Building an AI-Native Software Company With Legora CEO Max Junestrand | Ep. 44

Oh, wow. And so there was a shape of the legal market that I intuitively understood because I participated in the market. And so I sort of understood the different kinds of lawyers who buy software, do in-house lawyers buy software, do law firms buy software, sort of there was an intuitive understanding that I had. And there's sort of like two things that happen when you've like sold into an industry before. Or either you end up hating it or you have some strong bias against it. So there was always this idea that there's opportunity for AI in the legal market. And there was a player in the market that had already raised at a billion dollar valuation.

And when Max came in to chat with me and Peter, the thing that immediately jumped out was the clarity of thought that Max had on why the general foundation models had a lot of room to grow. intelligence and how that was going to be a huge boon for the legal profession over the next couple years. And so we get this like very strong viewpoint that there was something about legal data that the general models were going to serve in a very unique way. Max, since you're here, can you like explain like what was that? So I think it's worth to go back to 2023 and 2024 when I think part of the paradigm was you should train your own models. And like the general models aren't great and fine-tuning is going to be really important for two reasons we were like fuck that right um one fine-tuning doesn't really seem to work at least on the scale that we were operating right to train the new generational model you had to put billions of dollars into it and secondly there was so much application that you had to build on top of the models to make them useful in your environment. And back then, I mean, just solving like basic data compliance, privacy, and sort of great file uploads and like great parsing and great chunking and all of these

things, that was where the value was. And there was another part of your experience, which was that you were actually embedded in a law firm. Yes. And so you were studying the shape of like what data law firms had in a way that was you know bill talks about this a lot is like does an entrepreneur strike you as a learn-it-all and it was clear that the early lagora team when we invested with five people they were just trying to learn everything they could about how the legal profession worked and they didn't have any bias towards it and so the other thing max said which you should you should share with everyone is because they were embedded in a law firm in a windowless conference room in stockholm sounds nice sounds great uh they had a deeper understanding i think of like how a law firm like the data model of a law firm in ways that most of us didn't and I mean, just to take you back even further, like when we started, I offered to buy a lot of lawyers lunch on LinkedIn because I wanted to learn.

So like literally cold write them and say, hey, I'd love to meet. I'd love to talk about like IP law. I'll offer to pay you your hourly fee and lunch. And they were all too nice to like make me pay for lunch. They'd often even are paying for it. Right. But that did, as Chetan put it, like I think it allowed us to work with customers from the very beginning. So the founding team at Legora were all engineers. The first lawyer didn't join until nine months into the journey. When you had a lawyer join, had you already sort of like set the plan and the goal for the company? Like, was that done without experts?

And was that important to do without experts? So it's actually funny. I mean, the founding, and this is a bit of the Legora untold. First revealed here. First revealed. The company formation was in 2020. And there were four co-founders. I didn't know that. And I was not one of them. Didn't know that either. Right. They were sort of working on this intersection between AI and law for three years with the early BERT models, and even a Swedish-trained version called SweeBERT. It was impossible to work with. Not only was it not very intelligent, it was also blatantly racist, because I've been trained on the Swedish forums.

Some racist data there. Some racist data there. When the LLM's like 3.5 came, that was when the moment shifted, right? And so we turned this into a company, two of the co-founders left, I joined. And then we basically said, like, we're going to work in the intersection between AI and law. We don't know what that product is, but we're going to run like hell in this direction. And funny enough, the first lawyer who joined was a sort of soon to be customer of ours. So he was the CIO at one of the big firms in Sweden that we wanted to sell into. And he had built an early version of like a GPT plus the document management system.

So basically like an LLM that could rag into the existing precedent and data that the firm was using. And he basically said, well, these guys are going to run faster than me. And if you can't beat them, I might as well join them.

What have you found, like to the point of you have to be better than the models, if you had to break down like as a vertical AI application, what have been the things that have allowed you to just be so much better than the models that it's worth, you know, the incremental investment? So I think in the beginning, there was a lot of just foundational problems with the models. Like you had to guardrail them very hard to make them useful. You had to build citations. You had to build good rag systems. You had to overcome context window problems. And there was a lot of rate limits issues. So you had to like juggle different models for different types of tasks.

There's just so many incremental basic things to solve. I think as time has progressed, our product has moved further away from what the foundation models are and much more into this enterprise wide platform where, you know, we're going to transact billions of dollars of legal work on the platform. And we've moved from building a lot of the agent work ourselves. And we sort of let the models rip a little bit more like open claw or claw bot or whatever it's called these days, where like with Opus 4.5 and Opus 4.6, there was an extraordinary difference in level of intelligence and like instruction following capability.

And so I see our job as let's provide the model the right environment and the right tools and skills to leverage. And then let's build a UI and an interface to the rest of the business so that they can all leverage it comfortably and with a lot of trust. I do think that, you know, the model capabilities improving so quickly makes us run faster because we have to be three standard deviations ahead of any general capability yeah and that's like a very good motivator as in as

for six months where we didn't sell basically because we weren't ready to like hit the gas on onboarding a thousand lawyers a day and knowing that the product was going to keep up with that so we took the early hits of like investing in that talk more about that period specifically

and we sort of had our first boots on the ground in the US and then we felt like okay what we have is like a winning formula so we just need to crunch it out everywhere and now I think we're at another interesting point in time where we've built all these different tools but the paradigm from now onwards is humans are probably not going to work with all these tools like basically agents will leverage the tools that we built so i remember early when mcp came our cto basically went well now lagora has two users it's human users and agent users and every new feature that we build has to be able to cater to both and now we're seeing more people like basically use our agent that uses the tabular grid or like our agent who uses our word editing capabilities than humans actually going and using

have come the furthest in coding but also those organizations are very quick to adopt and shift and so like engineering orgs are today looking slightly different and i think we can expect the same in you know legal organizations two things you brought up that you should it'd be great if you could dive into one is lagora doesn't really have a long-term roadmap like you guys react and build today and you know when you first got started you had this like nearly weekly cadence where that's how long you would roadmap to and these days it feels like you almost roadmap on a daily cadence and so like things change tomorrow like you wake up but it's like we have to do

something different talk about that lack of roadmap and then also the other thing that you've invested heavily in is just understanding model capability and the sort of proprietary eval infrastructure you've built where you've had these conversations with the foundation model companies of how you're able to identify latent model capabilities that they themselves are not

do you do that while at the same time do your normal job, right? I think a lot of the organizations that we work with really struggle with keeping up with the technology uplift, even like our developments. And so we're, you know, we're struggling by getting all the latest models and then we're turning that into product and they have to adopt it and then their customers and it's, Yeah. There's a question, I think, for both of you. As I'm listening to you talk, I'm sort of like, you know, I can sort of see the, you know, the hill climb that you're on where you've like attacked, you know, one part of it and the next one's coming and the next one's coming. And, you know, one of the things I'm thinking about is for, let's say, a new startup in legal, what would the right strategy be for them? Like, how do you possibly get into the mix fast enough or all of these things?

and then exit. The Lagora. Exit to Selva Lagora. That's a good one. How urgent is it to grow really big, really fast for Lagora, given all of the dynamics around? Chetan, I'm curious, like, how do you think about this? Like, is it the same urgency as always? Or do any of these dynamics mean that, like, getting to real scale is more urgent here than other places? We can go back to sort of launch day, October 2024. so when when they launched you know roughly the error of the business was rounded to a million dollars if you just go back into that moment you know there was this exercise of should we make a budget and you know what what we all decided around the table was there was no reason to make a budget because we don't know anything about the market we don't know if people even like our product we had instincts but like we just needed to go literally as fast as we could to get the product as many hands as we could because ultimately the whole theory of the company didn't work until we got product feedback and so that was literally the aim the aim was like get this out as quickly as possible in as many hands as possible and i think one of the things that max did again this was like it's cliche to say it's first principles thinking but it is because it's like

And I think this is where we often talked about not only product engineering velocity, which came naturally to the founders here because they were engineers, but also this idea of velocity of customer interaction, which was like, if a customer wanted to buy a certain way, wanted to do a pilot, whatever, just don't add friction.

that was actually the key on luck which was like there was this idea of let's just go get this in everybody's hands and not to have any bias and so one of my favorite stories about max is that he came to san francisco to sell a bunch of clients and then you know he texted me he was like are you free for dinner so we met for dinner and then he asked for a ride to the airport and i casually asked where are you going expecting to say seattle or la or something and he was like i'm going to new delhi i was like why are you going to new delhi because like well like one of the largest firms in india wants to buy so i figured i'd like go give it to him that's crazy and so you know this in sass it was like no like do the west regional yeah then do like the east regional yeah then do like western europe and then eventually hire an apec head and then it was like this thing yeah and because this company didn't by the way there's going to be like a year of engineering work to be even kind of ready to serve india and because like this company and this team had never built a pre-ai software company they didn't know they weren't supposed to go sell in india early like one quarter into like selling the product so max got on a flight

went to india and a customer in india bought so it was one of those things where like because they didn't have the patterns they were able to get big globally in parallel

i think stands out a lot and so it's hard to describe to people what it's like to visit the when you came back from a lagora visit recently you were like oh my god they are so good like something's going on there that i haven't seen before it sounded different i don't know if it's lagora specific or if it's like something that is you know happens in sweden that can't happen in america but like you were affected by it it's true initially even in the I agree.

group of five or in that group of 10 in September of 2024, or group of 15, however big the company was, there was like a common thread amongst everybody. They were like deeply technical, deeply intense, and a desire to win. And they were like thinking globally from like day zero. And because they were in Stockholm, they also decided to recruit all over Europe from day zero to bring people to the Stockholm office. And so what ended up happening is I think you end up becoming a magnet for anybody that wants to build at the forefront of ai with a level of intensity and determination this idea of like wanting to win it's like what did it feel like to you on your recent trip there's like a few hundred people in there like yeah what did that feel like the level of engagement and buy-in to the company mission was truly unique and i think the company has done a great job with this idea of building for the company. And I really do think building an AI company is like a real test in ego. It's like you literally can't have an ego because you have to have this idea that AI is just going to do this. It's going to be better than us at everything at some point. And they're going to, it's just going to do this. The

foundation model will do this capability. And I'm like puzzling through this and it's really hard and it's an amazing feature. And we have these high bars of quality and polish. So we're going to ship fast, work really hard, build this amazing feature, and it's going to disappear within 12 weeks, requires an extreme amount of buy-in and an extreme amount of humility that we're just riding this massive wave and we don't know where it's taking us. But every day we solve today's problems and we don't worry about tomorrow because it's a different world. There's a different type of energy buy-in cadence that comes with that culture and i think that it's really interesting the disadvantage of stockholm has now become lagora's advantage of being in stockholm which is that their talent population that they that they get to hire from is not just in stockholm it's all over europe and now it's like all over the world because anybody that has that attitude is welcome to come join Stockholm.

I think our competition is, you know, has remote days, like three days in office. Everybody leaves at six. Like from very early on, like we serve dinner at eight every day. A lot of people in our region are sort of tired about like all these big American winners. and we know that we have the talent and the grid and the prerequisites to build a generational company. Like, yeah, we had to go to the U.S. to raise money because we want to work with the best VCs in the world. But, like, there is a level of, like, we can also do it, right? And we have Spotify just on the street. How are you going to get this level of fervor in the U.S.?

I think we have. I think we have a very unique culture in our New York office. Is it different? It's very different. Well, it's not different from Stockholm. Oh, okay. We seeded it with the culture carriers from Sweden that came to New York. I think tactically, this was a really cool thing they did. Which was, I think you should tactically talk about how you make everybody interview in Stockholm. And then they have to onboard in Stockholm. Everybody onboards in Stockholm. So you live in New York, you're going to join the New York office, you're going to Stockholm. Onboard in Stockholm. People who join in Sydney have to go on a 24-hour flight to onboard in Stockholm.

So you can't onboard anywhere else but Stockholm. And then when they first opened the first international office, which was New York, and actually London too, you did this with, which is like people that were based in Stockholm moved to those offices to set a cadence. It was like, it's all going to be the same as Stockholm. And like the Germans who joined LaGuardia, like they have to move. Stockholm, and they'll work here a year, and then they can move back to open the German office. You have to get it right. It's a fascinating thing where, you know, I've been part of many companies that have many offices, and every office tends to take its own character. And I remember the founders of Lagora saying, we want every office to feel the same, which was itself a different way of thinking. Every time Max has had me visit the company, I visit during dinner time, which is 8 p.m like that's when they have guests is like 8 p.m and that's been the case in every office and so that's another like thing that happened at this company and it's interesting to me that it continues to scale which is like you can continue to onboard in stockholm because like every the 400 people that joined before you onboard in stockholm yeah so you should too i mean

the only reason why we have that rule was because i did an internship at mckinsey and we'd have dinner at it so i was like i guess that's how you do this totally it's also like um in some ways doing doing the u.s office in new york obviously it's not like it's an outsider city but from a tech perspective there's a lot of people in new york like i want to work at like a great tech company yeah and you know it's there's obviously been more there than in stockholm but it's still different than san francisco and so i think you could probably bring some of that cultural thing there as a result of that now we just opened in houston and we're opening in chicago it's all the big legal hubs. Is this correct? Did you do a reference with Daniel Ek? Yes. Yeah. And I think I heard this from you. You asked him about like, what is the culture at Leia? And I think he said something like, they're pretty intense. That's right. We were very upfront with that, even in interviews and not intense to the point where it's like not fun, but like coming, like showing up as number, like being number two in this space is like not an outcome worth fighting for. Like then we might as well go do something else like we're only gonna play here to win you think number one number

two will just be vastly different outcomes oh yeah completely and it doesn't actually matter if that's the case or not but that's the way i mean gives you the right mindset yeah yeah like i think everybody's dialed into that and i mean i remember doing this interview in swedish and there's there's a saying um that you like you know like blood smock and you know like you taste the like you taste the blood and and because you worked so hard yeah and i basically told her in swedish that yeah you know sometimes i i wake up and you know it's a swedish saying and then and then she publishes the article in english yeah and the saying doesn't make any sense in english so it's like no it's like the lagora founders make wake up at lagora we wake up with a metallic taste of blood in our mouths and people in the company go holy shit is max a vampire or does he just floss badly like what's going on and what how do you feel about that now Now it's become this thing, like the Americans are hashtag blood smock.

Like it's everybody's in on it. It's amazing. It's a cult. I mean, I can like feel the energy of it. It's not like a culture that I think would quite work in San Francisco. Like, I don't know if that's something that you can do uniquely. Well, when we open our San Francisco office, they're going to taste the blood. They're going to taste the blood. All right. My last question is you just raised a big round, which is awesome. Congrats. What does this mean for the future? What's coming? Well, maybe first off, just to give you a bit of insight into the round, like every round at Legora since Chetan has been a preempted round.

I don't think I've ever actually gone out to fundraise since you did the round. Yeah, it's been very pleasant. We actually also have a history of taking the lowest term sheet. I remember taking, we were actually, so this is funny, Like we were negotiating the number of shares that Chetan was going to buy on Excel in front of us. And he goes, I've never, ever bought a company where I didn't get 20%. And I go, well, I'm never going to dilute more than 17%. And we sort of look at each other and go, well, I guess we're in a bit of a stalemate here. It's like the immovable object meets the force. And so we just put on Excel, we write down the exact number of shares, and we start going decimal by decimal.

Wow. Until we're both. That's such, that is so legal coded. Yeah. Just the nerdy Excel. It was wild. It's perfect. So you end up investing like 9.521 and we're both equally unhappy or happy. That's great. I think we were both happy. That's a beautiful way to start. Of course. We were both happy. But the Series D has been really great because it's the first time I've done it together with someone else. So David, our CFO who just joined from Vanta, he's an absolute monster. It was funny. We had our company-wide kickoff and you get to like pick the song you want to walk out to. and he goes Max I want Monster by Kanye West and I go okay dude and it's like the lights drop and I'm like I have a big surprise for you everyone like David is joining us our CFO and like the speakers just explode with this like and I don't know if you heard the song yeah yeah of course it's like starts and everyone's like holy shit what's going on and he like comes up on stage and he's just like so much energy and in the references people refer to him as a CF go And I was like, that's amazing.

So he and I did the round. It was super fun. It was the first time we went out to actually do a fundraise. We had a deck this time. And it was wildly oversubscribed. I think we ended up having like 1.5 billion in demand for the round. That's a lot. It was crazy. But we're super thrilled about Excel coming in and leading it. Some great participation from Manlo and Bain. Well, it's awesome. It's a huge testament to what you've done and super exciting. and I think you're just getting started. So, Max, thank you for doing this. Chathan, thank you as well. And really enjoyed it. Thank you so much, Zach.