Processing and reviewing everyday commercial contracts like leases and independent contractor agreements is often a time-consuming and costly process.
According to a study from the International Association for Contract and Commercial Management, U.S. businesses spend an average of $6,900 to review a simple, low-risk contract.
Denver-based legal tech platform TermScout has developed a solution to reduce the complexity, time and cost required in the commercial contract review process by utilizing a mix of artificial intelligence and real attorneys.
To further build out that solution, the company announced Wednesday that it has closed a $1.25 million series seed and a previous $350,000 convertible note funding round, for a combined $1.6 million. The round includes investments from Hilltop Venture Partners, Techstars and EonCapital.
The funding will primarily be used to develop a contract review and comparison platform and launch a website offering free and premium information about the top 500 B2B SaaS contracts.
"Our seed round combined with the $350,000 bridge round we closed in February provide us with a comfortable runway at least through the end of 2021," co-founder and CEO Otto Hansen told Colorado Inno. "As we grow, we plan to publish information on thousands of the worlds' most commonly signed terms and conditions, privacy and data policies."
While the current pandemic made things more difficult for TermScout, the company managed to open and close this round in just over a month.
"Raising during Covid definitely presents some challenges, though we were lucky to go from deciding to raise to close within 6 weeks," Hansen said. "On the plus side, it's a lot easier to schedule 10 investor meetings a day when all of them are on Zoom."
The company has five full-time employees and plans to hire a director of legal operations soon and two sales employees within the next couple of months. This round builds on the company's recent success, as TermScout recently took part in the 2020 Techstars Boulder Accelerator program, completed the LexisNexis Legal Tech Accelerator and signed its first enterprise clients.
Going forward, TermScout hopes to use the data it has collected to build out the AI and machine learning capabilities of its platform.
"By 2022 we expect to have tools that let people upload lease agreements, independent contractor agreements and similar documents to our system and instantly receive valuable information about how fair or unfair those contracts are for a particular party," Hansen said. "We believe that contracts are a necessary building block of the modern economy, but that contracts don't work without an easy and affordable way for people and businesses to understand the contracts they're signing."
