Neural Notes: The Australian legaltech going after the billable hour

Welcome back to Neural Notes, a weekly column where I look at some of the most interesting (and sometimes weird) Australian AI news of the week. In this edition: Legaltech startup Deeligence is cutting down on the grind of due diligence and reshaping traditional legal fees.

Streamlining due dilligence in the legal space

Deeligence recently secured $1 million in funding, with participation from the Alice Anderson Fund.

The Melbourne-based startup has positioned itself as a notable disruptor for legal tech by targeting the often tedious and pricey due diligence space.

Both its co-founders — Elena Tsalanidis and Justin Hansky — have legal backgrounds. Tsalanidis is a former human rights litigation lawyer who also worked for a legal tech startup.

Hansky is a former mergers and acquisitions lawyer that has first hand experience when it comes to legal due diligence.

“We are both obsessed with legal process,” Tsalanidis, Deeligence co-founder and COO, said to SmartCompany.

According to Tsalanidis, Deeligence wants to help lawyers improve their workflow processes through automation.

“There’s lots of space in the law, where things have just been done a certain way for a really long time,” Tsalanidis said.

Of course, there’s already a lot of competition in the legal tech space, including those implementing AI solutions. This doesn’t worry Tsalanidis. Instead, it drives the company to have the strongest possible offering.

“That bar is incredibly high these days, do we had to put lots of work into building something safe, secure and that has a great interface. All these sorts of things ensure that it’s used and doesn’t sit on the shelf for lawyers,” Tsalanidis said.

Tsalanidis also points out that AI has drastically changed the landscape, with LLMs eclipsing traditional machine learning tools. For Deeligence, it combines AI power with lived experience.

“Having the lens of being a legal process expert, having practiced and done due diligence before — coupled with having worked in legal tech scale-ups and helping lawyers solve their problems, means that our platform is actually super differentiated,” Tsalanidis said.

“Deeligence helps a lawyer go from a data room of documents to a client ready report. And we help them along that entire trajectory of that process.”

In practice, what Deeligence says its offering is streamlining and efficiency.

“A lawyer can spend two hours reviewing a really voluminous contract, trying to get to the bottom of maybe the two things that they need to tell their client about,” Tsalanidis said.

“With AI, we can find those things in seconds. So it really has such a power to revolutionise how this work is done.”

Deeligence takes aim at the billable hour format

The efficiencies mean Deeligence is also challenging another deeply rooted norm for legal firms — billable hours. Instead, it promotes a fixed fee model that claims to not negatively impact a businesses’ bottom line.

“There are areas of law where clients don’t view armies of juniors being thrown on their work to be good value for money,” Tsalanidis said.

“If firms can use technology and charge a lower fee to clients, while making a better margin on the work — that means they can win more work by charging less and make more money by enduring their internal processes are working effectively.

“So it’s a pretty strong business case.”

Tsalanidis affirms certain types of legal work may always need a ‘time and materials’ model, but many firms are now looking for value-based pricing.

“In those instances, we want to ensure that firms can meet their fixed fee needs and not necessarily think about work in a billable hour format,” Tsalanidis said.

Looking forward, Deeligence plans on using part of the $1 million raise to grow its offering and add more features.

However, the business has yet to reveal any potential plans to expand the business into other territories.

“We’re really just scratching the surface of what’s achievable in the next 12 to 18 months. And we truly want to push to the edge of what’s possible,” Tsalanidis said.

Tsalanidis also reaffirmed the enduring role of lawyers in the age of AI, stressing the importance of human oversight and the context of client needs.

“I’m still firmly of the view that there’s a place for lawyers. They’ve got to ensure that what’s coming out of these AI tools is checked and verified and what they share with their clients has gone through their lens,” Tsalanidis said.

“I don’t think that’s changing anytime soon, it will just be that the way that law is practiced is going to shift a little.”

More AI news this week

OpenAI is building a media manager so content owners can opt out of their work being used to train AI.
DocuSign is acquiring AI agreement management software platform Lexion.
Microsoft and OpenAI have launched a $3 million fund to go after US election deep fakes.
TikTok is going to automatically label AI-generated posts.
This year’s Met Gala was lousy with deep fakes.
The Rabbit R1 was underdeveloped at launch and nobody is surprised.