Wordsmith AI grows 100% quarter-on-quarter: Ross McNairn, CEO at Wordsmith AI

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0:33Hello and welcome back to the Scaling Europe show presented by DL. I'm Seth Johnson. Today I am joined by Ross, one of the co-founders of Wordsmith AI, one of the flying legal AI startups at the moment and one that is built here in the UK. How are you doing, Ross?

0:45Ross McNairn:Yeah, very good, thank you. Been a very pleasant week so far, so I'm in a great mood. Nice, nice. I mean, for those who don't know, tell us a bit about Wordsmith. Yeah, so we're a legal tech built only for in-house legal teams. So that means that we help them with speeding up the rest of the business. We help them with getting rid of external counsel spend. We help them with kind of stopping being renters of their intelligence and bringing everything in-house and creating sort of a more commanding, powerful in-house team. So we service hundreds of companies now. I think now we're in also 400 enterprises from, you know, the likes of British Telecom, Deliveroo, Remote, Skyscanner, a lot of the tech companies.

1:35But also, I think more recently, we've been doing a lot of the, like, 80, 90 % of our growth is coming from more traditional companies.

1:43Ross McNairn:so your random energy company with 20 lawyers or some public service public sector company or a lot of it now actually is going to come from the states so we we're growing at about um 100 percent queue on queue wow yeah it's not it's not that's crazy yeah laws of physics don't apparently apply to ai companies but it's nuts there's a lot of demand it's like catching rain right now if Everybody wants to get hold of something that can speed things up or save them money. And where's the demand from the US come from? Does that come from inbound referrals? Have you been testing out a bit of GTM in the region?

2:24Ross McNairn:I mean, look, I kind of sucked at growth for the first year in the sense we were doing much apart from building product and community. And that, I think, worked very well in our favor. I'm a product guy. I'm an engineer, a lawyer. So I was very much focused on the problem more than anything else. And then was always of this sort of deeply principled view that if you make a cohort of people really, really happy, then they'll do a lot of the work for you. So that's where most of it's been coming from. More recently, some very competent people have joined the business who are far more capable than I am at these things.

3:04Ross McNairn:And they've apparently done a really good job of what they should be doing. and we now have other growth channels, which is great. So, yeah, I mean, it's more of a blend now, but most of the engine room of growth has been people who had a good time telling everybody else about that. That's amazing. It's the dream, especially as a product person, right? You can't wish for better things than your product doing the selling for you. Especially a product-focused founder as well. And that must be amazing for you to not have to be like... I love her. This is such a good time to be a product guy. you know who likes building because your gearing has got so big now it's so you're capable of having way more impact like i was a cpo before with 500 people in my org and everything i wanted to build was layers of alignment and people to flow through and now the awesome thing about a lot of the tooling becoming available is you can go from you know concept to highly sort of you you know, production-adjacent prototyping in such a short period of time.

4:07Ross McNairn:Like, my cool code runs pretty hot. Like, I prototype. I'm involved in all this stuff properly with the team. So it's nice now more than ever being a builder. I absolutely love it. It's such a good time to be in this. Yeah. We're seeing this trend of all these, like, CEOs who have been in the business for, like, 10 or 15 years getting back on GitHub and, like, publishing things out. And just go love it, by the way. Like, when they just start worrying about, Oh, hearing Ross's GitHub rev up. They're like, oh, God. Oh, God.

4:38Yes, that's what we want, though, is founder mode, full-on founder mode. Yeah, exactly. When you build the product, were you, like, you've just got a legal background and an engineering background. Were you building this from a place of, like, what you knew was going wrong? Were you building it hand-in-hand with pilots and clients? Like, how did that first kind of product iteration go?

4:57Ross McNairn:So the nice thing about GCs is they have absolutely no problem telling you what they think. I don't know what it is about this ICP, but if you put them on a call and ask them what they think should be different about the world, maybe it's because they've had such substandard product and no one's been building for so long, but they are effusive in their feedback and quite happy to tell you what they want. So, yes, I'm highly opinionated, but I'm not a day-to-day operating GC. So between me and actually my co-founder, Robbie, is a pre-rock star. He spends his entire life on calls or in the trenches with clients.

5:38Ross McNairn:He's sort of one of our OG legal engineers. And, you know, between the two of us, yeah, we spend a lot of time with customers. most of it is um filling holes that people have been shouting at us about for a while which after a while like once you get pro market set in a good way if you just build a highly responsive business then the roadmap builds itself right people widen until they get what they want yeah i mean that's super interesting especially when you've really nailed your icp is like in-house legal teams you know the harveys and the lagoras of the world have theirs you know targeting of Yeah, it's super interesting.

6:17And let's talk about the move to the US then, right? So you're moving to the US. What does that actually mean in practical terms?

6:22Ross McNairn:Well, in practical terms, I think we're a British business, right? We're founded here. The majority of our team are here. We're headquartered here. We have Index. One of the reasons we picked them is that they are one of the most instrumental investors in the European, and specifically the UK, architecture. So our DNA is in the UK, but the Americans are experts at this. They build companies, and then they force project wherever they need to to get into new markets. we are going to build a very very big business here wherever I need to go and whatever nut I need to crack whether that be you know whether that be Australia or whether that be New York or whether that be Iceland like I'm gonna go there and I'm gonna take my wee kid with me and my wife and we'll pile in and get it done so next frontier is you know Hamish is opening up his shop in New York City.

7:19I was going to say, New York City, that's it. That's going to be your new home. How do you feel about it?

7:24Ross McNairn:Yeah, pumped. Let's do it. Yeah. I love Americans. I like doing stuff, like buying stuff, like selling stuff. Yeah, why not? It's all good. Amazing. I mean, it's going to be so fun. It's going to be so fun. I've lived in a few places, right? So, I mean, I spent six years in Barcelona in Spain. I spent quite a few years down south, like all over the shops. So, yeah, I'm excited about it. I think the main thing for me is when you are close to whoever you want your primary customer to be, your feedback cycles are short. You're eating with them. You're having coffee with them. You're just in the weeds.

8:00Ross McNairn:And right now, we're going to crack that market. Yeah, amazing. How many customers, you know, you mentioned like 400. How many of that are US-based? I mean, we were very few six months ago. I think we're north of 20 % now. And that's without this huge amount of investment. It's been largely just, I don't know, I don't want to say, again, I think it's just been dissatisfaction from people. The cool thing at the moment about Legal Tech is lawyers are quite diligent. They like to look around, and so you find a lot of them actually do a lot of research. They sit there, they're like, I'm going to compare this with this and this.

8:37Ross McNairn:And so specifically in the States where there's a lot of noise, actually there's a lot of research, and so we get a lot of overflow at the moment. But now I want to change our capability to service their market and make it much more of a first class citizen. Interesting. And have you got like a big splash planned? Have you got like a marketing campaign that you're going out? Or is it still going to be like, you know, get boots on the ground and start doing a bit of outreach? We were going to do it kind of quietly. But then, yeah, I've got one random stunt that will probably piss a few law firms off.

9:08But apart from that, I've got a few things that I'm going to go and do pirate mode on.

9:14Ross McNairn:But look, I think when you're first going into any, you know, we're in the States right now in a nominal way. My view on market entry is early on in particular, you have the pleasure of not having massive scale. And there are incredible advantages to that. You can be intimate and you can go and properly spend time with customers and get really into the weeds with them and be close to how they work. So I think broad-based awareness and big splash stuff is a second phase thing. Once you have completely nailed your early engine room of growth and you can see from how we built this business to the first couple of years, like we have a playbook.

9:58Ross McNairn:We have a way of growing. that's not going to change in any new markets we'll just redeploy it wherever we go amazing and you think you mentioned you know doubling every quarter do you think that's going to maintain while you're in the u.s you think you know i mean as you grow it becomes harder and harder to maintain that level of growth but now you're tapping into a new market in a big way have you got any predictions for what 2026 might bring i don't actually like ai is not like everything that i thought would happen with in terms of every week it just seems to rewrite so So everything I've seen so far, every prediction, ends up just always turning into more traction.

10:37Ross McNairn:Everybody thinks, you know. First, I remember two years ago when ChatGPT was sort of warming up and they were 80 % of the market. We had one set of predictions. Then we had another set of predictions when Gemini started to get good. And now there was a new set of predictions. All I know is if you build good product and you make a good cohort of narrow ICP very happy, you win. And I think that on the back of it, those fundamentals are just things that I believe to my core, right? You mentioned other companies before who are, I think, confusing their ICP. I just disagree with that approach. I think you pick your customer and you nail it.

11:24Ross McNairn:And that's the only way to win in an ever-changing world where you've got loads of things that are going up and down, just ground on the fundamentals. Interesting. And you mentioned the different tools, the different models. What tools and models are you, what kind of AI tools are you using to make sure that you can scale efficiently, move quickly, TEDx the engineers or whatever? Do you have a suite of tools that you are now leveraging to kind of take the business from zero to 100? honestly I should show you at some point maybe it's about when I'm brewing down for coffee in Andunashi the internal toolkit we have but yeah I mean there's two bits to that so one yeah there's some great AI productivity tools that I use on the side I love things like Whisperflow and Granola is just again just another lovely British business that is just proving everybody was completely wrong when they just called them a rapper two years ago it's just a great product I love it.

12:21Ross McNairn:Yeah. Yeah, I use a lot of those sorts of things like kicking around. But also we spend a huge amount, actually about a third of our team is dedicated to internal enablement and tooling, which means that the, like I think our CTO of Giggs, he's actually posting a wee bit more about it now. But the toolkit that he's built is wild in how they ship. Something like 40 % of our bugs and tweaks now basically are from Slack to production with one click. Wow. Wow. It's insane. Like scaffolding up a whole stack, coding it up, merging it, doing the root cause investigation, running through. So the guys have spent a lot of time on that and that works very well.

13:01Ross McNairn:We've built a lot of stuff into the sales organization. We use Atio a lot, which we think is an awesome product. Again, another lovely London business. Yes. I think Nick and that team are doing an awesome job of sort of adjusting to AI world and we built them into our toolkit massively in how we run sales. and how we flow all of their NCP capabilities through end-to-end. And they actually sent us a nice go-to-market engineer that did a lot of help with us. So I think there's a lot of things you can do now to run an incredibly effective organization. And the nice thing about being summer, a thousand employees, is you have the flexibility that you can build all that stuff yourself and change your operating model.

13:41It's interesting that now that so much of the engineer time is like infrastructure, right? It's about putting the automations in the infrastructure as opposed to writing the code itself and there's still a lot of demand what's interesting like i

13:52Ross McNairn:was actually had lunch with one of uh like uh one of our engineers i've worked with for a few companies now and um yeah we've been we've been talking and working together on a prompt for two weeks so we haven't written the code yet but we've been thinking a lot about the system design and like how we're going to architect this big change and tweaking it backwards and the debate is like yeah maybe it'll be seven shot to get this big change out but the upfront thinking and the prototyping and the design of the system is where the whole shift is gone and way less of our time is being spent hands-on I mean I don't think any of my engineers have written a line of code in months now maybe like tweak a few syllables here and there but structurally they don't they just do not write code anymore.

14:40Ross McNairn:What we spend way more time doing is architecture, system design, product architecture, thinking about everything into Weaves, like prototyping with VZero, little MCP service. It's a completely different job. Yeah, it's crazy. What are you using to help your code? What tool is it? Is it Cursor, Cored? Both. Yeah, both. And then we have quite a bit of internal stuff we've built as well. So, yeah, we've got a lot of our team or XMatter, so they like to build their own stuff. That's amazing. Super easy to build stuff now, so knock yourself out. Yeah, and how are you thinking about talent more broadly?

15:17Because talent at the moment must be really tricky, especially when you're growing quickly. You must be always on the lookout for top-tier engineers.

15:24Ross McNairn:Yeah, look, it's all about now how high the water the talent is rather than the volume. So more people get in the way, frankly. You know, if somebody isn't of a certain if they don't escalate by the quality of thinking in a particular way A lot of the work that used to just be rope work I don't I don't just need somebody to write copy. Yeah, I don't just need somebody to move it from a to B I need somebody who can think properly and that's what it was like saying about that building a prompt for a few days I need somebody that I can sit with at lunch with an engineer and who you can see they can understand the whole thing and think it through and to evaluate different approaches and like the the the demands of of of your ability to think deeply honestly have gone up massively now and that changes honestly that changes how we hire like we change the type of people that we hire i'm changing the kind of product managers and designers like we're completely restructuring loads the roles um interview processes now are are very different to how they were three, four years ago.

16:33Yeah, I bet. And what was it like raising from Index? You mentioned Index, you're right. They're the leading firm here. Amazing track record. How did that come about?

16:43Ross McNairn:Honestly, I cannot speak highly enough. I think Hannah Sewell is just, like, she's our partner there. She's just brilliant. They're just a fantastic set of investors. They're laid back. They're confident. They know the game. They build such a good reputation. They understand the value of it. And thus, you don't need to worry about anything other than them upholding that for themselves as much as anything else. So they behave with a lot of integrity. We don't really have any. I don't even know. Even negotiating with them is a relatively clean exercise because it's just dealing with a very sophisticated adult.

17:24Ross McNairn:Just lovely. So I can't shower enough praises on them. And I think actually just for the architecture, as I said, of capital in the UK, those sorts of funds are pretty structurally critical to unlocking growth. And it's good to see government leaning in more and taking advice from them because those are the kinds of places where I think you'll find – I think they – actually, they did it recently. I signed one of the bulletin guys to an AI committee. I think that kind of stuff is very smart from government. And I think leaning more into those more sophisticated groups of investors is a very good idea.

18:01Yeah, I mean, especially those ones like Index and Bolton who have been in the ecosystem for a couple of decades. There's a lot of VCs that have cropped up recently, but those guys really have been around for a while. And yeah, I think it was James, the sovereign AI unit. Yeah, which is going to be really interesting. And how are you thinking about capital generally? I mean, I know you raised a big round last year. Are you well capitalized for the U.S. expansion? And are you thinking about maybe tapping into some more US partners?

18:27Ross McNairn:Always think about money. I think at some point we'll do something. It depends exactly when the moment's right for us. Look, I think the way I think about most of these problems, whether it be product or capital or anything, there are things that you do to be upwind of the problem. and then there are things that you know rather than focusing on that specific thing the being upwind thing is just get completely cracking numbers and build a dominating company what we do that money will come right also you just don't really sell it right like it's more just an exercise of open the data room and let people have a scooby and then these folks are good they'll work it out right so i think if that's your philosophy and you're just trying to do a disclosure exercise rather than a raising exercise, and you're always in that mindset, then it's really just a timing thing of when you fancy opening the door.

19:23And at the moment, you know, you're happy with, you know, I spoke to a lot of founders at the end of last year who were raising their second round last year because they're a bit worried about recalibration of the market. Things, you know, whereas the start of this year feels like things are continuing to fire on all cylinders. But right now you're not thinking about it. You're happy.

19:39Ross McNairn:No, look, I think recalibration of the market is like, you know, I've been in SaaS for a while now. And I feel like when people talk about multiples being high on AI companies. If you look at the growth rate and you look at the forward-looking multiple on these companies to where, say, we will be by the end of the year, it's not a crazy multiple that these businesses are talking about. In fact, it's actually a bit of a bargain in many cases. And, you know, speaking to some of the folks who are around, say, NAN recently and watching what those guys did, you know, everybody puts out a plan and then one in three of these companies are taking the plan after they've raised halfway through the year and just tripling it.

20:22Ross McNairn:When you're in an environment like that, there is no such thing as recalibration because the public SaaS markets are being openly dissolved. What are you going to do with your money? Are you going to put it in the company that's going to do another 10 bagger this year or are you going to sit and park on it, not get your management fee and just sit and hope that, you know, you somehow are going to survive AGI in two years' time. So, no, I don't think it's a particularly challenging and good companies to raise in. And I think that's the only thing I'd focus on is make the curve steep and make it consistently steep.

20:59Amazing. Well, look, Ross, you're crushing it. And it's been great chatting. Best of luck with the US expansion. Let's stay in touch. I look forward to hearing about even more success. We'll have a pint next time I'm back. All right, chat soon, sir.

21:18Thank you.