Norm AI Raised $11.1 Million With Aim to Aid Compliance Chiefs

A startup announced Tuesday it raised $11.1 million as it looks to use artificial intelligence to make life easier for corporate compliance chiefs.

John Nay, a computer science expert who has taught law students about generative artificial intelligence, is the founder and chief executive of New York-based Norm AI. The company announced a seed funding round led by investment firm Coatue Management LLC.

“We want to focus on public law and regulation, rather than private law and contracts,” said Nay, 34. “How do we embed society’s values into AI systems and govern them appropriately? That’s only possible through leveraging public law rather than private law.”

Norm AI is among a slew of startups raising funds and launching operations to capitalize on the benefits of artificial intelligence in connection with legal operations. Norm AI claims to have built the first regulatory AI platform that’s automating some regulatory tasks for chief compliance officers at client companies ranging from small businesses to those in the Fortune 100.

Nay, a founding CEO-turned-chairman of the Brooklyn Investment Group LLC, an investment adviser that uses AI tools, declined to discuss individual clients. Besides Coatue, the company’s backers include M13 Ventures Management LLC, a venture capital firm backed by brothers and entrepreneurs Courtney and Carter Reum, the latter of whom is married to celebrity Paris Hilton.

Win Chevapravatdumrong, who last year became a partner and head of legal at M13, said platforms like Norm AI’s that automate “mundane aspects of corporate compliance in high-stakes situations” can help in-house lawyers and compliance heads, many of whom are the same person at smaller enterprises.

Information Overload

Within the last 50 years, Norm AI claims that the US federal regulatory code has more than doubled in its number of restrictive words, from roughly 400,000 to more than 1 million, making compliance an increasingly labor and time-intensive—and thus costly—business function.

One-thousand-page regulations, however, are too dense for most large language models to digest, said Nay, who has spent more than a decade teaching law school classes at NYU, Stanford, and Vanderbilt. “This isn’t something where you can ask, ‘Is this thing compliant with this regulation?’ The models fall over immediately, it’s just way too complicated,” Nay said.

Instead, Norm AI will take something such as a 600-page PDF from a regulatory agency and distill that into small enough units and associated compliance tasks so that a “large language model can determine if something is compliant or not with respect to that regulation,” Nay said.

That creates a decision tree that human compliance professionals—or regulators themselves—can walk through to see where certain determinations were made at a “granular level,” Nay said.

Nay’s team of lawyers and artificial intelligence engineers at Norm AI are currently focused on the financial services space due to increased demand from clients in that highly regulated environment.

Norm AI works with multiple large language model providers to power its artificial intelligence platform, including industry leader OpenAI, Nay said. He said Norm AI is being advised by Fenwick & West, a startup-friendly law firm, and the company has put together a regulatory advisory board.

Founding members include Katherine “Kate” Karas, most recently the top lawyer at financial technology startup Chime Financial Inc., former SEC commissioner Troy Paredes, Coatue’s compliance chief and deputy general counsel Vanessa De Simone, and ex-White House official and regulatory expert Susan Dudley.