E339: From Zero to $100 Million in 18 Months: Inside Legora

0:00Lagora is the fastest growing enterprise company in history. What's allowed Lagora to scale so fast? Lagora is a truly special company. We have been able to grow from one to a hundred million dollars in 18 months, setting a record in terms of execution. There are two billion people around the world that have experimented with AI. But more importantly, there are over 600 million people on a daily basis that use AI in their workflows, in their workforce, at home. If you think about the enterprise, over$100 billion exist in the enterprise TAM. And so Legora focused right here. There's this whole argument about horizontal versus vertical AI.

0:41Who's going to win? In what verticals? Why is Legora going to beat the horizontal players? The legal software space is a$40 billion opportunity. And it is incredibly siloed. You have document management systems. You have case law. You have the management of work. You have business law. And what Legora is doing is providing a centralized operating system for legal services. Great. That's Act One. But that's a$40 billion TAM. If you think more broadly, though, legal services is a trillion dollar TAM. And what we're really doing is helping lawyers do their work more efficiently, whether it's big law, so the AM200, or it's corporate law.

1:24We are helping them complete their tasks with automation, with expertise. And so we're turning that associate from the person who is drafting that documentation into the first reviewer. And that's that$1 trillion TAM that we're going after. One of the, I think, underappreciated aspects of Lagora and the legal TAM is the expansion of the TAM. We saw this famously with Uber. Uber was going out with slide decks, talking about if they could get 20, 30 percent of the taxi market, that would be a huge business. They ended up being 10 times the size of the entire taxi market. They expanded the TAM. Why?

1:56Because before you would only take taxis to go to the airport or for very specific cases. Now, when the cost went down, you would take it to visit your friends, you would take it to a restaurant. Do you expect the legal TAM to expand if the cost of legal goes down? So there is no question that if the bar to engage with a lawyer or to engage with legal services were lower, you would ask more questions. How many times have you come up with a patent idea that you wanted to explore or run a patent check or submit to the patent office? When faced with the concept that it's going to cost you$10 ,000, you back away and you no longer pursue that patent idea.

2:31Or unfortunately, you were wronged in some way and you know that you could probably sue someone for the injustice that you were incurred. If you lower that bar to engage with legal services, that entire pie will expand. And so I believe with Logora, the entire legal sector will expand way beyond the trillion dollars that exist today. And then on top of that, Logora, again, the first inning is legal services. But there's a much broader opportunity outside of that. Our goal is to expand to all professional services. And there's natural adjacencies in audit, tax, risk, compliance that's there for the taking.

3:07What keeps somebody from an OpenAI or Anthropic from doing this? OpenAI and Anthropic are great partners of ours. We work extremely closely with them. We leverage both of their models. And every month or two, when they release a new model and the ground shakes beneath us, our solutions get better with those models. Now, there is the work that's actually getting done, which depends on these engines. But then there's the rest of the chassis around the car that's really necessary to get from A to B. We're really focused on the management of work. How do you draft a case? How do you research a case?

3:38It is an incredibly complicated process. And so it's not a simple chat GPT prompt or a simple quad request. And that was something that came up a lot during our Series D process, something that our investors at Excel, who are really close to the Anthropic team, researched quite thoroughly. And at the end of the day, we came out on top. And we're really grateful for our partnership with Anthropic. And we feel really good about the fact that we are the cutting edge leading platform. Expert calls have always been one of the most powerful ways to build conviction. But today, investors are asked to cover more companies, move faster, and do it with leaner teams.

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5:25All of it lives inside the AlphaSense platform, trusted by 75 % of the world's top hedge funds alongside filings, broker research, news, and more than 240 ,000 expert call transcripts, turning raw conversations into comparable, auditable insight. Take advantage of AlphaSense AI-led expert calls now. The first to see wins, the rest follow. Learn more at alpha-sense.com slash how I invest. This is a good time. Full disclosure, I'm an investor in Anthropic. I'm an investor in Lagora. You get to win both ways. Thank you so much for having me. I think one of the maybe underappreciated aspects as companies get big, this is a Peter Thiel-ism.

6:02When Google was small, they wanted to pretend like they were a huge company. When they were a huge company, they were worried about being seen as monopoly. So they built all these different verticals, even though none of them actually contributed their revenue. So a lot of times when these companies turn into these trillion dollar behemoths, they want to have competition in certain verticals so that they can substantiate this case to Department of Justice and that they're not truly a monopoly. So there is the synergistic aspect there. Absolutely. And we have a number of different partnership fronts with Anthropic, whether it's co-development, whether it's leveraging their models, whether it's evals, there's a lot of joint opportunity that we can work on together.

6:41And it's because of that close partnership that our customers benefit. So I'm sure you get this question 100 times a day, Harvey versus Lagora. Why is Lagora a better company? We enjoy competition. Competition is what makes any company better. We weren't the first to the space, which drives a lot of humility. The space was established before we got there, and it forced us to make a lot of hard choices. When you start a company in Sweden, the entire Swedish market is smaller than the top line of Kirkland. And that means that you have to make a lot of calculated decisions about what you build, who you partner with, who you hire.

7:21And as a result, we have operated expeditiously and efficiently to become one of the fastest growing software companies in history. And having competition means that we need to out-innovate the rest of the space. And the results speak for themselves. We have an incredibly high win rate. We have grown at a clip that no other software company has seen. But at the end of the day, I was a swimmer in high school, and I was a competitive swimmer. And what our coach always told us is when you're finishing a race, you don't look to the left lane. You don't look to the right lane. You just focus on the wall in front of you.

7:56Because if you look in either direction, you break your stroke. And when you break your stroke, you slow down. And that 0.1 millisecond that you end up slowing down might mean the difference between winning and losing that race. And so that's something that we teach all of our Lagorans is just focus on finishing that race as hard as you can and hitting that wall. And that's what I say about competition. I've observed this in the very top, the top 1 % of founders. They love competition. If there's no competition, they invent it. Maybe you could distill why exactly competition is so good for a company.

8:26Competition is a forcing function because you want to win your customers' trust. and without competition, you are not constantly earning the right to get that customer's renewal or earn that customer's initial check. And they don't have another option. But I can't think of a single industry where there's one vendor and there's no other option. Every single industry has multiple options because there's a large market out there. Now, the question that we have to ask ourselves is, is this a winner-take-all market or is this a winner-take-most market? And we wake up every day with this concept called rutsmack, which is a Swedish term, which is you wake up with the metallic taste of blood in your mouth.

9:08And we like to live with that concept because we believe in intensity. We want to work as if there is no second place. There's only first place. We started after the market was created. And we not only want to catch up, we want to surpass the rest of the market. And that means we have to out-innovate. We have to out-think. We have to stay close to our customers. We have to operate with a deep sense of humility. And because of that, we have done an incredible job over the last two years. I never thought about it from the point of the customer. In an industry like legal, they may not want to adopt.

9:40So if there's one CEO going around from Lagora telling people about the future of legal tech, they may kind of put it to the side. Now there's two. Now you have to make a decision. So it kind of forces this decision to make a decision on the company. And then internally, I recently listened to an interview with an early Tesla engineer, and he was begging Elon, let's raise more money. Let's put some more money on the balance sheet. And Elon had offers and he's like, no, I'm starving the company on the balance sheet because I need you to be focused. There's something so focusing about competition.

10:09And although I don't think you need competition, maybe at all levels of management in order to really have that drive, if you want it to permeate through entire culture, I think competition could be extremely useful. So I'm the CFO. You know, I get to make the capital decisions for the business and you can raise money and you can spend that money. or you can raise money and have intentionality. We just raised our$550 million Series D round at$1.2 billion of interest and that$550 million could easily have been more. But that doesn't mean we're going to spend it. We have metrics that we follow that means that we're going to continue investing in things that yield the highest ROI.

10:47We have marketing ROI metrics that we have to hit. We have payback periods that we have to hit. We have cash burn ratios that we have to hit. And we don't lower those standards just because we have more money in the bank. For us, it actually raises the bar in terms of expectations because we now have more options that we can play. We can invest in the U.S. market. We can invest in the U.K., the European market, the Australian market, the Singaporean market, and we can just play on more fronts now. And so as we scale this year from 300 headcount to 900 headcount, those are the most important investments to make.

11:17We have to invest in our talent density. The greatest asset we have are our Lagorans. We don't have hardware. We don't have physical locations. We have IP that is created by our employees. And so when I think about investing, I think about hiring the greatest people on the planet, the people who have seen success before, and they can bring those best practices to our organization. So as we chart the next two years, which I think are the most critical for the legal AI sector, we can run fast, no U-turns, and execute near flawlessly. Much has been said about the Lagora special culture, or so much so benchmark called it one of the most special cultures.

11:58And this was an early investor in some of the greatest companies in the last couple of generations. What makes Legora's culture so special? And how did Dell PCs with Intel inside are built for the moments that matter, for the moments you plan and the ones you don't. Built for the busy days that turn into all night study sessions. The moment you're working from a cafe and realize every outlet's taken. The times you're deep in your flow and the absolute last thing you need is an auto update throwing off your momentum. That's why Dell builds tech that adapts to the way you actually work. Built with long-lasting batteries so you're not scrambling for the closest outlet and built an intelligence that makes updates around your schedule not in the middle of it.

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14:39It's, well, we are intense because we have a deep sense of humility. We started out as outsiders. We're not lawyers. Max isn't a lawyer. Max is our CEO. He wasn't a lawyer. He started out as an outsider with a deep passion to solve a problem in an industry that hasn't had a lot of change in decades or hundreds of years. And so we work hard and we're clear about that during the interview process. We go to the office five days a week. we show up every single day and we stay late and we don't stay late because the senior person's in the office and then as soon as that senior person leaves everyone else trickles out we stay in the office whether the senior person is or is not in the office because there's a sense of camaraderie and community to what we do we share ideas whether you're in sales legal engineering engineering we like working together and the culture is is super positive the vibes are super high we have very low attrition rates amongst the company.

15:39I've worked at five companies now that have scaled to over 100 million ARR. And I will say I'm having the time of my life at LaGoro. Tell me about the story about how you moved out to Silicon Valley. So I've always been very entrepreneurial. I tried to start a number of companies when I was in college at Washington University in St. Louis. I ended up graduating in three years, getting my master's in finance, going down a path towards investment banking. And I ended up graduating, going to Barclays in New York. I did that for a number of years, but I felt, despite being a great technical butt-kicking, somewhat monotonous.

16:13And it wasn't as fulfilling as I wanted it to be. And I had a desire to combine my love of entrepreneurism with investment banking. And the perfect blend of the two, to me at the time, was venture capital. And so I thought, great, I want to be a venture capitalist. And so I first tried to find a way into venture capital, But back then, it was super hard. It was, who do you know? And one position would open up every three or four years at a firm, and basically the door would open up for a second, and then it would close just as fast. Being an analyst in New York City, very far away from Silicon Valley, my chances of finding a job there were very slim.

16:51but what happened was i developed the thesis one of the companies that i tried to create when i was at washingtonst louis was a cloud storage company where you could upload your music to the cloud and then downstream it to any web-enabled device and so i developed a thesis about the cloud in general and there were three companies that caught my eye box dropbox and atlassian i applied to all three and i was very fortunate that i ended up getting a job at box and made it to the final rounds, got the job. Coincidentally, the same week as my girlfriend, now wife, got a job at Twitter. And we both went back into work and we quit and we moved to Silicon Valley a few weeks later.

17:26A lot of it has been written about this 996 culture. I did three months at Jeffries Invest in Banking. Banking has a crazy culture. How would you compare these two cultures? It's really interesting that you say that. I don't notice the 996. I don't think about the 996. But if I were to add up the hours, but the hours are my hours. I choose when those hours occur and they're on my terms. And a lot of those hours are on my couch or in my bed or on my own terms. And it's very different than when I was a banker at Barclays wearing a suit and tie, sitting at an office till 8, 9, 10 p.m. at night typing away on a keyboard.

18:08And so I actually find it incredibly fulfilling because I dictate when those hours occur and the timeline of when the work gets done. So it's a very enjoyable nine-nine-sixth amendment. It's flow. When you're doing something, you love it, and you're doing it in a team. There's something special about working hard and long hours with a team versus siloed towards a mission. It's what people talk about working in SpaceX. They don't look at it as working 70, 80 hours a week. They're looking at it. They're on a mission, and they're there to complete the mission. Sam Altman quote, like, the days are long, but the decades are short.

18:37I don't think about the days, the weeks fly by, but yes, the days are incredibly long. There are many days that I'm at the office till 10 o 'clock at night and I have three amazing kids and an amazing, amazing wife and they're all supporting me and they love what we do and they love the company. And, you know, Max, my amazing CEO will often write emails to my wife and I'll say, you know, thank you so much, Ellen, for lending David to me on this trip to California. You know, We did an amazing job doing X, Y, and Z. And that's awesome. The fact that my CEO and my wife are emailing together and it's a great partnership.

19:12It's very European of him to even consider your wife interviewing. You mentioned Sam Altman, his CFO, Sarah Fryer, is this legendary CFO. And the role of CFO has really evolved over the last, I'd say, 20 years in Silicon Valley. It used to be literally, you would just take a CFO, a public company, put them into a startup for quote unquote adult supervision. Now it's much more of an entrepreneurial role. Tell me about the role of CFO today in both LaGuardia and also what is the best practice for a Silicon Valley CFO? We like to call it CFO because the goal is to remove friction. The goal is to help quantify the qualitative and solve problems.

19:47It is not purely an FP &A role. It is not a finance, a budgeting role. It is a goal to remove barriers. And my day job is not predictable. And I think this is also emblematic of the fact that I'm an AI CFO. There are very few AI CFOs. So Sarah Fry is obviously one of them at OpenAI. There are a few other companies like RunwayML, Crusoe, Abridge. But we're kind of in the first class of AI CFOs. And the problems that we're working on are problems that really haven't been worked on before. So how do you make the switch from C-based pricing to consumptive-based pricing? How do you walk up your gross margin?

20:22Because a lot of these companies depend on Anthropic or OpenAI. How do you think about token utilization? How do you think about switching models between the major LLMs? There's a whole host of problems that don't necessarily have answers. And my job and my team's job is to solve them. And I would also say that the CFO's job has enlarged to be a PM's job very recently. I get involved in all the pricing decisions for the company. I have to solve for the gross margin for every deal on a deal-by-deal basis. That used to be a PM's job, but is now a great part of the finance job. It's tying a critical part of the income statement directly to my day job.

21:05And I wouldn't have it any other way. Have you had to create new metrics, new frameworks? Oh, absolutely. We look at the DAO, the Wow. We look at the gross margin on a customer basis. The level of fidelity we have on our users is unparalleled to anything I've ever seen before. In all of my prior SaaS roles, we would just bulk look at our business and we have to look at everything on a micro level. We look at our token utilization on an hourly basis because if we switch models from one model to another, it could drive up our cost$100 ,000. And so each decision is critical. When we decide to switch LLMs from one to another for document editing, that could be a$100 ,000 decision.

21:49And so the relationship between CFO and CTO has to be incredibly close. Before, one of the most important relationships is CFO and CRO. That's still super important. But I would say the CFO relationship now spans to all the different C-level executives. And I'm doing daily check-ins with all the C-levels. You're also, I think, the first CFO I've ever met that has their own fund. Tell me about your fund. Throughout my career, I've had people who have believed in me and put me forward for opportunities. And in 2015, my CEO at the time, David Ulovich, recommended me for a program called Sequoia Scouts.

22:27David Ulovich was the CEO of OpenDNS. Today, he's a general partner and Andreessen Horowitz running the American Dynamism Fund. And he is one of my best friends. But back then, he was very busy running OpenDNS. That year, OpenDNS ended up selling to Cisco. So he had a lot on his plate. But he was one of the original Sequoia Scouts. Back when Sequoia Scouts was a secret program that there was an article written about it in the New York Times. And I was fascinated by this program. I thought it was amazing that Sequoia was arming their top CEOs with this war chest that they could write$25 ,000,$50 ,000 checks into promising startups.

23:03And because David was so busy, I would bring David different ideas for companies that he could invest in. I was a 25, 26-year-old person in Silicon Valley. And so some of my friends were starting companies. Plus, my wife at the time was going to HBS, and a number of her classmates were starting companies. And so I'd bring them different ideas. Actually, a company yesterday, Shield AI, announced their$12 billion valuation, their newest$2 billion fundraise. That's a company that I invested in for David Yulovich when he was a Sequoia Scout. And so it's funny to mark up on that. A lot. A lot. I'm happy for everyone involved.

23:37And so he put me forward for the program. He actually wrote a very funny letter to Sequoia and said, David has been helping me with Sequoia Scouts. I'd write up all of his memos for him and he would submit it and he would get approval and he would make these investments. He's like, David's been helping me with all of my Sequoia Scout investments for the last six months. Either you make him a Sequoia Scout or I quit. And then you can make him a Sequoia Scout with my spot. And to me, this was my dream. Like when I would run on the treadmill and envision whatever my goal was, it was to become a Sequoia Scout.

24:04I wanted to be a Sequoia Scout more than anything. And here he was, David Yulovich was advancing this opportunity for me. And Sequoia, I remember, wrote back and said, no, no, no, don't do that. Don't do that. Don't quit being a Sequoia Scout. We'll meet him. And so I got to meet Ruloff, who is amazing, just such an inspiration, such a leader. And I sat down with him for an hour. And besides being the smartest human I've ever met, at the end of the conversation, he said, okay, you're in, you're a Sequoia Scout. And then over the next five, six years, I made about 70 investments. And so that allowed me to invest in seed and series A companies.