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Legal technology company Luminance has raised $40 million in new investor funding to grow its presence in the United States, capitalizing on a wave of investor interest in artificial intelligence.
The company told CNBC it has raised new capital in a Series B funding round led by U.S. venture fund March Capital. National Grid Partners, the venture capital arm of National Grid, and law firm Slaughter and May also invested in the round.
“We have received a lot of interest from a lot of VCs,” Eleonore Lightbody, CEO of Luminance, told CNBC on Tuesday.
The fact that artificial intelligence is now a “hot topic” certainly helped, Lightbody said, but added that Luminance had the metrics – such as its annual sales performance – to match the interest it got from investors.
Lightbody said companies are investing in AI tools like those from Luminance to maintain a competitive advantage and to reduce costs.
“Everyone wants to stay competitive,” he told CNBC. “We want to create opportunities they didn’t know existed.”
Luminance said its annual recurring revenue has increased about fivefold over the past two years, but declined to share the data with CNBC. The company counts the likes of Koch Industries, Hitachi, Yokogawa, Liberty Mutual, LG Chem and BBC Studios among its clients.
Legal business
Founded in September 2015, Luminance develops machine learning models that help lawyers automate contract reviews and reduce the time it takes to sign contracts. The company was founded by a combination of lawyers, mathematicians and mergers and acquisitions experts from the University of Cambridge.
Luminance is one of many companies attracting investor interest thanks to the hype surrounding artificial intelligence. Companies like OpenAI, Anthropic, Cohere and Mistral have raised billions of dollars from venture capitalists, along with interest from big tech companies like Microsoft and Amazon.
Microsoft has invested about $10 billion in OpenAI, and the company recently completed a secondary stock sale led by Thrive Capital, valuing it at $80 billion.
Luminance declined to comment on its valuation, but Lightbody said it commanded a “significant premium” over the $100 million valuation the company secured in 2018, when it last raised external money.
Investors have been betting on industry-specific AI companies lately, sometimes in favor of companies pursuing a form of “general” AI that can perform any task imaginable.
In an industry like legal, where a high level of attention needs to be paid to a company’s specific legal controls and decision-making, Lightbody said general-purpose AI solutions like ChatGPT are not the answer.
“We will start to see a lot more AI-focused companies come out,” Lightbody said. “This is exactly what we are doing.”
He noted that large, domain-specific language models are “absolutely critical” in the legal field.
“It’s important because, unlike generative AI, where it doesn’t matter if the answer is wrong because the AI’s main purpose is to provide an answer, when it comes to legal issues that simply can’t happen.”
Generative AI tools like ChatGPT have become known for producing “hallucinations,” responses that contain false information about certain historical events, in an attempt to guess the answer to a user’s question.
Luminance plans to invest aggressively to expand its presence in the United States, in an effort that Lightbody said will include hiring new executives locally, as well as exploring new offices.
Autopilot
Last year the company launched an AI tool that can negotiate a contract completely autonomously without any human involvement. Luminance says the tool, dubbed Autopilot, handles day-to-day contract negotiations and especially the tedious manual work of reviewing non-disclosure agreements (NDAs).
Luminance developed the AI based on its proprietary large language model (LLM). LLMs are a type of artificial intelligence algorithm that can achieve general-purpose language processing and generation.
The company is backed by Invoke Capital, the venture capital arm owned by controversial British entrepreneur Mike Lynch.
Lynch has been accused of artificially inflating the value of his software company Autonomy in favor of Hewlett Packard Enterprise, which is suing him over alleged billions of dollars in losses.
He has been charged by the U.S. Department of Justice with 14 counts of wire fraud, one count of securities fraud and one count of conspiracy to commit wire fraud. Lynch denies the allegations and says Autonomy underperformed under HPE due to mismanagement by its new owner.
Lightbody said the US proceedings against Lynch do not create uncertainty for Luminance and that the businessman has no day-to-day involvement in running the company.