June 2, 2023: An honest take on the future of Generative AI

What is Spellbook?

Spellbook is an AI Copilot for Lawyers. Using generative AI, it automates aspects of contract drafting & review. It works in Microsoft Word, the application lawyers spend most of their time in!

What was the insight/inspiration that led you to launch it?

I'm a software engineer by trade, and I had an amazing experience with GitHub Copilot, which helps programmers write code using the same technology. The parallel to contract drafting & review seemed uncanny, so we built Github Copilot for lawyers! One of the first times I used GitHub Copilot, it output 20 lines of code that I thought was garbage. I was skeptical. Then 10 minutes later I realized that Copilot was anticipating a problem that I wasn't. That was the first time I felt outsmarted by AI. It was when I knew this technology would change how programmers and other professionals work forever.

How has it been received by the market?

Unbelievably well! We have 5x more demand than we can handle! We are onboarding 35 law firms and legal departments this week! Shortly we'll be onboarding 100/week. We are rapidly scaling our team to digest. I guess this is what product-market fit feels like! Very tiring and very fun. I think the product is being received well because of what James Currier talks about in Find the Fast Moving Water:

"You’ll notice your target user physically leaning forward and their pupils will open up. Oxytocin and dopamine surge and can help the physical reaction. It happened to me when I was in the back of a yellow taxi in San Francisco in 2010. I leaned forward to look at what he was looking at in the front seat next to him and saw his smartphone. On the screen, I saw a map, a picture of a car, and a dot representing a potential passenger. It was Cabulous, the precursor to Lyft and Uber. Chemicals went off in my brain. I can still remember the exact feeling." - James Currier

Lawyers are smart. They don't need to be told: "What problem we are solving". The moment they see Spellbook in action, they understand that their profession is about to change forever, the same way I did when I tried GitHub Copilot. It sells itself.

How did your work at Rally lead to this product launch?

Our mission has been to reduce the friction of business legal transactions with technology. Every day countless businesses are formed, employees are hired, sales are made, IP is licensed, and funds are raised. What if all of these things happened 10x easier, 10x faster? It would improve the planet's productivity dramatically. We spent 4 years working closely with lawyers and the businesses they work with to understand their workflows, their pains, and their desires. We built a lot of automation tooling. All of this insight went into Spellbook.

How did you know you were ready to found a company?

It's always been in my blood somehow! I tried a lot of terrible business ideas before I had any good ones, like selling MS Paint drawings on floppy disks.

How did you meet your founders/know they were the right people to start a company with?

I'm super lucky to have met Matt & Daniel. Matt's an engineer & designer and Dan's a lawyer. Those were the two skill sets I was looking for, and they were looking for an experienced developer. We brute-forced meeting each other through networking (our first angel actually ended up introducing us), and then we worked together for a trial period for a couple of months before cementing things! It's worked out well.

What has been the hardest thing on your journey so far?

The grind. Founding a company requires an intense grind, there is no way around it. I love what Dalton Caldwell from YC says here:

"Before product market fit, the job of the co-founders is to do the shittiest, worst, low-status work you can think of. It's the opposite of most people's mental model of what a CEO should do." - Dalton Caldwell

The reason for this is that you need to constantly Do Things That Don't Scale to find product-market fit. We probably ran 200+ different experiments before hitting true PM-fit. It's very hard to delegate all the grunt work involved. It's hard to train in sales reps when the playbook changes every week. But after accepting the grind (rather than running from it), I've really come to enjoy it.

What has been the most pleasant surprise?

There are a lot of poised storytellers in business that are good at raising money and looking successful. I was pleasantly surprised to learn that a lot of that is smoke and mirrors, and the bar for real execution in startups is not that high. If your team can ship daily, run new experiments weekly, navigate pivots and mentally commit to a 10-year journey—the odds of success are surprisingly good.

What is your super strength?

High tolerance for chaos, mess, and ambiguity. Building new things is messy! Creative flow can't really be controlled, if you try to control it too much, you kill it. I think we avoid the unstructured game of creation by constantly coming up with structured things to do instead. Read another book. Clean the house. Set up some new tooling. Make a new spreadsheet. These things guarantee satisfaction. But creative magic doesn't happen until you are really comfortable diving into the unstructured. I wrote about this in How to Finally Make Something.

What is your proudest accomplishment outside of Rally?

My proudest moment is the first time I completed and shipped a complex creative project through my own initiative, which was a crappy album of electronic music, over a decade ago. It took me 10 years of banging my head on the wall to figure out How to Finally Make Something! I took those lessons to programming, startups, and everything else I've worked on since. It was a really important moment in my life.

What advice do you wish you had been given prior to launching Rally?

Founders really need to demonstrate conviction in their beliefs to succeed. No matter how great your team, investors & advisors are, you are going to have the most context. If you bend like a wet napkin and don't demonstrate conviction, it makes things harder for everyone. If you don't fill the "conviction void", someone with less context (rightfully) will.

"To believe your own thought, to believe that what is true for you in your private heart is true for all, — that is genius." - Emerson

What do you think the future of Generative AI is in the short term (e.g. a year)? Long-term (5 to 10 years)?

In one year, I think the biggest advancement we will see are action-oriented models (which I call "ActGPT"), which are oriented not just around language, but around actually taking actions in the world, like updating spreadsheets, pushing data to APIs, etc. I think we will have AI team members in our Slack channel within 12 months.

In 10 years: Terrifyingly hard to predict! I think our lives will become a lot more illegible. Every company will start to look more like a high-frequency trading firm. New product features will be mocked up by AI the second customer feedback comes in. AI will generate new ads overnight as a new trend emerges.

Other Canadian Companies doing interesting things with Generative AI:

• Durable - an AI-powered platform for solo business owners to assist with everything from website creation to managing finances, and everything in between

• WOMBO.ai - unleashing creativity through the power of AI

Scott joined the TechTO team on our recent episode of Quick Takes to chat about their recent raise and more on the story behind Spellbook

What is the news?

Toronto and Saint John's based Rally Legal announced that it was changing its name to Spellbook and that it had raised $10.9m

What does Spellbook do?

Spellbook enables legal practitioners to draft and review contracts up to four times faster by using LLMs and AI.

Any notable investors?

Besides N49P, several new investors including Moxxie Ventures who led the round, Thomson Reuters Ventures, the corporate venture capital arm of Thomson Reuters a company whose products are used by 98% of legal firms in North America, Inovia Capital, and The LegalTech Fund.

Why was Spellbook able to raise such a round?

Several reasons:

1. Traction: 600 legal teams are using the software and the company has a waiting list of 53,000 more potential customers.

2. Proven usage and value add for customers: Spellbook gives lawyers more time to focus on thoughtful work and avoid drudgery, all while reducing errors and increasing accuracy. Lawyers use Spellbook an average of 280 times per month and say that it saves them up to 30% of their time.

3. Massive market: There are over 20m lawyers at $180 per month (the current cost per user represents a $35b+ market.

4. Generative AI: This is in a buzzy part of the market so there is a demand to invest but Spellbook has shown that the technology is producing results.

Isn't Generative AI all hype?

Yes, many customers are going to try out generative AI solutions to see what the hype is about but companies that can deliver value like Spellbook, are going to retain those customers. The hype will let companies scale incredibly fast or die faster.

How does a company like Spellbook build a moat?

Spellbook has been building products for the legal industry for several years which means they have unique insights into the flow of work, pain points, and data from the legal industry. This allowed them to launch the first generative AI solutions for lawyers but more importantly, the AI is part of an overall solution that is built with a deep understanding of legal practitioner needs and creates data to uniquely train the Spellbook model and individual customer flows.

Takeaway for the community?

Generative AI is receiving a lot of attention and excitement, although some of it may be exaggerated. However, it is increasingly evident that this technology has reached a point where it can revolutionize how companies address customer issues. The rapid dissemination of the internet and the media's eagerness to discuss technology are accelerating the hype cycle in comparison to previous generations. As a result, every business is seeking an AI solution. Companies that can genuinely offer effective solutions will attract customers and experience rapid growth, while those that cannot adapt may fail.

To succeed in this competitive landscape, it is crucial to thoroughly understand your customers and develop a solution that utilizes data to effectively solve their problems. Additionally, the solution should be tailored to their specific needs. Creating a competitive advantage, such as through exclusive access to valuable data or a strong brand, is also important. Lastly, executing your strategies more effectively than your competitors is essential.

It's important to note that while some winners may emerge early on, the full potential of this technology will take years to unfold, and new winners will continue to emerge over time.

Check out the full episode for more takeaways, insights, and the personal perspective from Spellbook Founder Scott Stevenson.

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Check out the interesting content, events, and happenings for the community here:

• TechTO: Together | June 5, 2023: Learn from the top Founders and creators in Canadian Tech. Whatever your goals are, this event can connect you with like-minded individuals that will help you level up and reach your goals.

• TechTO x OneEleven present: The Summer Social Series | June 26, 2023: A chance to kick off summer with hundreds of founders, technologists, and like-minded individuals (over yummy food and drinks!) More activations and announcements coming soon!

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