Will This $11B AI Startup Disrupt Big Law?

26:09I mean, you can really explain to a human the stakes of the problem and have some more assurance that they're not going to make the mistake. Like, it seems like you can't really do that with AI at the moment. That's one of the biggest values that I think people underappreciate of law firm partners. Right? It's like at the end of the day, when you're doing one of these litigations or one of these mergers, there is like a single human being that has spent the past 20 years of their life doing all these similar transactions and being held accountable to that. And they're willing to bet their entire career that they're going to do that correctly.

26:40And it's like, that is a level of trust that I think we will get there with these systems, right? It's like the stock market runs on like an automated financial system that like we now all trust. And so there's ways to get there. I just think there are a lot of problems we need to figure out to get there. Just in terms of where you're at for the company right now, you started the company a few years ago. You're now up to an$11 billion valuation, nearly$200 million in annualized revenue. What are you seeing in terms of adoption on the front lines of these legal firms? I mean, how are they actually integrating it?

27:19And you mentioned earlier that, you know, for people within the legal industry, they don't think it's going to like massively disrupt the industry in the same way that people from the outside might. So talk a little bit about the adoption so far. To clarify the last point, I think most law firms and in-house legal teams now think this is going to change the industry a lot. I think my point is just in the past couple months, the jump with seam coding models, I think most of the world is still underestimating how much this is going to change everything. Like I think everyone has somewhat gotten comfortable with what GPT-4, GPT-5, this like caliber of models means.

28:02I don't think most people have baked in what this next capability jump, which I think is equivalent to like GPT-3 to GPT-4. And so in terms of adoption, most law firms we work with now or all law firms are like we need to adopt this. And I would say where most law firms are at is every one of my lawyers needs to be using this technology individually. There are a lot of law firms that are thinking about, here is how I need to change entire practice areas, like the workflows of a client matter that I'm doing with an entire team. And so starting to think about, okay, here's the parts of a merger that I'm just going to delegate to AI.

28:41And then I would say there is a decent number of firms that are then looking at the different ways they collaborate with their clients and price that work. And so I would say the industry is definitely like moving in the right direction. People are starting to think about this. And then their clients are also starting to look at this. So I think one thing that will be interesting is like most large enterprises have large internal legal teams and then also work with their law firms. And there's obviously like a blurred line between which work stays internal and stays external. And there will be this healthy tension of enterprises thinking about this is the work that I should do myself as these models get better versus this is the very specialized work that I want these outside law firms to do.

29:27I just want to clarify your position on this because it sounded a little bit different from what you said earlier. I thought earlier you were saying within the legal world, and we were talking in the context of job destruction. Within the legal world, it seems that lawyers, I mean, so from the outside, when I look at what's happening, I'm like, oh, this AI thing is going to completely transform the legal industry and it's going to destroy a lot of jobs. Destroy is a harsh word, but it's going to remove the need for a lot of jobs. And it sounded like you were saying, well, actually, within the legal industry, when we look at what's happened so far, people in law are less worried about that than you might be.

30:06But I'm also hearing at the same time that you're pointing out the capabilities of these new models. We've just seen what happened with Anthropoc's new model, Claude Mythos, which is just, I mean, eviscerating stocks across the board. and you're saying, yeah, people aren't seeing how transformative this is really going to be. So I guess my question is, where do you really stand on this? Do you think that we are overestimating the impact or underestimating the impact, specifically when it comes to law? If we go to the extreme, do I think 50 % of these jobs will go away in the next two years? I would say that's too extreme.

30:42And then I would say, where are law firms right now? I would say most of them are underestimating to your point of like how good this technology is going to get. And then I think there is from a purely capabilities perspective, I think these models are like exactly what you're talking about of like mythos. These coding models are incredibly powerful. I think there is a lag of the effort to productionize that in a way that these law firms can use. And so I think part of the capability gap you're seeing right now is like the reason programming is happening so fast is there's basically no implementation costs, right?

31:22Anytime a new model comes out, I can just go in terminal and I can be like, oh, codex 5.4, extra high, fast. Let me just use that and swap models and I can use it on my entire code base. And it's very easy to absorb all the new capabilities. The lag we're seeing with law firms is you can't use desktop products, right? Like if I'm working at a law firm, I'm working on an internal investigation for Goldman Sachs. I'm not allowed to download that data onto my desktop and use a code model on it, right? And so even though there is, to your point, this massive capability jump, I think there is still a lag to deploy this technology into a law firm and enterprise.

32:03Yes. A lot of what we're building now is all of the like security and things that you need to be able to use all of these capabilities in like a controlled way. Or just like a simple example, there's all these examples of use the code model and you're like, hey, can you change this song on Spotify? And it's like, oh, I don't have an API. I just like went on your desktop and wrote this Apple script to like get around these restrictions, right? But if you're doing that for like a sensitive merger that's not public and it's like, whoops, emailed this to the wrong person, I think there's all these things that you need to do to constrain it.

32:36And so I think that will slow this down a bit. But to your point, from a purely capabilities perspective, yeah, these models are senior assistants. They're just incredible. The shape of them is just still weird. The same way the coding models aren't quite there, where it's like, we can't have them at the scale we're at. They don't quite architect our product correctly. If I'm just like, go build this new product at the scale we need and make all the right architectural decisions, they don't quite do that but if you take like a principal engineer and these models the stuff you can do is insane like there is senior partners that i talk to that are working on very large mergers that are just like i'm able to do most of this merger with me and the model and doing the work but i think the other thing that is going to make this go slower is these models are very powerful when you know how to use them and so what you see in programming is because the code models are just so perfectly aligned with the way you do engineering, like most engineers are grokking how to get the like value out of these systems very quickly.

33:44There are very few lawyers that are understanding these models the way like engineers, because it's just not as intuitive. And so I think like to answer your question, because I think it's complicated, like in two years, do 50 % of these jobs just all go away? I don't think that happens for the reason I said. From a capabilities perspective, if we could perfectly diffuse this into the industry, can it do 50 % of what people are doing today? My guess is probably yes. But I think that diffusion, for all the reasons I talked about, I think happens a bit slower than maybe like Dario's predicting in terms of just like this happens next year for regulatory security, all of these reasons.

34:25And then the last point is, I do think law firms in general think this is going to happen slower than I'm saying. We'll be right back.

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36:00We're back with Gabe Pereira. So I very much agree with the points you're making here. And this is something that I found kind of interesting. And I think the market is getting it wrong on the SaaS apocalypse that we're seeing because, you know, we see these incredible models come out. They're incredibly smart. They're incredibly capable. And Salesforce gets battered and CrowdStrike gets battered. and Cloudflare and ServiceNow and all of these software enterprise CRM management companies just getting battered right now because the idea is like, okay, Anthropic can create the products that they do.

36:38But the thing that they seem to be forgetting and that seems to be a very, very big piece of the puzzle is there are other things that are important when you're managing a business that aside from capabilities, One of them would be trust. One of them would be security, cybersecurity. One of them would be privacy. Another would be relationships. I mean, those are the kinds of things that seem to matter a lot across basically all forms of white-collar work, where, yes, there might be some vibe-coded alternative that can do the job of the associate pretty quickly. but if you can't trust that it's going to protect the data or that it's going to do something kind of crazy or that you haven't even gotten the regulatory approvals or you haven't even got the approvals from your data partner or whatever it might be then you simply cannot use that product and it seems as though that i mean from a product perspective maybe you would argue yeah that's that's not salesforce's strength right now but in terms of privacy cyber security the relationship with the customer and the client.

37:49That seems to be the real strength. And it sounds like what you're saying is like, yes, these models could do a lot of the work in the world of legal, but there are all these guarantees and all these other parts of the business relationship that they can't do yet. And so they're just not, they can't use them at the moment, or at least they can't use them in the extent that a lot of people seem to think. I guess, would you agree with that characterization? Yeah, I think that's right, Where it's like, I think what's going to happen is the models will do much of the, like, if you're an associate at a law firm, like you are for the most part not interacting with the client, right?

38:27You are doing all the work that the partner delegates. And I do think the models will increasingly do more of that. And you will need to build these hybrid law firms that are, here's a ton of agents and probably less associates that do all the things that the models can't do. And there is a huge amount of legal work that is that. And so I do think like there will be a lot of legal work that these models can do. And then I think the point you made that I think it does feel like people miss of like, what is the value of these enterprise SaaS companies is exactly what you said, where it's like, there is a huge difference between vibe coding a product and building a product in an organization that another company is willing to bet their company on you.

39:09Like if Salesforce goes down, your like sales org that can't function. Right. And like, this is the same in legal with the private equity example I gave. Like, if you want this to do a fund formation, I need to wait 10 years until that fund pays out to know that you structured this correctly. And it's like, these systems are getting so complex that you can't evaluate them. Right. If you think of how do I evaluate that a partner is a good partner, there's no test I can give that partner. It's just that person has done mergers for the past 20 years and for the most part, those mergers have gone well.

39:49And it's the same with software. I think anyone who's built software, it's like you can test stuff, but at the end of the day, it's like did your system run in production for 10 years and not go down? And there's no test for that. and all of these things are ways that you build trust. Like you can't shortcut the trust. That to me is going to be one of the biggest things that slows this deployment of this technology because especially if you say, I'm gonna have one company or one model build all of this, you're just taking all this correlated risk on that single system where it's like if one thing is wrong with that model and it wrote all of your code and all of your infrastructure and you don't understand it, like your company is over.

40:34And so I just don't think banks, private, like you just can't take this correlated risk. And that's the value of something like Salesforce Cloudflare. It's like you have now spread out this risk to a bunch of these different parties that are accountable for very important, but like separate uncorrelated parts of your business. And it's like that to me is, I think when sometimes people talk about, oh, we're just going to have one model that solves everything. It's just the world's too complicated, I think, for things to play out that way. I think this is a pretty good segue into the next question.

41:07Your company relies on the foundation models from companies like Anthropic and OpenAI and XAI. I mean, I guess it's like there's literally just a handful of companies that are actually building foundation models. And that is the case for basically every AI startup. I mean, I know founders who are building AI for finance and who are building AI for all these other industries, and they all rely on the foundation labs. And the question is always to those guys and to companies like you, to a founder like you, what is stopping Anthropic from killing you? What's stopping OpenAI from killing you? If you are literally dependent on their models and they appear to have an ability to build the models themselves and to implement them into various industries.

41:56I mean, OpenAI can build codecs and they can just insert that into the engineering, the software engineering space. What's stopping them from doing that with legal? I mean, I think all of these companies are going to do that. And I think to me, the tension is, I think there's actually a lot of companies building these models, right? It's the foundation model companies you mentioned, plus all the cloud providers where they either have their own or you can get the foundation models through the cloud provider. And so I think you've kind of distributed that risk. And then to me, one way I would think about it is like, why didn't Google build a data room product, right?

42:35Like data rooms in the previous generation of software was like a multi-billion dollar industry. It's basically just Google Drive, right? But no one uses Google Drive to do a transaction. There's like an entire industry of companies that build data rooms, right? And if you think of the biggest challenge for these companies is how often does Dario or Sam think about the legal industry in terms of building a product? Never, right? It's like they're thinking about how do I compete with hardware? How do I get the funding I need to build data centers? How am I going to compete with the cloud? It's just like no part of that company is thinking about that, right?

43:13It's like, and then when you look at Microsoft or these large organizations, it's like they have a small GTM team that sells some of their products to law firms. But the thing that I think people don't understand is like, the problem you need to solve for law firms is not just, can this model do legal work? Like this entire industry is about to go through a transformation where the way you structure your firm needs to change. The way that you bill clients needs to change. The way you train associates needs to change, right? Who's going to help these law firms and their clients go through that transition, right?

43:50And that to me is like the problem we're solving where it's not just who can build the best models. It's what is the platform and all the change management. And if you think of companies like Salesforce, like that's the value they provide where when you need to build a sales organization, like Salesforce just has so much of that learning from helping every company do this. And I think what's going to happen will be similar to what happened with cloud, right? The models are going to become a core part of like societal infrastructure. Like that's very clear now. And these model companies are going to build massive businesses selling these to companies.

44:29And then there will be parts of products they can build, right? It's like Cowork, Chachabiti. It's like these are incredible products that are very horizontal. But I just think these industries and the world is so complex that is there very large businesses you can also build on top of these platforms? Like, I think for sure, right? Like this is what you've seen with every other platform shift with the internet, with computers, with mobile phones, with cloud. Like the reason these things become such large companies and such powerful technologies is because they are platforms that enable companies like us to build massive businesses on top of them.

45:06Like that's almost what necessitates them being able to capture so much revenue. And then I guess the last piece I would think of is like, right now, what's stopping anyone from starting a company, right? Like anyone can go hire a bunch of people and coordinate them, but it's actually turns out to be quite hard to do this. And I think that's what you're going to see with agents, right? Like very soon, every person is going to have the ability to hire infinite employees. And it's like, this is going to hugely democratize people's ability to build companies. And there will be really valuable small companies that are super specialized.

45:42And then there'll be people that figure out how to do this at scale. But I just think this opens the pie so much that it's like, there's just no world where just one provider does all of this, right? Because if the argument is like, oh, they do this for legal, then presumably they do it for every other industry in the world. And it's like, I just don't think that's how this plays out. It sounds like one of the things that we're learning here is that one of the biggest shortcomings of AI right now in terms of actually implementing it into the framework of an enterprise is trust and security. And that puts you in an interesting position because your company is literally three years old.

46:18And so the idea that you're going to come to these big law firms and say, don't worry, you can count on us. I worked at Meta. I worked at DeepMind. I'm a young guy and this is my roommate. And you can trust us with your data. that seems to be a pretty bold a bold statement how have you navigated as a founder and as a pretty early uh first-time founder like dealing with trying to get people to trust you like how do you actually do that as an entrepreneur the thing definitely that helps now is i think we were telling law firms about this before any of this happened like we started the company before chat gpt uh a lot of the things that we have told law firms investors enterprise like a lot of these things have come true and i think that is a big way you build trust over time right the things that you say are going to happen or that you say you're going to do like you do those so i think that's one piece i think the second is the team you're able to build and so i think we've just built an incredible team and it's like winston and i are relatively young but if you look at our c suite.

47:28These are people that our CTO, Siva, has managed a thousand-person engineering org. Our CLO has taken a company public. And so we've built a team, not just the leadership, the entire team, where I think you can trust them. But I think to your point, it's we haven't fully won this trust. And so there is a ton of work of we need to build the best product. We need to build the best team. We need to keep scaling. We're partnering with kind of all the other providers. And so we work with the existing legal technology companies and enterprise companies. And I think the more that you can just work with the entire industry, like that is how we build trust over time.

48:06But I think to my earlier point, like you can only do it so quickly. And so for us, this is, you know, a 10, 20 year company and we're just going to keep doing it. How much does branding play a role in all of that? Because something I think about with this is what you really want, especially for these very storied white-collar institutions, is you want to present as institutional. But if you are a startup, you are by definition not institutional. And that seems to be the real problem for a lot of companies that are trying to break into these very institutional industries, is that this isn't a place for startup.

48:42This is law. This isn't a place for technology. This isn't a place for young guys who are founders, at which point it seems like part of the job is to be like, no, no, we have an institutional credibility. And I would imagine that a lot of that falls on the responsibility of the brand side. Is that true? And how have you thought about branding? I think one thing Winston and I thought a lot about branding is by all the things that you don't do. And so I think we got kind of a bunch of flack early on because we like didn't do a bunch of marketing, didn't talk about what we're doing. And I think one thing that always inspired us was when you look at the websites of these top law firms, like they never do any marketing, right?

49:24Like if you look at a top transactional law firm like Wachtell and you go on their website, all you see is the caliber of their team and the size of the transactions that they've done, right? And they let the work speak for themselves. And I think when we think about our brand, like that is very much the brand we want to build, where I think one thing we take great pride in is all of the law firms and the enterprises that we associate with. And that to me is one of the biggest ways that we are able to build trust and show this where we have gained the trust of, you know, these fortune 500 companies, these top law firms, and we've worked with them in a way where they speak highly of us.

50:00And like, to me, that's the ultimate way to, to build trust. I, I think a lot of times when people think of brand, they think of kind of like, marketing and design. And I think those things matter. But when you think of an institution, it comes more from like the things that I'm talking about and less of like how you design the product. As someone who has built an extremely successful company, $11 billion valuation for the entrepreneurs and the first time founders listening to this podcast, what advice would you give them? I think the biggest right now is just use the models. Like Like if I was right now to start a company again, I would just be using the coding models 24-7.

50:39Because I think, to me, I would say the big opportunity coming is I think the company we started seems obvious now, but at the time wasn't obvious. And I think the companies that will be successful starting now are the ones that don't seem obvious now. And it's like going and doing legal or any of these verticals I think seems somewhat obvious now. But the thing that is not obvious now is, I think when people, when we invented the internet, no one anticipated Uber, TikTok, DoorDash, these companies. To me, the really interesting startup question is like, what is the shape of those companies on top of generative AI?

51:16And so I would say, like, use the models and, you know, figure out what those are. That to me feels like the big interesting question. Gabe Pereira is the co-founder and president of Harvey. Gabe, appreciate your time. Thank you. Thanks so much for having me.

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