VCs see a rich opportunity in tools to manage the contract lifecycle. Two years ago, startups developing software that helps draft, manage and review contracts raised over $70 million in venture equity. While a relatively small space compared to, say, the market for customer relationship management ($44.9 billion in 2023), contract lifecycle management, or CLM, is growing at a rapid clip. Gartner predicts that legal tech spending -- which includes CLM -- will increase threefold by 2025.
SpotDraft is one of a growing number of CLM vendors trying to stand out in the increasingly crowded field. Launched in 2017 by Shashank Bijapur, Madhav Bhagat and Rohith Salim, the company today closed a $26 million Series A funding round led by Premji Invest, which also had participation from Prosus Ventures, 021 Capital, Arkam Ventures, Riverwalk Fund and 100x Entrepreneur Fund.
With $30.5 million in the bank, SpotDraft says that it'll invest in product development and "aggressive growth" in North America, aiming to double its 170-person headcount within the next 18 months.
"The capital we raised allows us to capture the market opportunity as it evolves over the next several years," Bijapur, who serves as CEO, told TechCrunch in an email interview. "We believe that we’re stepping into a new era of legal technology and SpotDraft is going to be at the forefront of building the next generation of legal innovation that saves time and money."
Bijapur says that the idea for SpotDraft came to him while he was an associate at Bengaluru-based law firm White & Case. While there, he saw legal teams struggle with high volumes of contracts and sought to automate some of the more repetitive workflows.
After teaming up with friends Rohith Salim and Madhav Bhagat, two Carnegie Mellon computer engineers, Bijapur co-founded NYC-headquartered SpotDraft. (The trio met at a Diwali party in New York and moved back to India in 2016.)
SpotDraft's management dashboard. Image Credits: SpotDraft
"We are building an AI engine personalized for legal teams to ensure that a lot of the repetitive work related to contract review and negotiations happen faster than ever," Bijapur said. "Closing contracts faster is paramount to the organization moving faster. SpotDraft aims to provide deep insights into the overall contracting workflow to help the various teams identify bottlenecks and take steps to move faster."
At a high level, SpotDraft -- which integrates with customer relationship management software such as Salesforce and HubSpot -- leverages AI to extract key details and clauses from contracts as well as classify the contracts in question. Self-serve contract templates allow organizations to set up templates with compliance guardrails and enable teams, including legal, sales and HR teams, to create and send out contracts in a few clicks.
On the AI side, SpotDraft's platform can provide a summary of tracked contract changes received, search across contracts and generate follow-up tasks on contract execution. Bijapur claims that SpotDraft's AI has processed over 1 million contracts to date -- data that the company's using (anonymously) to improve its algorithms.
Through SpotDraft's automated approvals system, users can create custom workflows to trigger and automate required approvals based on conditions such as jurisdiction, deal value and entity. A unified task center shows upcoming deadlines, renewal reminders and individual and team jobs, helping teams stay organized -- at least in theory.
"Data and technical decision makers love the ability to get insights into contract data just as easily as they are used to getting insights into CRM and ERP data using our open APIs," Bijapur added. "We also support embedding contract execution into any app as part of the onboarding flow, which removes what is usually the only manual step in an otherwise automated process of onboarding vendors and customers alike."
SpotDraft's platform is holistic, to be sure. But -- as alluded to earlier -- the CLM segment is growing extremely competitive. SpotDraft competes for customers against vendors like LinkSquares, which raised $100 million last April, and Filevine which nabbed $108 million the same month as LinkSquares' mammoth funding round.
Bijapur says that business is in good shape, though, claiming that revenue tripled this year. (He credits SpotDraft's competitive pricing with recent client wins: Airbnb, Notion, Panasonic, Strava and Chargebee.) SpotDraft currently has "hundreds of customers" and tens of thousands of daily active users, Bijapur added.
With 65% of its revenue coming from the U.S., the legaltech startup intends to expand its U.S. customer base by bolstering its go-to-market strategy in the country. Bijapur shared that the remaining 35% of revenue is generated from other regions, with 20% from India and 15% from markets such as Singapore, the U.K., and the Middle East.
"Not all companies out there require a full-fledged CLM yet. However, contracts and collaboration plus transparency between legal and other departments is still a problem at several of these companies. One of our goals for this year is to provide value to this segment of the market as well," Bijapur said. "We grew really well as a business during the pandemic and are continuing to hit all our revenue targets despite the current macroeconomic headwinds. We are extremely bullish about our growth opportunities in the coming years and are very well-capitalized to capture these opportunities."