AXDRAFT CEO Yuriy Zaremba: AXDRAFT Appeared as a Solution to Ease My Own Pain
As we tread into the future world of digital entertainment, digital friends and digital currencies, it becomes ever more obvious that the inherently conservative legal industry has to become digital as well. It’s been more than a decade since legal tech services became popular tools for e-discovery and automating other lawyers’ and paralegals routine tasks.
Today legal tech is a hyped topic among lawyers, tech enthusiasts, and entrepreneurs willing to ease the job for their legal departments. However, as any other industry, legal tech companies are facing their own complications in this very competitive and ever changing market.
In order to get a taste of what is it like to manage a legal tech project and some first-hand knowledge about the industry, lawless.tech reached out to Yuriy Zaremba, CEO of an automated legal document drafting service AXDRAFT.
lawless.tech: Please, tell us about yourself and your legal background. Why did you decide to quit a law firm and set up a startup?
Yuriy Zaremba: I have graduated from the law faculty of Ivan Franko Lviv National University and was a lawyer for almost 7 years. More than 5 years of my legal practice I have spent at Avellum, top Ukrainian law firm. In 2015, 2016 and 2017 I was recognized as one of the recommended lawyers in Ukraine by Legal 500 and Chambers Europe, most reputable international legal directories. As you can see, I was pretty successful as a lawyer and enjoyed the work a lot.
The decision to quit legal practice and start a startup was not easy and was based most of all on the sense of responsibility. I had this great idea to automate routine legal work, my brother showed me that it can be done and I just could not allow myself to let it rot and die, because I was not ready to commit to it 100%. So, I made a leap of faith, stood up to the challenge and started AXDRAFT to relieve lawyers from routine work and advance commoditization of legal services. I have never regretted the decisions ever since. Startup life is very intense, but every day you learn new things and face new challenges. I haven’t felt that much drive in legal practice in a while.
lawless.tech: How did you come up with the idea of AXDRAFT? Were you inspired by something, or it’s your original idea?
Yuriy Zaremba: As in the best case startup founder scenario, AXDRAFT appeared as a solution to ease my own pain. As a lawyer, I hated looking for necessary clauses in my previous work products, copy/pasting them to compile a new contract from pieces of old ones and proofreading them for 100 times afterwards looking for typos, mistakes and traces of previous work products. There had to be a better way to do it.
With that request I came to my brother Oleg and we have built a very basic prototype. It was love at first sight. When I got a 10-page document in 2 minutes by clicking one button I thought “This is MAGIC!” Since then the button to create a document is called “MAGIC” in AXDRAFT. We continued working on AXDRAFT in our free time, adding new functions, testing it on different documents. When we got it to the point, when it looked “marketable”, we decided to look if there were any similar solutions on the market, and, to our surprise, found such solutions in the US, UK, the Russian Federation and Australia. Frankly, it was a bit disappointing at first, since we thought we were the first and only. On the second thought, I realized that competition proves that there is a market for this kind of product and the fact that not everyone knows about these competitors, means that no one has figured out how to do document automation that people will actually use and love. Therefore, there is a lot to fight for. When Google started, there were at least 5 search engines, who thought that search engines are already a thing of the past. Do you know the names of these 5 search engines? I don’t. This is what we want to achieve in document automation.
Shortly, AXDRAFT aims to provide a service for automated drafting of legal documents. To learn more, we asked Mr. Zaremba about the project’s nuts and bolts.
lawless.tech: Which companies use AXDRAFT the most? Is it just a tool for lawyers to speed up their work, or it can be used by people without any legal background?
Yuriy Zaremba: AXDRAFT is very data driven, so I can tell you exactly. Our top-5 heaviest users are: Law firm “Totum”, MHP, Avellum, ELEKS and Carlsberg. As you can see, 3 out of 5 are not law firms – they are corporations and we are currently shifting our focus more and more to this customer segment.
We allow legal departments of corporations to build error-free algorithm to create legal documents 3 times faster, so they can minimize routine tasks and even easily delegate creation of such standardized documents to non-legal staff without creating legal risks. We want to create a world, where lawyers focus only on high-end legal work, while non-lawyers can create basic legal documents with the help of AXDRAFT and with no risk for the company.
Law firms get a different value from AXDRAFT. In the market, where clients are pushing down on fees, you need to optimize internal processes to maintain your margins and this is what we help them to do. For law firms AXDRAFT also becomes a very sophisticated knowledge management database.
lawless.tech: AXDRAFT uses the specific markup language to make the contacts ready to be processed by the platform. Nonetheless, as of now, you are doing all work by your own hands using Microsoft Word. How long does it take to handle one agreement? How do you plan to automate this process?
Yuriy Zaremba: We are automating this process every day to reduce the time it takes to automate one template. When we started in February 2017, the average automation time for one document was around 10 hours. Now it is 4 hours and going down. Eventually we want to create a system, where you will be able to drag-and-drop document into AXDRAFT and get an automated template instantly. To achieve that we need to have much more data, so this is a 1-2 years perspective, but we are constantly working on optimizing our internal processes. AXDRAFT checks automated documents for compliance with automation rules, which makes it very easy to find any possible mistakes. We also use special software to simplify marking-up itself.
lawless.tech: Law is quite complicated field of knowledge. The situation becomes even more difficult as each country has its own laws, best practices for drafting legal agreements and so on. Nevertheless, you’ve already started to work on the Polish and British markets. How did you achieve this? Which market will be the next?
Yuriy Zaremba: AXDRAFT is law-agnostic. We don’t offer our own templates, we offer automation services. We automate client’s templates according to client’s requirements. Moreover, the software does not have any language limitations (bilingual, trilingual documents, we have even tried to automate documents in Greek and Japanese and it always works). Therefore, we can roll-out really fast in any country.
lawless.tech: Will the automatization of classical written contracts creation become a trend? What are the main “industries” on the legal tech market?
Yuriy Zaremba: Well, I think that automation of classical written contracts is a trend already. Market researches show that lawyers think about purchasing legal tech in the following top-3 categories: (1) e-discovery, (2) cyber security, and (3) contract and case management. These are the main industries of the legal tech market in my view. If we are talking about why automate written contracts, if you can have smart contracts, I think that the answer is twofold: (1) smart contracts have limited application for now, (2) lawyers are very conservative by nature and believe me when I say that even automated “classical” contract, which gives you a Word document as the end product, is a tough sell.
Moreover, if you use legal tech to automate legal services for consumers, the main question is: who is responsible for the mistake? People are used to passing liability to other people. You can shift liability to a lawyer, if things go sideways, but you rarely can shift liability to a DIY bot of a web-platform providing automated legal services. I think this is the biggest challenge in B2C legal tech and this is one of the main reasons, why we chose B2B for AXDRAFT.
Legal Tech Industry
The industry in which AXDRAFT is working is highly competitive. It also very changeable, considering lawyers’ conservatism. We took our chance and asked Yuriy to share his view of the industry from within.
lawless.tech: Legal tech has become the new black among lawyers’ community. It’s definitely trending. How do you think, is it just yet another hype, or it’s really something bigger than that, and legal tech may eventually evolve to the big independent industry just like fintech?
Yuriy Zaremba: The fact that legal tech is so popular is definitely a hype. It is fashionable now to be in legal tech or to use it. I heard many stories when law firms even in the UK and the US bought expensive software, did some marketing on this basis and never actually used it. Hype is very handy for the legal tech startup founders who actually have a product to offer, but, ultimately, at AXDRAFT we don’t want to have users who pay for our software but never use it.
The main challenge for the legal tech to become a really valuable and commonly used thing in the legal industry is to hack adoption and change management. People don’t like to change their habits. Therefore, you need to either force the change from the management downwards, or make such a loveable product that everyone will want to use it. For now, all B2B legal tech products are sold using the first strategy, but I believe that it is neither sustainable, nor scalable. We are working really hard to understand what our users like and need and make AXDRAFT loveable. This is very difficult, but we see some progress.
Regarding legal tech vs. fintech, I think that legal tech is already somewhere near fintech, if we are talking about proportions compared to industry size. In absolute numbers legal tech can never become as big as fintech, because financial industry is incomparably larger than the legal industry. If you talk to any experienced investor, they will tell you that legal tech is not a very interesting investment, because the market is too small and the buyer is too difficult. Therefore, for investment perspective we are positioning AXDRAFT as enterprise contract management tool more and more. From this point of view, the total addressable market is larger and more interesting to investors.
lawless.tech: There are several companies that offer solutions similar to your own, like ContractExpress or Concord. What makes AXDRAFT different? What is it that you offer that other companies cannot?
Yuriy Zaremba: I can name at least 20 more competitors worldwide (but none in Ukraine). Contract automation is a very competitive market, but it proves that there is a demand for this kind of product. To be successful in a startup business you have to be the first or the best, we aim to achieve the latter.
Our most important know how is that AXDRAFT creates the document 100% on user’s end without even touching our server, which gives us the advantages of SaaS, combined with the confidentiality of a desktop solution. Confidentiality is really important to our clients and we pass all security tests with ease. Another huge advantage is that AXDRAFT is very data-driven and has huge potential for predictive machine learning, once we collect enough data. We hope to be in a position to make the first step in this direction within the next 6-9 months. Imagine that AXDRAFT will be able to suggest you the best clauses to use in the contract, based on market standards and your previous data inputs. Contracts on AXDRAFT Standard Terms is what we want to see in the future.
We also have many smaller features, which many of the competitors lack, such as integration of data from external sources (public registers, etc.), automatic transfer of data between documents, automatic calculations, unlimited complexity automation, full brand and style support, etc.
lawless.tech: Laws aren’t immutable, so legal tech companies have to keep up the legislative changes. Still, it isn’t always possible to make changes to the programs and algorithms quickly. In your opinion, is it necessary to create some laws to limit the liability of legal tech businesses in case they failed to comply with new legislation or if the usage of the product led to damages for the user? How the legal tech market should be regulated in general?
Yuriy Zaremba: That’s a great question, which leads us back to my earlier comment regarding shifting liability. I think that to answer this question we need to differentiate between B2B legal tech products that assist lawyers (like AXDRAFT), and B2C legal tech products that replace lawyers altogether.
In the first case (B2B), there is no issue, since we automate client’s templates according to client’s requirements, we provide no legal advice and the liability for the content lies on the customer. We just make it easier to use and are liable for the fact that everything works according to client’s instructions.
In case of B2C products it is much more difficult. The platform must be liable to the consumer for its content. On our B2C free social platform AXDARFT Business we fully rely on our legal partners to update content and make sure that everything is up-to-date. For example, when law on LLCs changed, we started updates well in advance before it entered into effect and were ready in time, but for us it is easy, because we have only 62 automated templates and offer them for free. I am curious how Rocket Lawyer or LegalZoom handle these issues.
I think that as more and more commoditized legal services will be offered online, the legislature will introduce some kind of liability for bad quality legal advice online, which will, in turn, result in increased price for such services (liability is one of the reasons, why lawyers are so expensive). In parallel, law firms will start offering cheaper standardized legal services using legal tech tools, but maintaining the well-known comfort of shifting the liability to a law firm. Therefore, gradually, the difference between DIY legal services and cheap commoditized legal services offered by law firms will blur. I, personally, despite being a legal tech entrepreneur, would go to a law firm offering automated legal service, but providing me the comfort of bearing the liability for it. I think, that I am not alone in this thinking.
Regarding regulating legal tech in general, I think that we should just wait and see. The regulation will arise as the scope and the importance of transactions will increase and the first claims for bad quality legal services will start coming into public light. For now, we don’t see this even in the US, since the market leaders, such as LegalZoom and Rocket Lawyer focus on low risk deals and, probably, handle any mistakes there may be through amazing customer support.
lawless.tech: Your system is designed to simplify contract creation. Still, it adds all necessary data such as company’s name, address, etc. to a future contract. Does AXDRAFT store such personal data of clients? How do you comply with GDPR?
Yuriy Zaremba: AXDRAFT architecture is GDPR-compliant, but more importantly GDPR relates mostly to the personal data of individuals. AXDRAFT focuses on B2B contract automation for corporation. Data about corporations is mostly public (in Ukraine we even fetch it in real time from corporate register thanks to Opendatabot) and GDPR application in this case is limited. We save some data for re-use in other documents, but we store it safely, separately from document template and encrypt it. Moreover, the user can delete it anytime he wants.
lawless.tech: You have applied to Techstars London, but you haven’t obtained a visa to the UK in time, and that was sort of reason why AXDRAFT hasn’t been chosen to the accelerator’s program. So, how soon should we expect a service that will help simplify the process of getting a visa?
Yuriy Zaremba: I don’t think it was the main reason, but it definitely contributed a lot to the decision. We should definitely expect this kind of service, but not from AXDRAFT. UK announced that they will create a special simplified process for startup visa a week after we were declined visa. Probably, they understood, what a huge opportunity they have missed with AXDRAFT and decided to prevent such situations in the future.
Akin to many developing industries of the digital era, legal tech is benefitting and suffering from the hype at the same time. As Mr. Zaremba pointed out, some companies simply exploit legal tech to look progressive. On the other hand, such attention may help the whole niche to develop and bloom.
Legal tech market is definitely an interesting place to be in now, but there is still a question, when the existing solutions will break the wall of adoption and make legal tech as common and essential for legal business as computers and MS Word are today.