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Silicon Valley Heavyweight Bets on E-Discovery Software

Jan. 14, 2016, 12:30 PM

The venture capital firm Andreessen Horowitz announced Thursday it will commit $8.1 million in Series A funding to Everlaw, a Berkeley-based e-Discovery software as a service and legal technology firm.

Everlaw’s main product is a document review software with a cloud architecture that makes it somewhat different from other products.

In its annual report on the e-Discovery software market released last May, the research firm Gartner characterized the company as a vendor to watch, but did not group it in the “Magic Quadrant” with other more established companies. In an interview, CEO A.J. Shankar emphasized that his company heavily values design and is investing in a smart user interface, as well as artificial intelligence tools.

“Primarily, this is to drive development forward,” said Shankar, about Andreessen’s investment. “We’re a technology company that focuses on legal.”

“We think there’s a huge opportunity to build more tools,” he added.

In making the investment, Andreessen Horowitz is betting on an upstart in the estimated $2 billion e-Discovery software market . That contrasts with the Carlyle Group and other private equity firms that, in a flurry of deals in recent months, have invested in other parts of the e-Discovery market, most often companies that provide services such as staffing for large scale document review or data hosting.

Terms of the investment, including Everlaw’s overall valuation, were not disclosed. In conjunction with the announcement, Andreessen Horowitz Partner Steven Sinofsky will join the company’s board.

Sinofksy , an executive-in-residence at Harvard Business School and an advisor to the file-sharing software company Box, previously worked at Microsoft as a design engineer focused on Windows and Office, according to his LinkedIn page. He joined Andreessen Horowitz in August 2013 and is a board partner.

Andreessen Horowitz, based in Menlo Park, is known for making investments in companies such as Facebook, Twitter, Airbnb and Box among others. In a profile that appeared in the New Yorker magazine last May, its co-founder Marc Andreesen explained, “We’re funding imperial, will-to-power people who want to crush their competition. Companies can only have a big impact on the world if they get big.”

[caption id="attachment_6701" align="alignleft” width="214"][Image “Everlaw CEO A.J. Shankar” (src=https://bol.bna.com/wp-content/uploads/2016/01/AJ-Shankar.jpg)]Everlaw CEO A.J. Shankar[/caption]

Everlaw is based in downtown Berkeley just blocks from the university campus where its CEO Shankar received his PhD in computer science. According to the Gartner report, the company offers a single and all-inclusive pricing model, which is data-capacity-based. Its software is browser-agnostic and the cloud architecture allows it scale up to serve many customers, according to the report.

Shankar said Everlaw overhauled its user interface in 2015, a video of which can be found here . It also invested in features such as automated foreign language detection, which can identify whether a document contains any of 53 languages, including foreign characters and automatically translate, he said.

According to the company, its customers include 34 state attorney generals as well as plaintiffs’ attorneys litigating part of the General Motors Ignition Switch dispute. It currently has 22 staff, according to Jon Kerry-Tyerman, vice president of business development, and the company said it grew 33 percent last year.

“We’re growing very rapidly,” said Kerry-Tyerman, adding that Andreessen Horowitz was a vote of confidence in the firm.

Shankar, in an interview with Big Law Business, acknowledged that to succeed, Everlaw must compete with Chicago-based kCura, manufacturer of the Relativity document review software.

“They’re definitely the largest out there and ... their biggest advantage is the size of their network,” said Shankar, "... and they’re hard to disrupt, but at the same time, that also makes it harder for them to move quickly. They’re committed to decisions they made years ago before the cloud was around.”

In particular, kCura has developed its market share by establishing a network of partners who are certified in using its Relativity software. Shankar said many of those partners use Relativity specifically because it functions outside the cloud through a “hosted” installation on private servers. Although the costs vary, hosting can be a major cost of e-Discovery, according to the 2012 Rand Institute of Civil Justice study on e-Discovery costs, “Where the Money Goes.”

In contrast, Everlaw contracts with Amazon Web Services, according to Shankar. He said the cloud architecture allows the company to push out software upgrades to all its customers at once.

Shankar also said the cloud will enable easy overseas expansion wherever a country’s data privacy laws require servers be located onshore, whereas companies that rely on hosted installations will need to build out a data center in each country.The company announced its first expansion outside the U.S. in November, when Australian litigation support provider NuLegal announced it is moving to Everlaw for review and case management.

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