Startups, should you fire your lawyer and replace it with AI?

March 13, 2024

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It started with a simple premise from a Redditor 2 months ago

The responses were anything but unanimous. 

Some folks took to the standard answer of the ‘Will AI replace humans?’ debate

And then, there were some Redditors who were clearly frustrated by their lawyers 

And then, there was this guy who disavowed a lawyer completely

AI tools are everywhere, even in your Notion and Miro. While most of this pivot has been riding on OpenAI’s API, AI has been significantly impacting the legal profession since much before. AI-powered legal tools are already available and are being used to assist lawyers in performing legal tasks with greater speed and accuracy. All ChatGPT did was remove the barrier to entry and made the functionality open for exploration to everyone. With ChatGPT's ability to understand and interpret legal documents and provide instant responses to clients' queries, many are wondering if this tool will replace lawyers altogether. 

Especially startups. 

Legal work is one of the biggest pain points to set up for a new founder. Not only does it eat up dozens of hours, it also costs thousands of precious funding. Known for their breakneck speeds, will startups be the first ones to replace their lawyers using AI?

Catching up to speed

AI law existed before ChatGPT

In 2015, DoNotPay initially started as an application for challenging parking tickets. It offered services that generated legal documents on various legal issues, ranging from consumer protection to immigration rights, claiming to have generated them through automation and AI, and the app was said to be supported by IBM Watson AI. At the time, it was available in the United Kingdom and the United States, across all 50 states.

DoNotPay claimed that its services could help customers seek refunds on flight tickets and hotel bookings, cancel free trials, sue people, and offer legal services related to social issues like asylum applications and housing for the homeless. The company also offered a Free Trial Card feature, which provided users with a virtual credit card number that could be used to sign up for free online trials, like Netflix and Spotify. After the free trial period ended, the card would automatically decline any charges. DoNotPay also claimed that its services included the ability to automatically apply for refunds, cancel subscriptions, provide hassle-free trials, fight spam in people's inboxes, combat volatile airline prices, and file damage claims with city offices.

They went on to raise $10m from the likes of Andreesen Horowitz, Lux Capital, Tribe Capital and more in 2021.

What’s happening right now?

DoNotPay has already been used in 250,000 cases and boasts a 64% success rate. What’s more interesting is: Harvey AI. Harvey AI, an artificial intelligence startup backed by OpenAI, has been making waves in the legal industry by automating legal document drafting and research for some of the world's largest law firms. The potential benefits of legal AI like Harvey are clear: using AI to assist with research, drafting, and other routine legal tasks could help save law firms time and cut down on their clients' bills. Since November 2022, Allen & Overy, one of the world's largest law firms, has been using Harvey AI to draft legal documents and research. Harvey AI has raised $21 million in fresh investor cash, and more and more lawyers at major law firms are using fast-advancing generative artificial intelligence tools.

Harvey AI is an AI-powered legal assistant that can help lawyers and legal professionals with a wide range of tasks, such as drafting legal documents, conducting legal research, and predicting case outcomes. With over 15,000 law firms on Harvey's waiting list, the start-up is using GPT-4 to create AI models focused on the legal services sector. 

Legal firms all over the world are lining up to integrate AI into their workflows. But where is it going? Everyone agrees that AI complements lawyers quite well, but

Can AI replace lawyers completely? If so, by when?

Where it’s going - The open bounty for chatGPT to fight a case in court

Joshua Browder, the founder of DoNotPay, is one of the biggest voices pushing the limits of AI usage for legal matters. Not only has Browder showcased the use of AI in saving money via negotiating down bills, he’s planning to take it one step further. Browder is planning a legal hearing where a defendant will use GPT-J, an open-source language model, to generate and recite legal arguments in real-time.


Biggest challenge with AI in the legal industry (for now)

AI in legal services isn't all smooth sailing. It faces challenges like accuracy of the info it generates and the ethics of using AI in courtrooms. We can't ignore issues around security, client privacy, and privilege when sharing data with tools like ChatGPT.

Plus, AI tools may lack the human touch of understanding and judgment when it comes to interpreting legal rules and past cases. This could spell trouble when deep legal analysis is needed.

Even DoNotPay has faced legal speed bumps. It's been hit with a class-action lawsuit claiming that the tool is not legally up to snuff. Some users have said the documents and services it provided were riddled with errors, or sometimes, not provided at all. This highlights that AI still has a way to go in delivering accurate and reliable legal services.

How are startups reacting?

As consumers

Startups are leveraging AI tools to save legal expenses in various ways. According to a survey by CBRE, 61% of companies are using AI to generate and review legal documents, 47% are using it for due diligence, and 42% are using it for research. AI tools can help automate routine legal tasks, saving law firms time and cutting down on clients' bills.

One example of a startup using AI to save legal expenses is DISCO, a Texas-based company that provides an end-to-end e-discovery solution to law firms, corporations, and government agencies. DISCO uses AI and cloud computing to improve legal outcomes and gives clients total control over their data, workflows, and costs with a flat-rate per gig pricing model.

Another way that startups are using AI to save legal expenses is by automating workflows to make them more efficient, reducing labor costs and improving quality. AI can identify inefficiencies in workflows, allowing companies to address them and reduce end-to-end production lags, which are expensive.

The limitations of AI for startups

AI implementation comes with its own set of challenges and limitations. There are mainly 5 challenges that startups face while using AI:z

Computational costs

Computational costs are a major obstacle for startups that want to adopt AI. Training AI models such as deep learning requires significant computation and time, which can be a costly affair for startups.

AI capabilities

AI capabilities are still limited. Despite many recent advancements, there are still significant limitations to what AI can do. McKinsey Global Institute's Partner, Michael Chui, highlights five limitations that must be addressed, including the inability to understand context, lack of common sense, and inability to learn on its own without human intervention.

Data utilization

Data utilization is another significant constraint of AI. AI requires data to begin and has an unquenchable thirst for data that never gets fulfilled. This makes data utilization a major limitation for AI, whether in the training or execution phase.

Access to data

Access to data is a significant obstacle for many startups. For prediction or decision models to be trained effectively, they require data, which has become a highly valuable commodity in recent times.

AI cannot replace human expertise

AI cannot replace human expertise, especially when it comes to complex decision-making. While AI is adept at performing specific tasks, it cannot replace human intuition and expertise in complex scenarios. Startups should, therefore, consider using AI to complement and enhance human capabilities, rather than replacing them.

As creators - A gold rush for VCs and founders

Legal tech companies have been thriving since 2021, with venture capital investments reaching over $1 billion that year, according to Crunchbase data. The industry continued to grow, thanks to pandemic-related challenges and the legal world's gradual adoption of cloud technologies and other modern solutions.

Venture funding in legal tech 2017-2021

As we stand in 2023, these investments have significantly impacted the sector. The pandemic forced the industry to confront inefficiencies and explore new methods, successfully bringing it into the 21st century.

While the number of deals back in 2021 was slightly lower than in previous years, the increased funding has led to the ongoing development and expansion of innovative legal tech services. Some of the major investments in 2021 included:

Checkr, a San Francisco-based platform that helped employers screen job seekers, raised a $250 million Series E at a $4.6 billion valuation. Rocket Lawyer, another San Francisco-based legal services provider, secured a $223 million venture round. Notarize, a Boston-based remote electronic notary service, raised a $130 million Series D, valued at $760 million.

How can your startup start implementing AI in legal work right now?

Yes, AI tools can help you save up on expenses for document review, templates, and eDiscovery; that can otherwise cost thousands in legal expenses with a lawyer. Here’s how:

Legal docs review

AI can help with document automation, which can save a lot of time and reduce the costs involved in legal procedures. Secondly, AI can be used to review contracts, which can range from simple to complex, and can create a bottleneck that delays deals and revenues. Lawyers, especially inexperienced ones, can miss important issues that can come back to bite their clients later. AI can help with both bulk and individual contract review 

AI-enabled tech can ease the headache of contract review, especially reviewing many, often similar contracts as part of a large transaction.

Legal templates

AI is massively helpful in drafting documents and coming up with accurate legal contract templates, thereby bolstering a startup's legal strategy. AI-assisted tools can swiftly identify compelling case precedents and facilitate the creation of new documents and forms.

Companies like Genie AI are popping up everyday with 1,000+ free templates to get you started with hiring contracts, international freelancing contracts, etc. 

Document discovery

As startups grow, the cost of legal document discovery, or eDiscovery, can really pile up. However, Text IQ, was one of the first companies specializing in eDiscovery services, and had found an effective way to save startups money.

Text IQ's software was set apart from other eDiscovery services by its ability to identify relationships and potential issues that may not be immediately apparent. For example, the software could infer the identity of individuals from a combination of documents or recognize attorney-client privilege based on the tone a lawyer uses in their communications. 

In a trial with Twitter, Text IQ not only caught all the identified documents but also found more privileged documents that would have otherwise gone unnoticed. 

This success led to Text IQ winning every bake-off they have conducted so far and working with some of the largest companies in the United States, with contracts ranging from hundreds of thousands to millions of dollars.

Bill negotiations

You can negotiate down your SaaS tool bills, raise queries with your banks, get refunds, and even manage flight refunds with AI tools. DoNotPay has been pioneering the space by launching it directly into iMessage. Yup, you can simply text the bot, give it the required information it needs, and save 1,000s of dollars in outdated subscriptions, refunds, and more!

Top AI powered legal tools for your startup

While AI powered legal tools can’t replace your lawyer 100%, they can still make your life easier by handling legal tasks, saving you time and money. Let's look at the top 10 AI legal tools that could be a game-changer for your startup.

  1. Smokeball: Think of it as your law firm in the cloud. It tracks time, creates invoices, and helps you work smart, not hard. It's like having an experienced legal team right at your fingertips. (Price: $29 per user/month)
  2. Brightflag: This tool is like a magnifying glass for your legal operations. It uses AI to smooth out your workflows and helps you collaborate better with your lawyers. 
  3. LegalZoom: Starting a business can be a maze of legal paperwork. LegalZoom simplifies this. It helps with everything - from setting up your business to protecting your ideas. 
  4. Rally: Rally makes creating and managing legal documents a breeze. It's like having a personal assistant that prepares documents, gets them signed, and keeps everything organized. (Price: $29 per month)
  5. https://www.fastcase.com/: Ever felt lost in a sea of legal rules and regulations? Fastcase is your compass. It's a library of legal information that can guide your business decisions. 
  6. Bilr: Keeping track of billable hours can be a headache. Bilr is the aspirin. It's voice-enabled and checks your invoices for errors using AI. This means more accurate billing and less time wasted.
  7. LexisPSL Arbitration: If you ever find yourself in a legal dispute, this tool can guide you. It's like having a seasoned lawyer explaining the process in a language you can understand.
  8. Rocket Lawyer: Legal advice can be expensive. Rocket Lawyer makes it affordable. It creates legal documents and connects you with lawyers for advice. (Price: $9.99 per document)
  9. Onit: This is an all-in-one tool for managing your legal needs. It's like a swiss army knife that helps you handle legal matters more efficiently. (Price: Subscription-based, no user limits)

Bottom line, should you fire your lawyer right now?

No, you shouldn’t fire your lawyer altogether and replace it with AI tools. 

You can shave down their scope of work and their total costs a lot by exploring the above use cases and doing a lot of it yourself. You can have them review highly-important contracts once you’re done with the first draft, but it’s wise to keep a lawyer around for more nuanced issues. 

AI tools like ChatGPT are undoubtedly revolutionizing the legal landscape, offering startups a means to save time and money, streamline processes, and address unmet legal needs. However, these tools are not without their limitations and challenges, including accuracy, ethical concerns, security, privacy, and privilege issues, as well as limitations in legal analysis.

While AI will continue to play a significant role in legal services, it is unlikely to completely replace human lawyers in the foreseeable future. Instead, a balanced approach that combines AI capabilities with human expertise promises to deliver the best possible results for startups and other clients in need of legal assistance.

Looking ahead: The future of Law and AI

​​Imagine a future where AI not only understands legal jargon but also tackles complex legal issues. That's where we're heading. Expect AI to become a key player in the legal field as it continues to evolve.

Legal Research with AI's Help

Picture an AI tool digging deep into loads of case laws, statutes, and rules to find hidden patterns. That's a game-changer for your startup's legal strategy. You could find innovative legal arguments that give you the upper hand.

AI's Role in Contract Analysis and Negotiations

Imagine an AI tool that can read and write contracts like a seasoned lawyer. It could help your startup negotiate better deals and dodge legal landmines. By giving you instant feedback, AI can highlight risks, suggest better terms, and even predict the negotiation's outcome.

AI Bridging the Justice Gap

As AI gets smarter, it could become a champion of justice. By making legal help affordable and easy to access, AI can level the playing field. That means everyone, even the underprivileged, can defend their rights and interests.


How reliable are these AI-powered legal tools for my startup?

AI legal tools are continually improving, but they're not without limitations. While they offer great assistance in drafting documents, research, and contract analysis, they may lack the human touch in complex legal interpretations. Always consider seeking advice from a human lawyer for complex issues.

Are AI legal tools secure? Can I trust them with my startup's sensitive information?

Security is a top concern for AI tool developers. While many tools have robust security measures, there's always a risk in data handling. Ensure you choose tools with strong privacy policies and data encryption.

How can AI help make legal services more affordable for my startup?

AI legal tools can reduce the time spent on routine tasks like contract drafting and legal research, leading to cost savings. They also offer fixed, usually lower prices compared to traditional legal services.

Can an AI tool fully replace a human lawyer for my startup?

While AI tools can handle many tasks, they're not yet able to completely replace human lawyers, especially when it comes to strategic advice, complex negotiations, and in-court representations. Think of AI as a tool to assist, not replace, your human legal team.

What should I do if the AI tool makes an error in a legal document or gives incorrect legal advice?

AI isn't infallible and errors can occur. If you notice an error, it's best to consult with a human lawyer. Also, reach out to the tool's customer service for support and to report the issue. It's crucial to double-check any legal advice or documents generated by AI.

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