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Venture funding in legal tech is exploding, but it may not be "crazy enough" yet, Jay Madheswaran, CEO and co-founder of Eve, tells Axios Pro.

Why it matters: Legal tech venture funding this year has reached $3.7 billion, soaring above last year's $2.8 billion total, per PitchBook.

Driving the news: Eve, which offers AI tools to plaintiff firms, last month raised a $103 million Series B led by Spark Capital at more than a $1 billion valuation. And they're not the only one making headlines.

How it works: Eve's platform helps plaintiff law firms evaluate new cases, draft documents and demand letters, send and respond to discovery requests and more.

The company has more than 500 law firm customers, up from 13 last year.

This interview has been edited for length and clarity.

The legal industry has typically been slow to adopt technology. Why has that seemingly changed with AI?

"There was just nothing useful before. You probably could be just about as productive with a good process with the cell phone and the email account, as you were with all the technology."

What has led to the massive venture investment in the space? What do they see?

"The opportunity investors are seeing in legal services is a $1 trillion market globally, if you look at salary spend on it, and software spend on it. If you added it up, it's a shockingly large amount.  

In terms of valuation potential, that is massive. As far as VCs are concerned, that's an infinitely bigger market than the software revolution of the past. So that's kind of the opportunity, and how they're viewing it." 

"This year, we're getting to the point where people like us are scaling, are growing in revenues pretty rapidly, are adding, customers are renewing, and this attracts growth capital. 

So I actually anticipate next year to be even bigger, as crazy as it sounds.

There will probably be reckoning on, like, individual companies, but on the whole, I see the legal AI market to be pretty healthy. I generally think it's not (too much). It hasn't gone crazy enough yet."

"We actually got approached. It's one of the nice things about growing quickly. It's hard to ignore. 

If a VC is paying attention, they hear about it from their own networks."

Why did you choose Spark Capital to lead the round?

"All these investors we picked in the early stage, Lightspeed, Menlo, they've all put immense amounts of capital behind these large foundational players, and that did give us early access to navigate that market. 

So we were able to architect ourselves in a way we directly benefit from their growth. The next thing here is organization structure. Being the best place to work, really building a talent pool that we're proud of. This is where Spark comes in."

There also has been some M&A dealmaking in the sector, even with startups buying startups. Will we see more?

"I would assume it'll actually pick up. The successful companies are going to get the new capital, and the not-so-successful companies are going to have to find exits."

We haven't seen many IPOs come from the legal tech space. Will that change?

"I would say we're a few years away, but not too far away. Typically speaking, these days, you have to be at $1 billion in revenue to IPO, and we're probably a few years away from that.

The only company that's kind of IPO'd here is Disco, in the e-discovery space. And e-discovery still has enough money to be made. I expect someone there to probably make another stab at IPOing. 

I do expect we're going to start seeing (more). At least I hope. Otherwise, all this funding is questionable."

Eve founder on legal tech's funding explosion

Eve raised a $103 million Series B led by Spark Capital.

Photo illustration of Jayanth Madheswaran surrounded by abstract shapes. 

Photo illustration: Axios Visuals. Photo: Courtesy of Eve

Venture funding in legal tech is exploding, but it may not be &quot;crazy enough&quot; yet, Jay Madheswaran, CEO and co-founder of Eve, tells Axios Pro.Why it matters: Legal tech venture funding this year has reached $3.7 billion, soaring above last year&#x27;s $2.8 billion total, per PitchBook.

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Eve founder on legal tech's funding explosion

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