Spellbook Gets $40m Debt For Legal AI M&A

Spellbook has secured $40 million in debt financing from RBCx, the technology and innovation banking arm of Royal Bank of Canada (RBC), to ‘fuel prospective acquisitions as the legal AI market experiences rapid consolidation’.

This strategic capital comes just two months after the company’s $50 million Series B funding round which valued the company at $350 million post-money, and will fuel prospective acquisitions.

Scott Stevenson, CEO and co-founder of Spellbook, commented: ‘We hear from a small legal AI company every few weeks looking for an exit. It’s become increasingly difficult for new entrants to gain a foothold in this space.’

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OK, exciting, but what does this really mean?

First, are there a bunch of legal AI companies out there looking for a buyer and very soon? Yes, probably lots of them. I know of two – both quite well-known. There are more.

They are two main groups, the older ones that have run out of steam and are just not growing fast enough to keep investors happy. And then the new, smaller ones that had a nice start in 2024 and 2025, but as rivals have built past them they no longer have either a moat or the investor cash to really make an impact.

Moreover, many investors expect some kind of sustained AI dip this year and that may be the death knell for some of the weaker players that have run out of money.

Are there companies that $40m will buy? Or perhaps more than $40m if they throw some of their other cash into a deal, or several deals?

Now, this is where it gets interesting.

Companies such as Harvey and Legora are worth billions of $$$. They have massive multiples. So, one can totally forget about companies with huge multiples – as $40m won’t go far there.

But, AL has heard of legal tech deals where the target’s founders just about walked away with some pocket money, but not much else. Investors got paid off, but it was hardly an amazing sale. It was that or go bust – almost an acquihire.

So, what can you buy, that you want to buy with that money?

Probably companies that are as noted above, small enough to be affordable, but not bankrupt yet, with good founders that bring talent to Spellbook, and hopefully some useful IP.

We shall see who they scoop up.

Also….AL just reached Scott and he said: ‘Preference would be a smaller whole company with great talent, [but also acquihires].’

And that: ‘We get reached out to by a small legal AI company every 2-3 weeks right now. Market needs consolidation.’

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AL and Spellbook will be on stage at Legal Week on Tuesday afternoon to talk about Moneyball for contracts – so………… you know where Scott will be guys….! Get those pitch decks ready.