Crosby: AI-Powered Law Firm Launches with Sequoia Backing
AI-Powered Legal Services: Crosby's Innovative Approach
The technology sector frequently discusses the potential of Artificial Intelligence to reshape the landscape of work. Legal technology startup Crosby, having recently emerged from stealth mode with a $5.8 million seed funding round spearheaded by Sequoia, represents a particularly striking illustration of this impending transformation.
A New Kind of Law Firm
Crosby distinguishes itself by not merely developing AI software for legal professionals; it operates as a fully functional law firm leveraging AI to deliver legal services with unprecedented efficiency.
Instead of marketing technology to lawyers, Crosby employs legal experts who utilize its proprietary AI software. The firm specializes in contract-review legal services, primarily catering to the needs of startups.
Speed and Efficiency Through AI
Currently, Crosby guarantees a review of new client contracts within an hour, utilizing its AI software alongside human oversight. The company anticipates further accelerating this process, potentially reducing review times to mere minutes, as stated by co-founder and CTO John Sarihan in a discussion with TechCrunch.
The Founders' Backgrounds
Ryan Daniels, Crosby’s co-founder and CEO, is a qualified lawyer and the offspring of two law professors. He gained valuable experience at Cooley, a prominent firm serving the technology industry.
Subsequently, Daniels dedicated nearly a decade to providing general counsel services for various startups. He observed firsthand the challenges faced by rapidly growing companies.
Identifying a Critical Bottleneck
“At my previous company, where I was the sole legal representative, we expanded from approximately 10 to 100 employees,” Daniels explained. “I discovered that a significant portion of my time was devoted to contracts, sales agreements, and MSAs.”
These contract negotiations and legal reviews frequently created a bottleneck, hindering the company’s desired growth rate.
The Limitations of Traditional Contract Negotiation
Currently, contract negotiation remains fundamentally a person-to-person process, often extending over weeks or even months.
A Holistic Approach to AI in Law
While numerous AI tools are emerging to assist lawyers in streamlining specific tasks, Crosby’s founders posited that truly revolutionizing the legal industry necessitates “building our own law firm to maintain complete control over the entire process, from beginning to end,” according to Daniels.
Building the Team
Sarihan, a former early employee at Ramp, focused on recruiting software engineers from the startup ecosystem, while Daniels assembled a team of legal professionals. The startup currently employs around 19 individuals, including the founders.
“The core of our innovation lies in both the technology and the people we’ve brought together,” Sarihan emphasized.
Early Traction and Client Base
The firm initiated a soft launch in January and has since reviewed over 1,000 customer contracts, including MSAs, data processing agreements, and non-disclosure agreements, for rapidly expanding startups such as Cursor, Clay, and UnifyGTM.
Seed Funding and Investor Support
Sequoia’s Josephine Chen and Alfred Lin led the seed funding round, with participation from Bain Capital Ventures and a group of angel investors. These include Ramp co-founders Eric Glyman and Karim Atiyeh, Opendoor co-founder Eric Wu, Casetext co-founder Jake Heller, Instacart co-founder Max Mullen, and the co-founders of Flatiron Health, Zach Weinberg and Gil Shklarski.
Strategic Investor Connections
Crosby’s ability to secure Sequoia as an investor was facilitated by existing relationships. Chen had prior acquaintance with Sarihan through Ramp and had previously connected with him via the co-founder of Venue, an AI procurement startup backed by Sequoia and later acquired by Ramp.
During their pitch to Chen, she consulted Sequoia’s in-house counsel, Cindy Lee, who was familiar with Daniels from their time together at Cooley.
Investment Rationale
“In seed-stage investing, we prioritize the team, accounting for roughly 70% of our decision-making, with the remaining 30% allocated to market dynamics and the founders’ insights,” Chen explained. Considering her existing connections to the founding team and the substantial size of the legal industry—valued at $300 billion—Chen was enthusiastic about disrupting it with Crosby.
“We’ve observed, even within our portfolio companies, that contract negotiations can impede growth,” Chen stated. She views the legal sector as “an ideal application for Large Language Models (LLMs).”
