TermScout, which gives users a detailed rating of key terms in software contracts, such as whether they are market or favourable (see AL TV Walk Through below), has announced that it has gained $5m in Seed funding. They have also formally announced the hire of Carlos Gamez as VP of Product and Growth.
Gamez joined in November last year and previously worked at Thomson Reuters before moving to Frontline in early 2021 (see story).
Founder, Otto Hanson, told Artificial Lawyer that they started the round in September 2021 – which is a second Seed round after bagging $1.25m in 2020 and is in anticipation of a much larger Series A in the future. As with the move of Gamez, this also concluded in November.
Hanson said they had waited until now to make a big announcement because they have been working hard on product development and preferred to wait until they had more to show everyone.
Hence the launch also today of ‘Benchmark’, which the US company calls ‘a first-of-its-kind tool that allows its users to compare their IT contract to hundreds of anonymized and aggregated negotiated contracts and more than 1,000 unredacted public contracts used by companies like Google, Microsoft, Salesforce, and others’.
They added that this ‘helps customers ensure their contracts strike a balance between the terms they want and the terms their counterparties expect’.
Check out the 5 min AL TV Product Walk Through below of some of the key aspects of the platform.
Hanson also told this site that some of the software companies where TermScout has analysed and rated their contracts have added a badge to their websites as a sort of ‘seal of quality’ – as FreshWorks does – which is a great idea as it gives users a degree of confidence in accepting the terms of a contract without having to dig too deeply into it. In fact, TermScout reckons that using its rating and analysis system will give users ‘30-40% reductions in contract negotiations, resulting in huge cost savings and accelerated deal velocities’.
Of course, this only works if you also have confidence in TermScout’s analysis. But, as seen in the Walk Through, they really go to town on analysing what is there, first with NLP for an initial analysis and then with their own team of contract experts. They even compare the contracts to the standards created by the World Commerce and Contracting group. You also get a score for the clarity of the agreement, and there is a visual slider that shows you whether the contract terms favour you or the software company. And, there is of course a break-down of all the key clauses, one by one.
As Hanson noted, the more software contracts they analyse the more they know what is market and what the right benchmarks should be, i.e. it’s an ever-improving cycle.
‘The more data we get the more valuable we become. It makes the product richer for all our customers,’ he said.
In terms of growth, Hanson explained that the key was to keep bringing in and retaining top tier talent.
‘We want to retain talent so we can have the best product. This is not easy and needs monetary investment,’ he said, and of Gamez he noted, ‘Carlos is a world-class team member.’
The key for TermScout, it would appear, is therefore to keep up the momentum, i.e. more clients = more feedback = more engagement = more revenue = so can cover more and more contracts from more companies. And central to that is the talent to drive it all forwards in a virtuous circle.
Meanwhile, Gamez told this site that he had come to TermScout after speaking with Mike Suchsland, a former President of Thomson Reuters Legal who is now a venture partner of the Legal Tech Fund and the Bridge Venture Fund.
Gamez added that it was an exciting opportunity to be part of a startup like this, and he noted despite its relatively early stage ‘it has a solid culture, is very well organised, and the majority of the staff are seasoned professionals’.
To conclude, the funding was co-led by NFX and Ground Up Ventures, with participation from The Legal Tech Fund, Killer Whale Strategies, Underdog Labs, Bridge Investments, and others. NFX General Partner, James Currier, will also join its board of directors.
Overall, what TermScout is doing is providing a form of standardisation. They are analysing contracts and saying: ‘OK, this is market, this clause is a bit unusual, this other part seems way more in favour of the seller than is usual.’
(And again, see the AL TV video to view these aspects at work.)
Although still a relatively small company, if it succeeds, TermScout could eventually become something of a nationwide arbiter for what should be in a contract and how it should be worded – at least in terms of US software contracts at present. And that’s quite a prospect. Moreover, once they have succeeded at scale in that area there is no reason not to expand in other directions.
Legal Innovators California – June 9, San Francisco – All-Day, In-Person Legal Innovation Conference.
If you found this interesting then come along to Legal Innovators California conference on June 9, in San Francisco, where we will be exploring a range of subjects, from legal ops to legal tech and much more, with a range of great speakers from across the industry…..In fact, Otto will be one of the speakers….!
Ticket information can be found here.