News + AL Analysis
Rapidly expanding legal tech platform Litera has bought Kira Systems, the standard bearer for NLP doc analysis. Kira’s CEO, Noah Waisberg will act as a strategic adviser to Litera post-acquisition, but is launching a new company called Zuva, focused on NLP doc analysis for corporates.
As part of the deal, Insight Partners, which provided $50m in funding to Kira back in 2018, will become a minority shareholder in Litera, along with its longstanding private equity backer, Hg, which has been funding the legal tech platform’s now dozen M&A deals in just two years.
Alex Hudek, the co-founder of Kira and the CTO, will also not be joining Litera full-time and will act as a consultant when needed.
During an in-depth interview with Artificial Lawyer (see following story that presents the 30-minute video interview in full) Litera’s CEO, Avaneesh Marwaha, and Waisberg, explained that late last year the platform had approached Kira about doing a deal.
Both companies have known each other for some time, and the deal makes perfect sense. Litera, alongside its knowledge management work, is also building out its transactional capabilities. Kira has a strong following of large commercial law firms in the US and UK, and in fact has more such customers than any other NLP doc analysis company focused on M&A due diligence.
Given that RAVN became part of iManage some years ago, eBrevia is part of Donnelly Financial, and Seal Software – which was never focused on law firms in any case – is part of DocuSign now, and the far smaller company LexPredict is part of Elevate, there were few realistic choices for Litera to consider in their search for a doc analysis company.
Luminance might have been an option, but it was probably not a great fit for Litera given the lack of global law firms that use it regularly. Eigen Technologies is highly unlikely to have been in the mood for takeover given its growth trajectory and multi-sector focus, and smaller, more startup/scaleup level companies such as Della, are probably not at the stage that Litera wanted.
So, why Litera wanted Kira makes total sense. But why did Kira sell? A couple of years ago it would have seemed very unlikely that Kira would have even contemplated such a deal – although no doubt they had plenty of offers from around the world.
What changed? Waisberg stressed that it simply was a very good deal, for the company, for investors, for the clients, and all concerned. He noted that Litera has many hundreds of staff and are well-equipped to take Kira on, and perhaps do a better job of being product owners and marketeers to the law firm market, even without him at the helm.
Also, it’s worth pointing out that Kira had reached its tenth birthday not long ago, a point where many founders – or in a lot of cases far earlier – look for a change of scene and to realise some of their blood, sweat and tears in a cash pay-out by selling up. Moreover, Kira has experienced a couple of bumps recently, such as having to undergo a strategic restructure at the end of last year/start of this year, that saw more than 20 staff leave the company.
The M&A market during the pandemic has also been unusual, in that there was a painful pause at the start of it, followed by a wild surge of activity. But clients were often in a state of crisis and efficiency was not always on their minds when it came to life or death transactions. Of course, there are lots of good reasons to use an NLP tool like this even in such scenarios, e.g. to be able to analyse more of the documents in a due diligence exercise and so reduce your risks, but, let’s face facts, driving efficiency has always been one of the key arguments for using the likes of Kira, Luminance, et al.
Also, we have to consider that Waisberg is not joining Litera as a full-time employee, instead he is launching a new NLP doc analysis company of his own, based on work done at Kira, and that will focus on the corporate market. Product announcements are planned in the near future, but areas where it might work could be helping companies to extract key data that becomes part of a CLM system. About 30-plus staff will be joining him in the new venture.
Kira may have been sold, but Waisberg has not lost the ambition to keep building businesses. So, this cannot be seen as a kind of ‘sell up and retire to Aruba’ type of situation. If anything, he will be even more busy now as Zuva targets growth.
Meanwhile, the remainder of the Kira staff will go over to Litera and the focus there will be very much on law firms and transactional doc analysis for things such as M&A due diligence. This team includes SVP of Product, Joey Benedek; SVP Technology, Michael Raw; and Senior Director, Global Sales, Kennan Samman, who are all going with Kira to Litera.
And then to the price. As usual with PE-backed deals this has not been mentioned. It’s also quite a complex transaction, with Insight taking a small share of Litera, so the actual cash price may not be totally indicative in any case. A couple of years ago when Artificial Lawyer’s founder and Waisberg were having a chat in Shoreditch about what Kira would sell for one day, far, far away in the future, the figure of $400m was mentioned in jest – it would be fairly unlikely that Kira sold for that, even though the company is clearly something of a ‘legal AI’ crown jewel in the market….or it was, until Litera bought it.
So, what does this all mean?
As mentioned, a couple of years ago this deal would have seemed like a massive surprise. But, now, not so much.
Litera has been very open about what it is trying to do, i.e. build a large, interconnected platform of capabilities that covers a wide range of law firm needs, from knowledge management to transactional support. What they lacked – and it was a big gap – was an NLP tool for helping with things like contract analysis in M&A due diligence, a cornerstone of transactional work.
They had to do a deal like this eventually. The question was who would join them? Meanwhile, the number of options has remained very small, in fact being realistic, probably it was either Luminance or Kira, and given the strong US client base, Kira was clearly a better fit. (Kira would also argue they are a product that clients actually use at scale.)
Another option was to build their own, but that would have taken a lot of investment and a lot of time, and it would not have been easy to make a credible offering.
But, could Kira have remained independent? The short answer is: yes. It had even recently formed a close partnership deal with ALSP Factor and a group of other companies, which one could see as an attempt to avoid having to do a merger. Although, ironically, the deal with Litera must have been all but signed when the Factor partnership was announced.
Artificial Lawyer also asked if Insight, the major investor in Kira, had put pressure on Waisberg to sell up, but he said, no, that had not been the reason for the deal. As he noted above, Litera asked, they mulled it over, and decided to say yes.
But still one has to ponder: why now? The reality is that only Waisberg can add to that beyond what he has said already. Perhaps the answer is simply that we need to accept what he said (see the AL TV video in the following article) and this was a great deal for all involved and he decided to take it because the offer was from people he already knew well, and from a platform that would be a good home for Kira’s law firm-focused team.
Also, Artificial Lawyer asked if Kira’s deal was a signal that legal tech companies that tried to stay solo would struggle now, i.e. that this was one of those bellwether events that showed the market how things were changing? Waisberg and Marwaha said they believed legal tech companies could still succeed by flying solo.
One thing is for certain, it’s the end of an era. Kira was more than just another legal tech company. Its work normalised the idea that you could use NLP technology for M&A doc review and its success triggered the creation of many competitors and imitators, although no rival has managed to capture as much of the large law firm market in the US and UK as Kira has.
Moreover, the story is not over. Kira will be integrated into Litera – and in some ways that integration, as part of a set of well-established technologies, shows just how far NLP doc analysis has come. I.e. it’s now so standard as an approach that it can be offered as part of a much bigger platform of tools, some novel, some quite well-developed now.
And, Waisberg goes on, now at the helm of his new venture, Zuva – (and while Kira in Sanskrit means ray of light, Zuva also refers to day and light). What is different is that Zuva will be focusing on corporates, an area where Kira had focused its efforts before the deal, but now under the new brand and new corporate vehicle will be able to focus wholly on that.
So, don’t expect to see Kira disappearing, or Waisberg, it’s just a change, and one that he would no doubt argue it was time to make.
(If you would like to see the full interview, please see the next article.)