First $5,000 for LegalRobot
Intro. This was our 10th interview and I was very skeptical. To be honest, I even forgot about it, but Dan emailed me just a few hours before the appointment. It was a Saturday morning at 10am. I told Dan that previous interviews were not successful and he had to be ready for a negative answer. He said no problem, at least some feedback would be helpful. With that far from optimistic mood, we started.
Product. LegalRobot is a hosted software solution for parsing legal documents and finding abnormalities within them. That's how I understood it, at least. You can upload a PDF contract and in a few seconds get a summary of what looks suspicious. For example, "clause 8.3 is too much against the buyer." The software contains a machine learning engine that basically compares a huge amount of similar documents with the one you uploaded. The smarter the engine, the more accurate the answers.
Market. The product is already on the market, if Dan was telling the truth. There are a few beta-users already uploading some documents there and trying to use the system. Moreover, there are over 300 subscribers who expressed their interest in the system. I doubt that even 10% of them will become real clients, but it's very important to see that Dan is focused on bringing his product to users.
Competition. There are a few companies that are technically doing the exact same thing. However, according to Dan, they are all focused on lawyers. Their target users are attorneys, while LegalRobot is for those who want to do those verifications without paying legal fees. I truly believe that taking lawyers out of the market as much as possible, and replacing them with computer systems, is definitely the right strategy.
Team. Dan is a CEO, an architect and a programmer. I was glad to see that. In general, I believe in startups managed and founded by technical people, who are real authors of their products. There are a few freelancers helping him. That's exactly the type of startup team I'm comfortable investing in.
Cash. Dan put his own money into this and someone else also added $25,000 a few months ago. His burn rate is around $3,000 per month, which sounds very reasonable. He basically spends most of this money paying his own bills. That's a perfect tactic for a young startup, I believe. He is planning to raise seed or series A money in a few months and needs cash to survive until then. He asked for $20,000 but I offered him $5,000 for the next calendar month. If things go well, the product will be ready for a demo (it wasn't during the interview) and beta-users will produce some traction. He may come back to us again and we'll invest another portion of cash to cover the next calendar month.
On Monday, Dan emailed me the contract, we signed it electronically, and I've sent him a wire transfer for $5,000. We're partners!
2016-02-20 00:00:00 +0000