Canadian legal software provider Clio has pounced on its second major acquisition of the year, buying an artificial intelligence startup called vLex LLC for $1 billion.
The deal will help Clio, officially known as Themis Solutions Inc., to enhance its legal management software with vLex’s AI tool, which prevents lawyers from accidentally citing fake court rulings, while doubling its potential market, the company said.
Clio sells software that helps lawyers manage their legal practices, automating processes such as accounting, document management and client intake. It has built a cloud-based “operating system for law firms” that also handles case file management, bookkeeping, billing, scheduling and advertising. It came to attention last July when it announced it had raised $900 million in a Series F round led by New Enterprise Associates, valuing it at a cool $3 billion.
Founded in 2008, Clio was for a long time primarily focused on serving small- and medium-sized law firms, but in March it bought the U.K.-based startup Sliced Bread Ltd., which sells legal software to much larger, global law firms, doubling its market potential. It’s thought that more than 200,000 lawyers globally now use Clio’s platform.
By buying vLex, Clio will obtain that startup’s AI assistant Vincent, which is built on a rich database of legal documents. Vincent promises to generate legal citations that are free of so-called “hallucinations,” Clio Chief Executive Jack Newton (pictured) told The Globe and Mail in an interview. He explained that hallucinations have caused lots of embarrassment for lawyers, leading them to file documents in court citing fictional cases conjured up by AI.
According to Newton, Vincent is an AI agent that can carry out legal tasks autonomously once it has been prompted to achieve a specific goal. Lawyers simply oversee its work at key steps, rather than guide it through every prompt.
According to Newton, the acquisition of vLex will be “significantly accretive” to his company’s valuation. It’s thought that Clio was able to beat at least one other interested bidder, the San Francisco-based legal software firm Counsel AI Corp., which does business as Harvey.
Clio is now in a much better position to take on legal software industry heavyweights such as Thomson Reuters Corp. and LexisNexis, which have both made significant investments in AI themselves in recent years and created tools that are similar to Vincent.
“Vincent enables fully hallucination-free AI where citations are grounded in case law and lawyers can rest easy that what it produces is trustworthy,” Newton told The Globe and Mail.
In a research note, CIBC Capital Markets analyst Scott Fletcher Clio’s acquisition will “alter the competitive landscape” for Thomson Reuters, which will “need to continuously improve its product to keep up with peers.”
Newton added that the acquisition also represents a statement about Canada’s ambitions to become a major player in the global technology industry. “It’s extremely exciting to see a Canadian company doing billion-dollar acquisitions rather than being acquired for $1 billion,” he said.
Photo: Clio
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