Tag: Fundings & Exits

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Amid layoffs and allegations of fraud, the FBI has arrested NS8’s CEO following its $100+ million summer financing

The tagline from today’s announcement from the United States Attorney’s office for the Southern District of New York says it all: “Adam Rogas Allegedly Raised $123 Million from Investors Using Financial Statements that Showed Tens of Millions of Dollars of Revenue and Assets that Did Not Exist”.

Rogas, the co-founder and former chief executive and chief financial officer and board member of the Las Vegas-based fraud prevention company, NS8, was arrested by the Federal Bureau of Investigation and charged in Manhattan court with securities fraud, fraud in the offer of sale of securities, and wire fraud earlier today.

Last week, the company laid off hundreds of staff as reports of an investigation by the Securities and Exchange Commission surfaced, according to a report in Forbes.

“This is a rapidly evolving situation,” Lightspeed Ventures told Forbes in a statement. “We are shocked by the news and have taken steps to inform our LPs. It would be premature to comment further at this time.” Lightspeed Ventures helped lead NS8’s $123 million Series A this June. Other investors include Edison Partners, Lytical Ventures, Sorenson Ventures, Arbor Ventures, Hillcrest Venture Partners, Blu Venture Investors, and Bloomberg Beta, per Crunchbase data.

The allegations are, indeed, shocking.

“As alleged, Adam Rogas was the proverbial fox guarding the henhouse,” said Audrey Strauss, the acting U.S. Attorney for the Southern District of New York, in a statement. “While raising over $100 million from investors for his fraud prevention company, Rogas himself allegedly was engaging in a brazen fraud.  Today’s arrest of Rogas ensures that he will be held accountable for his alleged scheme.”

Allegedly, while Rogas was in control of the bank accounts and spreadsheets that detailed its transactions with customers, he cooked the books to show millions in transactions that did not exist.

From January 2019 through February 2020, the FBI alleges that somewhere between 40 percent and 95 percent of the purported total assets on NS8’s balance sheet were fictitious, according to the statement. Over the same period bank Rogas altered bank statements to reflect $40 million in revenue that simply were not there, according to the Justice Department’s allegations.

On the back of that fake financial data, NS8 was able to raise over $120 million from some top tier investment firms including Lightspeed Venture Partners and AXA Ventures. 

Rogas managed to hoodwink not just the investment firms, but the auditors who were conducting due diligence on their behalf. After the round was completed, NS8 did a secondary offering which let Rogas cash out of $17.5 million through personal sales and through a company he controlled, according to the statement from the DOJ.

“It seems ironic that the co-founder of a company designed to prevent online fraud would engage in fraudulent activity himself, but today that’s exactly what we allege Adam Rogas did. Rogas allegedly raised millions of dollars from investors based on fictitious financial affirmations, and in the end, walked away with nearly $17.5 million worth of that money,” said FBI Assistant Director William F. Sweeney Jr. “Within our complex financial crimes branch, securities fraud cases remain among our top priorities. We’ve seen far too many examples of unscrupulous actors engaging in this type of criminal activity, and we continue to work diligently to weed out this behavior whenever and wherever we find it.”

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Schools are closing their doors, but Opendoor isn’t

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

This week Natasha Mascarenhas, Danny Crichton and myself hosted a live taping at Disrupt for a digital reception. It was good fun, though of course we’re looking forward to bringing the live show back to the conference next year, vaccine allowing.

Thankfully we had Chris Gates behind the scenes tweaking the dials, Alexandra Ames fitting us into the program and some folks to watch live.

What did we talk about? All of this (and some very, very bad jokes):

And then we tried to play a game that may or may not make it into the final cut. Either way, it was great to have Equity back at Disrupt. More to come. Hugs from us!

Equity drops every Monday at 7:00 a.m. PT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

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Homage announces strategic partnership with Infocom, one of Japan’s largest healthcare IT providers

Homage, a Singapore-based caregiving and telehealth company, has taken a major step in its global expansion plan. The startup announced today that it has received strategic investment from Infocom, the Japanese information and communications technology company that runs one of the largest healthcare IT businesses in the country. Infocom’s solutions are used by more than 13,000 healthcare facilities in Japan.

During an interview with TechCrunch that will air as part of Disrupt tomorrow, Homage co-founder and chief executive Gillian Tee said “Japan has one of the most ageing populations in the world, and the problem is that we need to start building infrastructure to enable people to be able to access the kind of care services that they need.” She added that Homage and Infocom’s missions align because the latter is also building a platform for caregivers in Japan, in a bid to help solve the shortage of carers in the country.

Homage raised a Series B earlier this year with the goal of entering new Asian markets. The company, which currently operates in Singapore and Malaysia, focuses on patients who need long-term rehabilitation or care services, especially elderly people. This makes it a good match for Japan, where more than one in five of its population is currently aged 65 or over. In the next decade, that number is expected to increase to about one in three, making the need for caregiving services especially acute.

The deal includes a regional partnership that will enable Homage to launch its services into Japan, and Infocom to expand its reach in Southeast Asia. Homage’s services include a caregiver-client matching platform and a home medical service that includes online consultations and house calls, while Infocom’s technology covers a wide range of verticals, including digital healthcare, radiology, pharmaceuticals, medical imaging and hospital information management.

In a statement about the strategic investment, Mototaka Kuboi, Infocom’s managing executive officer and head of its healthcare business division, said, “We see Homage as an ideal partner given the company’s unique cutting-edge technology and market leadership in the long-term care segment, and we aim to drive business growth not only in Homage’s core and rapidly growing market in Southeast Asia, but also regionally.”

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As low-code startups continue to attract VC interest, what’s driving customer demand?

Mendix CEO Derek Roos shares his insight with The Exchange


Alex Wilhelm

7 hours

Investor interest in no-code, low-code apps and services advanced another step this morning with Airtable raising an outsized round. The $185 million investment into the popular database-and-spreadsheet service comes as it adds “new low-code and automation features,” per our own reporting.

The round comes after we’ve seen several VCs describe no- and low-code startups as part of their core investing theses, and observed how the same investors appear to be accelerating their investing pace into upstart companies that follow the ethos.

The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.

Undergirding much of the hype around apps that allow users to connect services, mix data sources and commit visual programming is the expectation that businesses will require more customized software than today’s developers will be able to supply. Low-code solutions could limit required developer inputs, while no-code services could obviate some need for developer time altogether. Both no- and low-code solutions could help alleviate the global developer shortage.

But underneath the view that there is a market mismatch between developer supply and demand is the anticipation that businesses will need more apps today than before, and even more in the future. This rising need for more business applications is key to today’s growing divergence between the availability and demand for software engineers.

The issue is something we explored talking with Appian, a public company that provides a low-code service that helps companies build apps.

Today we’re digging a little deeper into the topic, chatting with Mendix CEO Derek Roos. Mendix has reached nine-figure revenues with its low-code platform that helps other companies build apps, meaning that it has good perspective into what the market is actually demanding of itself and its low-code competition.

We want to learn a bit more about why business need so many apps, how COVID-19 has changed the low-code market and if Mendix is accelerating in 2020. If we can get all of that in hand, we’ll be better equipped to understand the growing no- and low-code startup realm.

A growing market

Mendix, based in Boston, raised around $38 million in known venture capital across a few rounds, including a $25 million Series B back in 2014. In 2018, Mendix partnered up with IBM to bring its service to their cloud, and later sold to Siemens for around $700 million the same year.

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Oracle boots out Microsoft and wins bid for TikTok, reports say

Enterprise provider Oracle is said to have won the bidding war for the U.S. operations of TikTok, a chase in which Microsoft was booted out earlier today.

A TikTok spokesperson said the company “[doesn’t] comment on rumors or speculation.” Oracle did not immediately respond to TechCrunch for comment.

The Wall Street Journal writes that Oracle, a rare ally of the Trump administration in Silicon Valley, will be announced as TikTok’s “trusted tech partner” in the United States. Additionally, the Journal cites that a person familiar with the matter says the deal is “likely not to be structured as an outright sale.”

Oracle’s alleged purchase of TikTok’s U.S. operations would put an end to the unclear fate of the app within the country. The app’s reported buy comes days before September 20, the day that the Trump administration set for a ban on TikTok’s operations if the company doesn’t reach an agreement with a buyer. But there’s much confusion about which deadline TikTok will adhere to as Trump said last week “there will be no extension” of the September 15 deadline.

On Sunday, Microsoft said its bid for the U.S. operations of TikTok has been rejected by the app’s parent company, ByteDance.

“We are confident our proposal would have been good for TikTok’s users, while protecting national security interests,” the statement read, stating that Microsoft would make “significant changes” around security, privacy, online safety, and disinformation.

“We look forward to seeing how the service evolves in these important areas,” the statement ended.

Issues and fears around TikTok’s security has been a flagship issue for the app. TikTok was banned in India, along with 58 other apps, due to “national security and defence” issues. India was TikTok’s biggest overseas market. In addition to Microsoft, a number of prominent tech companies have rumored to be in the market for TikTok’s U.S. operations such as Twitter, Google, and Walmart. But, as our Ron Miller pointed out, there’s some reason toward why a company like Oracle would crave an app like TikTok: marketshare.

Oracle has grown out of its database roots and made its way into marketing automation and cloud infrastructure. The company is not just a database maker and provider. It’s a massive operation, that monetizes off of data. Earlier in this pandemic, the enterprise data provider teamed up with Zoom. If Oracle was to bring the same kind of partnership to fruition with TikTok, it would be landed a huge client.

Holger Mueller, an analyst at Constellation Research, told TechCrunch Oracle’s scoop of TikTok “will add plenty of load to their infrastructure service.”

“That’s what matters to them with viral loads preferred. If Microsoft gets TikTok it could boost their usage by between 2% and 5%, while for Oracle it could be as much 10%,” he said.

Oracle’s reported buy, thus, could be a boost that actually makes sense. But a dramatic one, nonetheless.

It’s uncertain how an Oracle deal will carry out or win approval from Beijing, which is clearly not happy with a forced sale. Two weeks ago, the Chinese government updated a set of trade rules that could block the export of artificial intelligence technologies such as those used to personalize TikTok’s user feeds. The revision is widely viewed as Beijing’s move to complicate TikTok’s sale and ByteDance said at the time it will “strictly abide by” the law.

Over the weekend, Reuters reported that Beijing would rather see TikTok close down in the U.S. rather than following Washington’s order to sell, which would “make both ByteDance and China appear weak in the face of pressure from Washington.”

Some form of transaction may still happen, but it might leave out TikTok’s proprietary algorithms developed by ByteDance’s Beijing office, a source told the South China Morning Post. That means TikTok’s U.S. operations or future owner would have to rewrite the very codes that have propelled the app to global domination.

After all, Oracle might end up as a minority stakeholder rather than an owner of TikTok, according to CNBC. An investment tie might just be strong enough to bind Oracle’s cloud services to TikTok, which has over 100 million users in the U.S. market alone.

Whether a sale happens or not, getting caught in geopolitical tensions is probably the last thing that Zhang Yiming, the ambitious Chinese founder of ByteDance, would want for his brainchild.

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Is the vaunted cloud acceleration falling flat?

Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading. 

Ready? Let’s talk money, startups and spicy IPO rumors.

Is the vaunted cloud acceleration falling flat?

This week we’re taking a look at the bad side of the cloud software market. In case you were avoiding the news over the last week, tech and software stocks are struggling. Not much compared to their 2020 gains, mind, but after months of only going up their recent declines have been notable. (As I write to you, the tech-heavy Nasdaq is headed for its worst week since March.)

The pullback makes some sense. Having watched SaaS and cloud valuations get stretched to historical highs, Slack’s earnings were an endcap on a good, but not-quite-as-good-as-expected set of results from public cloud and SaaS companies. 

As we’ve noted, most public software companies are not seeing their revenue growth accelerate. Some public software companies may be seeing their growth deceleration slow, but the number of public software companies actually accelerating in 2020 is tiny. The actually-accelerating group is Zoom, and maybe one or two other companies. 

Why is that, given all that we’ve heard about the presumably accelerating digital transformation? Slack earnings are a good explainer. The enterprise communications company’s recent filings explain that its COVID-bump has somewhat dissipated, while a number of COVID-related problems are persisting. 

Seeing recently risen valuations slip in the face of a lack of materially accelerated growth and some churn issues is reasonable. 

Does this matter for startups? Some. Public software valuations are still elevated compared to historical norms, which helps software startups defend their valuations and raise well. And there are plenty of startup hotspots as we’ve noted, including API-delivered startups enjoying time in the sun, as well as edtech startups that caught a COVID-related tailwind.

I am chatting with investors from a16z, Bessemer, and Canaan next week at Disrupt about the future of SaaS, collecting notes on the private-market side of this particular issue. So, more to come. But for now, I think we’ve seen the top of the peak and are now dealing more with reality than hype. Or, as public investors might say, the COVID trade has run its course and earnings will set the tone moving forward.

Market Notes

Moving on to market notes, a fintech stat, and some other bits of data for your consumption and edification:

A brief interlude: Disrupt is next week, you should come. You can enjoy it from the comfort of your couch. 

Various and Sundry

SaaS and cloud earnings continue to trickle in, which means I spent a good portion of my week talking to more execs at public companies. Short notes from Smartsheet, nCino and BigCommerce to follow, along with some final thoughts for your weekend.

  • On the valuations front, Smartsheet CEO Mark Mader told TechCrunch that “investors are thinking about how to balance historically high multiples with historically high potential returns in the space that’s still very young.” 
  • He added that no one doubts that cloud “is going to be the answer” to a lot of stuff, or that “people are [going to] change how they work,” but did note that cloud companies are not impervious to macro headwinds, because “cloud companies serve non-cloud companies,” and not merely companies in sectors that are excelling.
  • This fits neatly into our notes on Slack above. More on Smartsheet’s earnings here.
  • nCino had a good quarter, beating expectations and guiding well during its first public earnings report. However, like many other SaaS and cloud companies, it has lost some valuation altitude in recent weeks. It’s still miles above its IPO price, however.
  • I was curious about how the post-IPO period has been for the company’s CEO, Pierre Naudé, and his response was fun. Like all new public company CEOs, he made sure to note how quickly his team got back to work after the debut, but he also told The Exchange that he does now spend time that he used to invest in customers and “innovation” talking to analysts and investors. 
  • Being a public company, therefore, has time and focus costs that are worth considering, as we see so many tech shops approach the public markets.
  • And then there was BigCommerce, which went public quite recently. I got back on the horn with CEO Brent Bellm, wanting to learn a bit more about the current state of the e-commerce market. 
  • Here’s what the CEO had to say, lightly edited and condensed for clarity:

“I think it’s staying pretty hot. The surprising thing in the post-pandemic weeks was just how rapidly growth accelerated, and consumer and business adoption grew. We all kept saying ‘well at some point stores will reopen, and the growth rates will come back down.’ But the growth rates for actual sales running through stores continued to be very strong. You know, whether you look at our customer set, or [at] credit card data from Bank of America or others […] you can see quite clearly that e-commerce remains very, very hot. It’s a permanent change in behavior. Consumers have found a lot more places where they now like to buy online and reasons to like to buy online, and companies have found new and more effective ways to sell.”

  • This is probably a good reminder to turn our attention back to e-commerce when we get a chance post-Disrupt. 
  • And, finally, read Natasha on why rolling funds are blowing up, something that we talked about on the podcast this week.

That’s all the room we have. Hugs, fist bumps, and good luck.

Alex

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As direct listing looms, Palantir insiders are accelerating stock sales

According to Palantir’s latest S-1 amended filing published this morning, the company intends to start trading in two weeks on September 23 under the ticker PLTR.

That gives us a bit of time to speculate about how the company will perform on the public markets, particularly given Palantir’s unusually shareholder-hostile governance structure, which was a topic at today’s Investor Day event.

The good news: Palantir gave us the latest secondary sale trading data for shares traded by insiders before the company starts trading publicly. We also now know how insiders are going to register their shares, giving us some hints about who is excited to double down and who is looking to move on from the company.

Palantir has a large number of insiders today compared to other tech companies that recently filed to go public. According to its S-1, the company has 2,794 owners of its Class A stock, and 738 of its Class B stock. While there is almost certainly overlap between those two groups, it indicates that there are thousands of owners of Palantir shares today. Compare those figures to Snowflake, which had 1,026 owners, or Sumo Logic, which had 473 owners.

Palantir has more shareholders since it has been around longer (it’s approaching two decades), many early and even some recent employees would have had to exercise their stock options by now lest they expire, and there has been a robust secondary market for shares that has allowed new investors to buy into the company.

Given the number of people involved and the number of shares bought and sold over the past 18 months, we can get some insight regarding how insiders perceive Palantir’s value.

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AngelList pioneers rolling VC funds in pivot to SaaS

When AngelList first launched rolling funds, an investment vehicle that raises money through a quarterly subscription from interested investors, the company looked at it as a bet. But early interest from emerging fund managers indicates that rolling funds might be more of the future of the company, according to AngelList CEO Avlok Kohli.

“Rolling funds are what venture fund structures would look like if they were built in the age of software,” Kohli told TechCrunch.

Since February, about 70 rolling funds have been created and managed using AngelList. The company estimates hundreds of new funds will be generated by the end of 2020. For comparison, one report says that 282 institutional funds were closed in 2019. AngelList’s data shows promising activity, although it remains unclear how much capital has been raised through the new investment vehicle.

What are rolling funds?

Before you understand rolling funds, you need a high-level understanding of traditional venture capital funds. Traditional funds are closed through a “months long process” fully behind closed doors. A fund manager will go to multiple LPs, such as family offices, high-net-worth individuals, colleges and universities, or other investment firms, to raise a minimum capital commitment.

Once the first tranche of the fund is raised, a fund manager can publicly announce it and start investing in startups. Because funds are usually invested with a 10-year return cycle, it keeps LPs and investors legally bound for a decade (and the money flowing until the capital commitment is closed).

Rolling funds were created as a potential path for emerging venture capitalists to start and close their first funds in a faster fashion. Fund managers raise new capital commitments on a quarterly basis and invest as they go, ergo “rolling” investment vehicles. Investors come on for a minimum one-year commitment, then invest at a quarterly cadence. The flexibility could allow LPs to bet on new fund managers, and new fund managers to bet on more diverse LPs.

All this flexibility could come with a cost. The rolling fund structure can be a bit volatile because limited partners have to “re-up” their investments on a quarterly basis. In a worst case scenario, an LP could drop out on a whim with no repercussions. With traditional funds, LPs are legally obliged to stay through the end of a fund or just write off their investment entirely.

Unlike traditional fund managers, rolling fund managers can be public about their fundraising activity due to an SEC regulation, 506(c). While legal, public solicitation by these new fund managers have rattled traditional VCs, who are used to a ban on marketing a new fund until after it is closed.

The way that AngelList is externally approaching rolling funds is similar to how it approaches angel investing and syndicates: it wraps things up in a pretty bow and gives people a place to talk about and access deals. The company recently created a page where it lists the names of all rolling funds on its platform to further transparency.

Because AngelList views transparency as a core tenet, it makes sense that the first rolling funds have been created by a generation of operators and founders who build in public. The cohort of rolling fund managers includes Gumroad founder Sahil Lavingia, seed investor Cindy Bi, Andela and Flutterwave co-founder Iyinoluwa Aboyeji and creator of Mcjpod, Jason Jacobs.

The four mentioned above did a seminar in early September (linked here) to talk about why they created their own rolling funds. A general consensus emerged that for the next generation of founders, it pays in terms of reputation, deal flow and access of capital to build in public.

Rolling funds allow public builders to share their ups, downs and LP openings in a way that traditional funds wouldn’t legally allow.

But another detail, also addressed during the seminar, is that the rolling fund managers all had blaringly strong networks, the kind that could easily be used to close a traditional fund. Lavingia closed his $7 million fund in less than two months.

That dynamic throws into question if rolling funds are somewhat limited to only helping an emerging generation of fund managers who are already well-networked and well-resourced. After all, the very idea of a quarterly subscription means that a fund manager has enough charisma, resources and returns to convince LPs to invest consistently.

“We see rolling fund managers whether they have an audience or not,” Kohli said. “And they are successful whether or not they have a pre-existing audience or not.”

But how do you raise without an audience? Kohli noted that AngelList’s platform product connects rising investors to rolling funds. He estimates that 50% of capital raised by rolling funds has come through AngelList’s LP network, but did not share the total capital raised by rolling funds. The company also did not disclose the diversity breakdown of rolling fund managers.

AngelList’s stake

Kohli sees AngelList’s progress over a short time span as a powerful enough signal to prioritize the new product as a flagship offering. In fact, it sees itself becoming a SaaS company.

Here’s why that comparison actually makes sense: All of the rolling funds on AngelList are essentially the company’s customers. It charges a fee per customer to handle logistics.

However, unlike a traditional SaaS company, AngelList is an LP in a number of rolling funds and makes money the same way a traditional venture fund does. To limit unfair advantage, the AngelList team that invests in funds is separate from the team that helps manage and create funds.

AngelList declined to share the number of rolling funds it has anchored through a direct investment.

Despite rolling funds getting momentum, the structure isn’t competing with traditional Series A or Series B firms just yet.

“We view that rolling funds are going to be a very big part of the venture, and will be side by side with traditional funds,” Kohli said. “In the early stages, pre-seed and seed, you’re going to see a lot of rolling funds.”

In addition, AngelList.com is rebranding to include solely AngelList Venture and rolling funds. Talent and Product Hunt, two of AngelList’s other offerings, will move to separate websites and continue operating as independent entities.

Photo Courtesy: AngelList website.

In April, AngelList confirmed that it laid off a number of staff. TechCrunch learned that the layoffs largely impacted the company’s talent arm. Kohli emphasizes that the two products will continue to live on, and says the rebranding has been in motion since January.

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Do Ventures launches $50 million fund for Vietnamese startups, backed by Naver, Vertex and other notable LPs

Vy Le and Dzung Nguyen, the founders and general partners of Do Ventures, an investment firm focused on early-stage Vietnamese startups

New investment firm Do Ventures announced today the first closing of its fund for Vietnamese startups, which is backed by several of Asia’s most notable institutional investors. Called Do Ventures Fund I, the investment vehicle has hit more than half of its $50 million target, with limited partners including Korean internet giant Naver; Sea, whose businesses include Garena and Shopee; Singapore-based venture capital firm Vertex Holdings; and Korean app developer Woowa Brothers.

Do Ventures was founded by general partners Nguyen Manh Dung, former CEO of CyberAgent Ventures Vietnam and Thailand, and Vy Hoang Uyen Le, previously a general partner at ESP Capital. Its first fund will focus on early-stage companies and invest in seed to Series B rounds.

Both of its founders have a long track record of working with Vietnamese startups. Nguyen was an early investor in companies including Tiki.vn, one of Vietnam’s largest online marketplaces; food delivery platform Foody.vn; and digital marketing company CleverAds. Before she became an investor, Le was a serial entrepreneur and served as chief executive officer at fashion e-commerce company Chon.vn and VinEcom, the e-commerce project launched by Vietnamese real estate conglomerate Vingroup.

In an email, Le told TechCrunch that Do Ventures Fund I is industry agnostic, but will structure its investments into two tiers. The first will consist of B2C platforms, including education, healthcare and social commerce, that serve younger users, and are addressing changes in consumer behavior caused by the COVID-19 pandemic. The second tier will include B2B platforms that can provide services for companies in the first tier, and allow them to expand regionally with SaaS solutions for data and e-commerce services.

Do Ventures’ founders say that between 2016 and 2019, the amount of startup funding in Vietnam grew eight-fold to $861 million last year. But there are still only a few funds that focus specifically on the country, which means early-stage Vietnamese startups often run into funding gaps.

One of the firm’s goals is to help founders weather the impact of COVID-19, so their companies can continue growing in spite of the pandemic.

“We hope tech startups can enable traditional businesses to digitize faster and better adapt to the new normal,” Le said. “For consumers, we hope tech startups can transform customer experience in all aspects of daily life, and bring more accessibility to consumers in remote areas.”

The firm will take a hands-on approach to its investments, helping companies develop new business models. Do Ventures plans to set up an automatic reporting system that collects data about how its portfolio companies are performing, which its general partners say will enable them support startups’ operations, including product development, business organization, supply chain development, and overseas expansion.

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ThoughtRiver nabs $10M to speed up deal-making with AI contract review

ThoughtRiver, a London-based legaltech startup that’s applying AI to speed up contract pre-screening, has announced a $10 million Series A round of funding led by Octopus Ventures. Existing seed investors Crane, Local Globe, Entrée Capital, Syndicate Room, and angel investor Duncan Painter also participated in the round.

The UK startup is one of a number applying AI to automate work that would otherwise be done by legal professions with the aim of boosting operational efficiency. Other startups playing in the space include the likes of Kira Systems, LawGeex and Luminance to name a few.

ThoughtRiver argues it has a different focus vs the majority of contract view companies because it’s focusing on pre-signature contracts — with the aim of making securing a deal faster. “Almost all others are just employed to pull data from existing contracts. ThoughtRiver is as much in demand by Sales teams as it is by Legal,” a spokesman told us.

The Series A investment comes after twelve month’s of what it’s billed as significant growth for the 2015-founded startup, which says its automated contract review software is now being used by the likes of G4S, Singtel and DB Schenker. It launched a service at the end of 2017 and now has more than 25 customers around the world, per the spokesman.

It also trumpets inking a strategic partnership with professional services firm PwC — which will see the latter developing a service for its clients powered by ThoughtRiver’s software, according to a press release.

ThoughtRiver touts up to 95% in time and 80% in cost savings vs an initial contract review that’s carried out by in-house lawyers. And ‘faster contract reviews sum to increased deal flow velocity’ is its overarching claim.

On the tech side, ThoughtRiver has created an ontology of contract legal logic, couched as a series of detailed questions which, combined with its natural language processing (NLP) engine, enables its software to pre-screen contracts by generating a risk assessment. It will also suggest tweaks to the legalese to remediate problems, including via a plug-in for Microsoft Word, where customers’ in-house lawyers may prefer to work.

Other benefits the startup touts are data extraction to power contract analytics at scale — such as for due diligence or to assess the impact of regulatory change. Its sale pitch also suggests that easy access to an overview of contractual positions helps customers by enabling better-informed business relationships.

Image credit: ThoughtRiver

ThoughtRiver has already established offices in New York, Singapore, London, Cambridge and Auckland. It says the new funding will be put towards further growth in the US market, where it will be dialling up sales and marketing efforts. Expanding integrations with major tech partners is also on the cards.

Commenting on the funding in a statement, Akriti Dokania, early stage investor at Octopus Ventures, said: “While the legal sector has been slow to adopt AI compared to other industries, ThoughtRiver has a proven business model based on solving a fundamental issue for lawyers. By using an advanced Natural Language Processing engine to drive faster contract reviews and acceleration of deal flow and business growth, legal professionals can work more efficiently than ever. We are thrilled to support the ThoughtRiver team with its plans for global expansion as the firm disrupts an established market and set of processes.”

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