# AI can make smaller legal cases viable for contingency firms

Markdown copy of https://realalpha.app/s/ai-can-make-smaller-legal-cases-viable-for-contingency-firms/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

- Speaker: [Jay Madheswaran](https://realalpha.app/people/jay-madheswaran/) · Jay Madheswaran is cofounder and CEO of Eve.
- Host: [Erik Torenberg](https://realalpha.app/people/erik-torenberg/) · General partner, Andreessen Horowitz · Helped build Product Hunt; founded On Deck, Village Global and Turpentine.
- Show: a16z Podcast
- Episode: [Why AI Could Turn Small Law Firms Into Billion-Dollar Businesses](https://realalpha.app/v/iRMmPjunm3Q/), Oct 30, 2026
- Moment: 3:37 to 8:45 of the episode (5 min), playing on https://realalpha.app/s/ai-can-make-smaller-legal-cases-viable-for-contingency-firms/; the episode from there: https://realalpha.app/v/iRMmPjunm3Q/?t=217

## Quote

> “So that is why **96% of cases** on the labor and employment side, for example, gets rejected.”
> — [Jay Madheswaran](https://realalpha.app/people/jay-madheswaran/) at [7:09](https://realalpha.app/v/iRMmPjunm3Q/?t=429) · a16z Podcast

## Takeaways

1. Firms may need at least $5,000 in fees to take a case.
2. 96% of labor and employment cases are rejected, Jay says.
3. Eve can turn a 10-hour research process into immediate work.

## About this segment

Jay Madheswaran explains why firms reject cases that cannot cover the labor, even when clients need help. Eve aims to make that work economical by automating intake and early case tasks.

From “Why AI Could Turn Small Law Firms Into Billion-Dollar Businesses”, Oct 30, 2026. [Watch the full episode](https://realalpha.app/v/iRMmPjunm3Q/)

## Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

[3:50](https://realalpha.app/v/iRMmPjunm3Q/?t=230) They might not want to take my case because if they take a third of the outcome, it's like they want a bigger case and it's going to require a certain amount of work. And AI really, it kind of liberates these market failures to a certain extent because you mentioned kind of giving David a bigger slingshot. a lot of times David just, well, number one, if I have $1,000 of damages, I certainly can't pay $1,200 an hour for a lawyer. So like I'm out for that. Well, enter contingency law. The problem is that the settlement might not be big enough. So the lawyer might want to serve me, but he or she has paralegals that they have to pay and so on and so forth. But if the software can do the work, now the market opportunity is so much bigger, right? You can actually deliver justice for a lot of people that otherwise they weren't priced out of it because how are you priced out of

[4:38](https://realalpha.app/v/iRMmPjunm3Q/?t=278) contingency? But it's not really in the interest of a lawyer. They want to serve a thousand customers that they get, but they can't. They have to focus on the biggest ones to the detriment of the smaller ones. Because again, it's kind of the right of that equilibrium point. I don't know if you agree with that or how you think about that. That is exactly right. I think that is the actual market problem we have today, which is if you go back to first principles, if you're a person, you deserve a great lawyer to represent your case.

[5:06](https://realalpha.app/v/iRMmPjunm3Q/?t=306) And you usually only need a lawyer when your back is against the wall, right? The best of us, the worst of us comes out this time and we don't have the skillsets to represent ourselves. That's why this whole profession exists. That's why the legal system is about a third of our government. It's for this reason. And today, what's happening is because lawyers still need to get paid, it's still bottlenecked on legal work.

[5:29](https://realalpha.app/v/iRMmPjunm3Q/?t=329) Today, if a lawyer doesn't make at least 5,000 fees off a case, they do not take it on. Yeah. That is the market dynamics today. And even at 5,000, they're losing money on a lot of cases. They're really banking on a few cases paying out very large. They're not even guaranteed to win, period. That's exactly right. So they already take that. That's the contingency aspect. That's exactly right. But it's kind of like, even if I win, I lose because my costs of carrying the case are going to be higher than the actual potential outcome even if I win.

[5:57](https://realalpha.app/v/iRMmPjunm3Q/?t=357) That's exactly right. I mean, think about, like, most people here have been in a car accident, fender bender of some sort, if it's below the deductible, no lawyer in America will touch that case, right? It's just not economically worth it. Even if the deductible's $3,000, $4,000, to an individual, that is a difference between a paycheck being gone versus not, right? And there's no representation they can get for that.

[6:21](https://realalpha.app/v/iRMmPjunm3Q/?t=381) And the reason is actually from their side, we have to understand it from their side too, right? So let's say you've been getting harassed at work and your employer could stop it. Like in hospitality industry, let's say you could tell your customers, hey, don't harass my employees. and change processes to make that happen. Today, that doesn't happen because when that person gets calls, the lawyer on the other side has to pick up a call, field that call, that's about 30 to 45 minutes of work, and then after that, go do legal research because in employment in America, pretty much everything's at will, and you have to tie a problem to like a protected clause of some kind, and it's called causes of action.

[7:01](https://realalpha.app/v/iRMmPjunm3Q/?t=421) So you have to tie it to a cause of action, And that work requires them to go spend 10 hours to go research your case law, research the facts, go back and forth and ask them more follow the questions, see if they qualify. And while they spent all that time, they might still realize, hey, this doesn't even make me $5,000. So that is why 96% of cases on the labor and employment side, for example, gets rejected.

[7:28](https://realalpha.app/v/iRMmPjunm3Q/?t=448) So you can never find anybody to represent you unless you come out of pocket. In many cases, people don't have money to come out of pocket. That's exactly right. So you just kind of take it unless something really egregious happens. And that is the current state. And it's all bottom-down legal labor. And this is what Eve is meant to do is to, how do you now take that 10 hours is now immediate with Eve.

[7:51](https://realalpha.app/v/iRMmPjunm3Q/?t=471) a call comes in, Eve actually answers the call and automatically uses his insights on the law firm to know whether or not this is a case the lawyer has to take on or not, and then hit the ground running with a demand or the initial preliminary work done, right? And that completely changes the economics of that type of case. And we're still at the very beginning stages. Like what's happening is Eve is getting more and more capable of handling outcomes end to end over a very long horizon. These cases take six months, a year to launch, and through them, probably a thousand actions back and forth that are happening. And as accuracy of EVE is getting higher and higher, this long horizon becomes possible. So the more this becomes possible, even more complicated work