Max Junestrand: You Need The Willingness To Learn Faster Than Anyone Else

0:06This is a much warmer welcome than what we had coming into Y Combinator the first time. Legora's YC journey started with a rejection, but more on that story later. In YC, they teach you something, and it's called the two-sentence description. It is, describe your company in two sentences. Legora is the agentic operating system for lawyers, and it handles complex legal work from start to finish, so lawyers can achieve more than ever before. And over 3 % of all the world's lawyers are now active users of Legora. You will learn more about this when you get accepted into YC. When we started looking at the legal industry, it felt like one of the biggest opportunities to apply large language models to solve real problems.

1:09And the software that we were up against looked like it had built in the 90s. As software engineers, we have been incredibly spoiled with great software because we love to build for each other and for ourselves. But in the legal industry, this is what the software used to look like and what we were up against when we started out. Now, Legora has grown into a global brand, putting celebrities like Jude Law at the New York Wall Street. And still, I feel like we are only getting started. My most favorite Slack channel in Lagora is customer love. It is where our customers post things that they sort of truly feel like they couldn't have achieved without our system.

1:59And we mine many of our sales calls for quotes like these. And I wanted to share just a couple with you because I think at the end of the day, this is what it's all about. A parent asked me at one of the tournaments how I juggle work and all of the golf travel. One word, Legora. Never has the path between an idea and executed been so short. Never, man. If Legora went away tomorrow, I'd just go back to coaching high school basketball. When Legora went into YC, we were questioned about the idea of even selling and working in the legal industry. It is such a conservative business that had never been sort of lenient to software before.

2:48But from the time that we went into GA of October 2024 until the last end of quarter, we've grown from one to 100 million in ARR. And starting from just three engineers in Sweden to a company of over 750 people all over the world, this is awesome. And the fact that we've gotten to do this starting from Europe, I think just adds another flair in that hat. But the Legora story almost didn't happen. And it actually didn't start with me. In fact, it started almost like the great beginning of a joke. And so a lawyer, a physicist, an engineer, and a psychologist back in 2020, before GPT, before AI was cool, started a company called Judilica.

3:45And what they observed was that law school students were going into their internships basically to summarize court cases. And with the early models from Google called BERT, they started to explore what this space could be and what was possible to build. My story started in the Swedish archipelago at an island which looks something like this. And I met my two co-founders at a volleyball game. I think startup founder stories can come from many different places, and this definitely wasn't one, you know, high odds of a place to start. But when I met August and Sigge, they showed me a demo of the product they had built, and our group chat actually looked exactly like this.

4:40they gave me a demo of the project and with GPT 3.5 they had built a very simple product that could explain what a stock option agreement really meant and so we started with that and I said this is a super cool demo a super cool project and my co-founder Sige said I'm glad you want to help out and I ended up helping out a little bit more than just that When GPT 3.5 came, that was the internet moment of our generation. I dropped out of college. I never finished my master thesis because the opportunity cost of not building had become too large. But when we started out, it wasn't obvious that we were going to be a success.

5:31And so to learn about what the legal industry was, what it meant, how lawyers actually worked, we came up with the ingenious plan of cold emailing lawyers on their emails that we could find on their websites and writing to them on LinkedIn asking for a lunch where we could learn more about their different practice areas. And we offered to pay their hourly fee to have lunch with us. And many of them took us up on that offer, but fortunately for us, many of them didn't make us pay for the hour, and many of them even paid for the lunch. And once we had gotten our feet under ourselves, we approached one of the largest law firms in the Nordics named Mannheimer Swartling.

6:19But just two years before that, their managing partner had gone on TV and said that AI, back when they were starting to use it, was really more artificial than intelligent. And so we had to work really hard to change the perception of what both technology and what AI could be in the area of law. In law, you are not paid when things go right. You are punished when things go wrong. And many of the initial AI solutions in the space had required immense amount of training. You had to sort of bring a lot of use cases and examples just to get very, very little results. And when GPT 3.5 came, that really changed the story.

7:11And so with Mannheim and Swartling, we ended up moving into their offices and working really close with them. And as I said in the beginning, the warm welcome here was quite different from the first time we interacted with YC. We applied in May of 2023 with a promise of being able to query all legal documents using large language models. And when we came to our interview, one of the first questions that we got asked was, what type of lawyers are you serving? And not very knowledgeable about the legal space yet. Our response was, what do you mean? Are there different type of lawyers? And that did not land very well with the YC partners at the time.

8:07And so I actually remember very painfully that Tom Blomfield started laughing in the interview when we gave that response. And we knew that we were cooked. But that also gave us the perseverance and the drive to continue. And so with a lot of letdown, the day after we did not work. But the day after that, we got back to building. and two months later we got accepted under a new name and with a different platform. We had done our homework, we had done the work and from Sweden the idea of getting accepted into Y Combinator felt like we were going to Mount Olympus. we were going to dine with the gods, and we were going to get to work with other startup founders who came from all of the great tech companies that we knew of.

9:10And once we got to Y Combinator, we realized that we actually knew a lot more than we thought we did. And this is one of my favorite pictures, and it is the screenshot I took after we did the video call, after our second YC interview, when we knew that things had gone a lot better than the first time. So after we got accepted into Y Combinator, we moved into this law firm I mentioned earlier, Mannheimer Swartling. It was the biggest law firm in the Nordics, but they had no real clue about how to work with software and how to work with technology. And we ended up getting a conference room with no real windows, where the AC would turn off at about 5 p.m., but it was really close to the Coke fridge.

10:09And so at about 6 p.m. every day, one of the engineers would go up, grab the door, and start waving it back and forth to get more oxygen into the room. And those conference chairs still made an imprint on all of our backs, I think three years later. And me in the car there with two more screens is when we make the move from the conference room of a law firm to our first real office. And I think one of the key takeaways from this entire experience is that first off, we quickly learned not to take no for an answer, but also the power of simply reaching out and asking for help. I think one big lesson from these first three years of building Legora has been that it is very powerful to be a person and to be a company that others want to see succeed and that others want to help.

11:10And so we came to San Francisco. we got a room at an Airbnb up in Bernal Heights and we started building. And during YC, we grew from zero to a million dollars in ARR. And we also learned the hard way that working across San Francisco and Europe took a big toll on the team. I couldn't find a picture of this, but I bought an influencer ring light that I put on my laptop. And the reason I had that ring light was because I was doing sales calls between 1 a.m. in the morning to 10 a.m. in the morning every single day in San Francisco to Europe because that was where our initial customer base was. And after a rocket trajectory during YC, which now, two years later, is slow compared to what some of the companies are doing, we set off to fundraise.

12:16And this was my first time fundraising. I had no idea what to expect, but we had lined up 80 investor meetings in a week and a half. And we had European investors, American investors. and the main takeaway from that experience for me was that you need to become a really good storyteller in order to drive interest and to get people on your team. It was also a very different experience talking to some of the European investors versus some of the American investors. I feel like in the US, we think more about what can go right rather than what could possibly go wrong. And we ended up working with a venture firm called Benchmark.

13:06This is a picture of Chetan, our partner, when we had signed the term sheet. And I remember negotiating that term sheet on his desk with a computer opened, going on decimals in the Excel to determine the exact number of shares. and they ended up investing$9.51 million. Now, following that investment, Redpoint pre-led our Series A just three weeks later and we started to run into a challenge. We had about$35 million on the bank. We were 10 people in the team And there was actually a month following that, that we made more money from interest rates on those 35 million than we did from customers.

14:04And that is not a very good sign when you have become a bank. And going into our first board meeting, we had Chathan and we had Redpoint and it was me and my co-founders. And we made a very hard decision, which was to freeze our sales motion. Because when you work with lawyers, you only really get one chance to get it right. If you show up and the product doesn't work, or if the lag in the system is too high, or if the system goes down when there's too much traffic on your Azure instance, you are toast. And after that six-month sales freeze was when we really started ripping. And that's where you see that curve from 1 million to 100 million really starting.

14:59And what happened at the start of that was turning from a small startup looking for PMF to really establishing what our business and what our product was going to be. In the very, very early days at Leia, so even pre-Legora, the way that we would decide what to build was by voting. We would make democratic votes in the entire team. And for anyone who has built software before, you know that if you have too many chefs in the kitchen, that typically does not make one very good dish. And that was exactly what was going on. We were working on too many features. We had to rebuild everything for the product launch that we were going to have after the summer, after the sales freeze.

15:55And we had to build a platform where it was adaptable to foundations that were constantly changing, both with the underlying models, but also with the frameworks that we were using to build agentic workflows like Langchain, etc. And so in October of 2024, we wrote down what we would call the Layup Product Manifesto. This was basically gathering everything we had learned, putting it into one very simple document that we shared with the entire 25 strong person team back then, and that we would rally the troops around. At the time, we were doing about$1.3 million in annual recurring revenue, and many of our competitors were doing 10 times that with products that only had one of these features.

16:48And I also think that's a function of having started in Sweden. The market is not big enough to house a real unicorn or a Decahorn or something even bigger than that. And so one of the earliest questions we got from YC was, when will you move to the United States? When will you make the jump? And it was off the back of this product refocus that we were able to not only compete out the competition on product, but build enough momentum to make the jump over to the US and start to compete for the biggest logos in our markets. And I think as engineers and as tech people, we often overemphasize the reliance on product and on the tech.

17:35But if there's anything I've learned in these past three years, it's that it's all about the people. And building product is one thing, but building a company is a very different thing. And we made many early mistakes around this. One of the hiring patterns that we had to unlearn was looking for fancy logos on resumes, or what we like to call Y-intercept. If you think about somebody's skill curve, it might start out really high, but if they don't have a good trajectory upwards, they are going to have a really hard time working in a company that is scaling exponentially. And so instead, we started to look for people like us who wanted to work insanely hard with a very high growth potential.

18:31And we doubled down on that talent over and over again. Our top seller today is 23 years old. And he sold over more than$10 million worth of Legora. And he had no sales background. He jumped out of university and by continuously doubling down on that type of talent, I think we have built a very unique culture at L 'Agora. And one of those things has been about bringing and building cultural fit. Up until the point where we were around 500 people, I interviewed every single candidate outside of engineering. Now I interview every director in Upwards. But what we have done is we have set the cultural foundation in the business where it self-selects for itself.

19:28We have three values at Legora. Lean in, fight for excellence, and grow together. And together they make LFG. Let's fucking go. That also sends a signal to leaders and others who join the company who are coming from more perhaps established backgrounds. Where joining a company where the values includes profanity quickly sort of tells them what this is about. Another very complex cultural thing starting a company in Scandinavia is something called Jantelagen or the law of Jante. This is very foreign to our American friends but in Swedish culture this basically means that you should not think that you are somebody or you are not more important than anybody else and your ideas are not better than anybody else's.

20:38And I think a part of this humility is good and it supports a culture where the best ideas win and where people earlier in their careers feel empowered to speak up. But it's very hard to build one of the fastest growing enterprise companies in the world if you think that you aren't somebody or if you don't think that you are better than anybody else. And so we have had to really create a nice cocktail of US, European, and Asian culture all in one to create a global company that is Legora today. And so I really think that building a strong company culture is the best guarantee to attract and keep the best people.

21:39Another way that company culture gets expressed at Legora is through articles like this one that ended up in Sifted. For us, there is only winning. Everything else is losing in a winner-takes-all market or winner-takes-most market. And the company has to run like there is no place for number two. I think it actually would be fair to say that when Legora was founded, it really had no reason to exist. We were one of many legal AI companies. But because of this mentality and because of not feeling like we're safe, even though we have achieved extraordinary numbers by any normal measures, we continue acting like professional swimmers who are looking down in our lane while the competition is looking sideways at what we're doing.

22:43And at Legora, we have had to build a culture to really support that ambition. So starting years behind some of our biggest competition and having to build this intensity in a country where most people want to go for fika at 3pm, which means having a cinnamon and a coffee or you know go home at five um one of the ways that that has been done is to create cultural values and cultural moments that really distinguish us from many others and so in swedish there is a saying um you can wake up with the taste of blood because you're so excited about something. And I was doing an article in Swedish, and I used that saying, and I didn't know that the interviewer was going to release that article in English.

23:43And so when this came out, it got lots of fun reactions. One of them was, is Ligora made up of vampires? The second one was, you guys need to floss better. Many good ideas, but this has now turned into the word blood smock internally, which means that, and we just keep going at it. And I think part of having our HQ in Stockholm has worked to help us keep this. Everybody globally from the company makes their onboarding in Stockholm, which is a lot nicer in summer than in the winter, but that has created the same vibe in any Legora office, regardless of where you walk in all over the world. And I think one great example of this was we had a very big law firm in the US that our competition was working with, but that law firm had a specific problem around being able to draft certain types of documents based on incoming term sheets.

24:52And our competition had promised that they were going to solve that problem for them, and they hadn't. And so one of our US-based engineers, legal engineers, lawyers, learned about this use case, got on a flight to Stockholm, spent a week with our engineers, solved the problem in Sweden, and then went back to the US and delivered it to the customer. And I think that Swedish base has become one of Legora's real superpowers.

25:26And so to round things off before we jump into the Q &A, I'm sharing this stage this weekend with people who have built things at a scale that I haven't yet gotten close to. And so I will leave many of the big lessons for them. But what I can tell you is that three years in, it's a little bit smaller than that. Most of what actually mattered in the company and in Lagora so far did not revolve around signing a big client or closing a new round of financing or open a new big office in Manhattan. It happened in a windowless room without much oxygen or on a call on our way to the airport, a slack channel at 2am trying to fix a bug before a big presentation on Monday.

26:21and nobody puts that in a pitch deck, but that is what makes the company. And you shouldn't wait around for those big moments. You have to love the hustle.

26:36And I think if I can leave you with anything, it's that even though we started in a small law firm in Sweden, I was born in the Swedish archipelago with a class of 10 other people. I thought I had a big plan for my life and I was going to go to McKinsey after school. But when GPT 3.5 dropped in our knees, we truly made that into our thing. And we captured what I believe to be our generation's internet moment. And so you can just do things. Legora and myself is living proof of that. So with that, we're going to jump to Q &A. and I want to invite a very good friend, our partner from Y Combinator, Gustav Amstromer.

27:34Gustav, we're really becoming professionals at this now. This is not the first time that you're doing this. No, it's great. It's good to see you. You too. Good to see you. Thanks for the talk. That was awesome. You're really good. Thank you. And always thank you for coming back and speaking to YC and to founders here at Startup School. Of course. Good to be back. I want to ask the first question, which is one that I've gotten from a lot of founders who ask about you, which is you guys are three founders, or were three founders who were not lawyers. Yeah. And you started the best legal AI company in the world.

28:09Does domain expertise not matter that much anymore? So there's actually a story of a Swedish VC who was very bullish on doing the pre-seed of Leia. But they ended up not doing it because we did not have any lawyers in the team. And I met them at the airport. I met one of the partners from there at the airport quite recently. And they were very, very bitter. And Leia or Legora turned out to be the lesson for them that perhaps domain expertise is not what you need to succeed. I think that you need a willingness to learn about the market, which we did very, very early by, you know, exposing ourselves and spending lots of time with lawyers, like as much as we possibly could.

28:54Yeah. But I don't think you need domain expertise. Probably, you know, dependent on the market that you're going after. Like, maybe if you're building in quantum computing or in fusion, that's a good idea. But legal was easy enough for us to pick up as we went along.

29:14I spoke to some founders yesterday, and we spoke about sort of like the next categories where the LLMs are not sufficiently good yet, but they will be. and it made me think of what you just said when you were toying around with Bard in the early days.

29:29What gave you the confidence to build a legal AI product on a model that wasn't good enough? It was good, but not good enough. And there's many other founders probably in this audience who are thinking about the same problem, but in a different domain, maybe like, I don't know, mechanical design or some other part of, somewhere where the models are just not good enough. So I think the sort of tribal knowledge when we got started was that you have to fine tune a model. In 2023, 2022, that was really like the name of the game. I even remember, I think it was Bloomberg, who spent millions and millions and millions of dollars building a Bloomberg law model.

30:10Our view was partly because we didn't have enough money and partly because we truly believed that to be right. the models will keep improving. I'm sure Sam is going to come up on stage and say that later today. And so by just betting that the models will keep improving and what you should be focused on is how can you deliver the value that the models generate to your market, that was the crux for us. Even with the first generation of ChatGPT, that was unusable in law. partly because the model wasn't good enough, but partly because it actually didn't support private conversations, European data hosting.

30:55I remember the first sales I ever did, we basically said, we are like ChatGPT, but we are compliant in Europe. That was the pitch. That was not a very strong pitch. And clearly ChatGPT would figure out how to do that later on. But at the time, it was good enough. And so I think we recognize that you don't have to build for the world over here. You need to build for the world today and maybe one step ahead. And it's kind of like this ladder where you should maximize the opportunity now, make sure that you get really good relationships with your customers, and so that you can also have that conversation with them.

31:35Because if everybody's betting on this exponential uplift in model capability, the Legora platform will continue delivering more and more value. I think that we have built 1 % of all the software that we will build over the company's history. And probably the product will look very different from what it does today a few years down the line. Yeah. A lot of news on models this week, or last two weeks. It's going to be like a great episode for whoever makes the documentary. I'm hoping that someone is making a documentary right now about everything that's going on. I'm not sure if someone is, but I hope they are.

32:16Open weight small is very much the topic right now. And when we spoke on stage a couple of months ago, you talked about that you're not attached to one specific model. You can work with many different models. Have you updated your view based on this week? But how do you think about, I'm sure there was a moment a year and a half ago when it seemed like there was just one or two models that were really sufficient to do the power of Ligora, and now there seems like a lot more. Yes, which I think will be great. And I mean, clearly there will be applications of different models in different use cases.

32:55And so if you take customer support, you're optimizing for speed of turnaround, latency to the customer, and cost on solving a particular ticket. I think Finn used to charge like$1 per solved customer ticket. But in law, you actually want the most amount of intelligence quite often because the fraction of a token spend or software spend compared to human expertise applied to the problem is really tiny. If you're solving complex litigation, you're going to want to throw the most brain that you can on that problem. And so we have really sort of two different camps. Like one group of our users are asking for the ability to loop really complex models just to work on problems for a long period of time, like racking up big LLM costs.