensive and lawyers are very thoughtful. So I think there's a few things I'd say. One is that trillion-dollar amount that we spend on lawyers every year, that number is hard to get our heads around. There are very few industries that are that big. Obviously, the reason is it's a services spend. It's not a technology spend. So when you look at TAMs for, you know, legal tech, it's about $18, $20 billion, probably growing maybe closer to $30 now. but it's just like a small fraction of what lawyers make every year. The interesting question is, if we can turn some of the spend on what lawyers do to AI, or even a large portion of it, that's an enormous aspect here. I don't think the top 100 or 200 law firms are going anywhere anytime soon in the US. I think they're just extremely entrenched. They do extremely complex work that I actually think is fairly hard to automate. The other thing I'd say is there's this theory of like Jevons' paradox, which is the idea that as something gets cheaper, There's more demand for it. The price goes up, doesn't go down as the supply increases. In other words, there's probably about 50 or 60% of Americans who are not poor enough to qualify for pro bono legal services, but not wealthy enough to have access to lawyers. But if the cost of legal services go down, they're going to be in the market. They're not going to get evicted or fired or get in a car accident without getting legal representation anymore. We just see the market potentially expanding even as the cost of each piece of work goes down.

I'm actually not familiar with that paradox, but it touches on a theme that I've been noodling on. So I'm going to throw in like a flyer, more like debate question for us, which is, have you been hearing the phrase like high taste or like having taste at all? Has that crossed your desk?

A little bit, but we fill me in.

I feel like we're talking about it a lot at Vercel, just like in a world where there's this proliferation of AI swap, how do we also have high taste? What does that look like? And so anyway, I'm just thinking about building on that for you all. How are you thinking about still having high taste in how you approach supporting legal decisions given oftentimes like the legal advice that you're providing through the contract work is mission-critical parts of people's experiences because it's touching the revenue pipeline.

It's funny. It's like, it's the same everywhere. This is why we have human in the loop. And this is why, again, to go back to what I talked about a moment ago, why we needed to hire fairly skilled and very smart attorneys who have taste and judgment. We have one lawyer here who just told me like she only uses the word will and not shall. It comes off better in a contract. People accept it more. And it was like so subtle, but like, it's true. Love that. There's this theory in professional services. There's like a book I was reading about this. You kind of have 3 tiers of work and different practices mature over time. They go from a place of expertise where like it's a frontier issue that's never been dealt with before to experience where a law firm that maybe it's not a brand new issue, but they have experience doing it to efficiency. And every type of legal work goes along that curve. Maybe GDPR is a good one. 10 years ago when I was just starting in, in law, like only the top lawyers could help you kind of sort through GDPR. It was such a new issue. And then maybe 5 years ago, you went to a law firm that had some experience, and now you can go to like a Big 4 consulting firm and they can give you some advice. It's just kind of efficiency-based. We thought of contracts as like very much an efficiency play. If we could just do it with more leverage, more AI, faster, and not diminish quality, we would win. And now I'm realizing within contracts, there's actually like a bit of an experience and even a bit of an expertise element of it, which is to say, It's taste. Where we want the company to go eventually, this is what we're working on, this is the whole goal of the company, is to simulate negotiations agendically, right? So if I know all the things you care about in negotiation when you're buying my software, and I know all the things I care about, to just like simulate and show me an auditable trail of I would have asked for this, then you would have responded with that, then I would have asked for this. We're probably a year away from a pretty good prototype, but like that's what we're working towards. And then the interesting question is, what do you do at the end of that? Are you just signing the paper? No, like at that point, Then the human lawyers come in and then they talk through all those taste issues. That's where things get really interesting.

Okay.

That's really interesting. I didn't think that was what you were going to say in terms of the North Star. Do you feel like we're going to hit Pareto efficiency in this future state of being able to negotiate in this way?

That's why we use that word a lot. There's definitely like a Pareto efficient use of human lawyers. Lawyers should be spending their time on the phone, talking, looking each other in the eyes and negotiating things that like really matter for two businesses and not changing 30 days to 15 days or changing Delaware to California. These are the things where people spend a good deal of the hours of their day. I'll give another example. In every contract that we review, for the most part, there's a lot of concern about how are AI tools being used? What is data retention? Who's liable for who owns the models? Again, this is a frontier issue. And it's all in these contracts that we thought were efficiency-based. So like, you need a lawyer with some judgment on what is a court going to say in 5 years? And we wanted to get it right today. There will be a new issue in 3 years. It's not going to change. So like, this is where the taste comes in.

Looking forward to that. Speaking of just the technology side of what you're building, of course, so much of what you've been able to do has been unlocked by LLMs. And so much of the conversation we're having today with our founders on the podcast is what is the edge that you're creating in your own tech stack? And what are you deciding to not have to own? What are the other providers layers on top of Crosby that's allowing you to service your end customers. So we'd love for you to peel back the layers on what's in your AI-native tech stack.

Delighted to get into that. The thing that kind of tipped us off to this idea is we heard about research, I think at Stanford, that asked two students to do a negotiation, I think over a, like, divorce over one person wants child custody for Monday, Tuesday, one wants Tuesday, Wednesday, and they would try to get to the best, you know, they had their bottom lines. They would give the same bottom lines to two agents and had them simulate negotiation. And every single time the agents got to a better outcome for both parties in a few minutes. It was a very simple stylized negotiation. So, when we heard that, then yeah, like a year ago, we were like, oh, this is it. That's where we kind of had this idea, let's just do that for contracts. It's so simple. Turns out it's hard.

Agents probably just get less emotional and like less about wanting to win maybe. And so, perhaps that does allow you to achieve better outcomes.

We found, we ran this like very limited study, but now we do a lot more of it. If we just have the comments we leave in Microsoft Word to be like a bit more friendly, gentle, and like conciliatory, like the change is much more likely to be accepted. And you'd be amazed at how angry people can get in the comments. It's just a classic thing. So, yeah, totally.

Okay, let's just dive in on just how you guys are actually enabling these amazing experiences for your customers.

We've taken a really long bet on the models. If the models don't continue their improvements and every few months we really see step function changes, then we're just like a slightly better law firm. And so, I think our edge in some sense is being really aggressive in the ways we incorporate models and with the agents that we're building, can just put in different models and see the improvements we get. And so we get a lot of free points there on just like bigger context windows and feeding a lot more information. The thing that we're really investing in right now, which I think when you look across a lot of the really successful application companies, like whether that's Sierra and Decagon for support or like Cognition for cogent, is how do you plug in across a company to understand all the context? For contract negotiation, it sounds simple, it's a legal negotiation, but we have to plug plug into a CRM and know who are the counterparties, what is the priority of this deal, what are the things that we have given on in the past for deals like this. We want to plug into your Slack and look at all the context in your sales channels. We plug into Glean or Dust a lot and kind of like learn little things about the business. What are your insurance policies? Who are your subprocessors? We plug into your Vanna. Figure out all of the connections in a way that's scalable across every different company in a way that like if we were your commercial counsel working at your company, we would have scanned through kind of all these things. Has been a huge unlock for us. And I think figuring out exactly how to feed those in at the right points is probably something we feel is like pretty defensible over time.

I think you're teasing this out a little bit, but, you know, we've spoken a lot about your founding background, the incredible things that Crosby's doing. I'd love to dig a little bit into the future for Crosby. You've mentioned a vision of a Robinhood-like future where anyone has access to high-quality legal services. Maybe Madison McIlwain and I are using Crosby for our real estate issues. Expanding beyond unlocking faster revenue through faster contracting for sales teams, what does that look like in practice over the next few years?

The key thing for us is when you look at a lot of the benchmarks for LLMs in legal, they're really good at drafting brand new documents based on— you've just given much precedent. They're amazing at summarizing and they're pretty good at analyzing. If you just say, pull out the main deal points and research redlining. Like a contract for some reason, and I have theories, is still like not amazing. And I think because the precise word you use is so important. Reasonable and commercially reasonable sound similar, but they're legally different terms. I mean, there's a million examples. And so like our number one goal is can we build the best eval sets to build the best redlining service, period. There's a huge race for that. I think there's really simple kind of AI redlining tools on the market. I've tried them and I'm like, it's not quite getting me there. So I think that's the one thing that we're really focused on, and we have a lot of human data labeling with our lawyers to get that. Once we've cracked that, like, of that trillion dollars spent on lawyers, I think there's conservatively about $200 billion that you spend on lawyers doing contract work, contract adjacent work, reviewing and negotiating contracts. And we think we can expand that to be even bigger. If you might have just thrown your lease in ChatGPT or not done anything with it, like, we can give you some insights. And so we want to build the best redlining tool. And the step from there, as I mentioned a second ago, is Can we simulate negotiations to not just be like a faster law firm, but just change when you want to enter into an agreement with someone? And contracts are the connections of businesses. Like, we think of the rails of commerce run on Crosby. We should be the stripe for your negotiations. Like, it all just happens here. And we inform that with market insights and benchmarks and all of your business context. That's where we go. And when I say contracts everywhere, it's like leases, lending, life science agreements. We've identified like hundreds of contracts that are super high volume, super important, and like, you know, neglected today.

It was funny when we were going through our M&A process, there was this one meeting where literally 6 lawyers got in a room and were like debating about a single indemnity clause. It was the wildest conversation, and I wish Crosby was around so that all of our AI lawyers could have gotten to the same conclusion much faster.

All your agents just hang out in a conference room.

Yeah, exactly.

Exactly. On a personal level, you're obviously the founder and CEO. As you're growing the company, growing the team, how are you thinking about personal growth as a founder, and what are you actively trying to get better at right now?

Every few months, it feels like the company really changes, and I'm assuming this is a very common experience. I actually think it's a virtue, but I think I live in a constant state of dread and, like, paranoia. I constantly wake up in the middle of the night terrified of, did we get that right? How should we fix this? And I just accept that that's probably a really positive thing. What I'm trying to do now is really channel it to be like a really constructive force in the business, not come in and just be super anxious and freak everybody out, but just channel it because it's very motivating and it's a drive. And I think like coming in and saying, guys, in a sort of stable way, I'm like, we really need to focus on this because coming from a place of I'm terrified is better than just coming in like a bull in a china shop month to month and be like, we have to change everything. You know, there's a sense of being nimble and like, worried and concerned and paranoid without being rashy. And I think I'm trying to thread that needle. Well, we'll see if it works.

I was definitely a paranoid one at times as well, and it evens itself out. As we come up on time today, we'd love to ask you our hero question for the podcast. We ask this question to all of our guests. Who is a woman in your life that has had a profound impact on you and your career?

It's so obviously my wife. It's like the easiest answer ever. I've heard founders who are like, you gotta be single when you start your company so you can be locked in and focused. I could not more strongly give the opposite advice. Like, on the hardest days, my wife's name is Sandra, who's a doctor and doesn't understand this whole tech thing. She has this, like, irrational belief in me that is, like, the only thing between me not really pushing through and pushing harder. And so, my strong push for founders is find that partner that really keeps pushing you. It's so amazing.

Couldn't agree more. And Ryan, thank you so much for joining us on The Room today. It was fascinating and we're so excited for you.

Guys, thank you so much.

Thank you so much for joining us at The Room Podcast. If you want more from The Room every week, subscribe to our newsletter at theroompodcast.com/newsletter. We'll be back next week with a new episode, an inspirational guest, Tuesday, 10:00 AM Eastern, 7:00 AM Pacific.

Perfect.

See you in the room.

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Perkins Coie supports the most innovative entrepreneurs and investors in fast-moving and high-growth sectors, addressing their myriad of legal needs. But the firm doesn't just provide end-to-end legal and business counseling to its startup clients. It also facilitates introductions to key advisors and sources of capital. Perkins Coie's interactive website, Startup Percolator, offers access to programs, resources, and rich dynamic content designed to assist entrepreneurs on their startup journey. To learn more, go to startuppercolator.com and perkinscoie.com.