Streamline AI CEO On Dismantling The 'Legal Black Box'

Steven Lerner - Law360 (click here to view the original article)
February 13, 2023

Kathy M. Zhu left her role as senior director and associate general counsel for DoorDash in 2022 to become CEO and co-founder of legal technology startup Streamline AI. The California-based company, which secured $3 million in seed round funding in November, offers an intake and workflow automation platform that helps in-house legal teams process requests. It's one of several emerging legal tech startups that are attempting to change the way that in-house teams use technology so that legal can finally have a seat at the table when it comes to driving revenue.

Here, Zhu talks with Law360 Pulse about raising capital in a tough environment, the state of legal tech in 2023 and how her startup is trying to stand out in a growing field of companies that serve legal teams. This interview has been edited for length and clarity.

How did your experiences working for a technology company prepare you for co-founding one?

My first in-house role was as commercial counsel at Medallia, a business-to-business software as a service, or SaaS, company. There, I learned the intricacies of how a SaaS business should run, such as how to maximize recurring software revenue and how to shorten days to cash in the bank.

I remember learning from our general counsel that many companies fall into the trap of thinking they have a healthy business based on revenue growth only to be shocked when they realize they are running out of cash.

I also had the opportunity to work cross-functionally with most teams within the company and realized the importance of creating a collaborative, healthy company culture where people love showing up to work. Next, I was hired as the very first commercial lawyer at DoorDash, tasked to build out the commercial function from the ground up. This gave me an incredible view into supporting a company that's in hyper growth.

Every commercial transaction that happened at DoorDash was structured by my team, and it was happening at a staggering pace. I realized that I could never hire quickly enough to meet that kind of demand and needed to turn to technology to operationalize how my team handled its work.

Through the four years that I spent at DoorDash, I learned about the legal tech market, what tools existed, and the shortfalls and benefits of tools within each category. I started to build a brand for myself as a supporter of legal tech. And that's when it struck me that the tool that I needed the most did not exist.

All of this groundwork meant that when I launched Streamline, I wasn't starting from scratch. I already had a foundation to build from, not just my grasp of the product, but also my grasp of the market, deep empathy with our customers, developing a network of advisers, and day-to-day operations.

It's no secret that this is a tough time for legal technology companies to raise capital. How was your startup able to secure funding in this environment?

Like most other startups, we had to be persistent in the beginning. At the start of our fundraising journey, we encountered investors who were skeptical about the legal tech space and didn't really make much of an effort to understand why we were different from existing solutions.

We aren't trying to shoulder our way into an already crowded space like contract life cycle management, or CLM, and we aren't selling our product to law firms. We are solving a problem that hadn't been addressed yet — the problem that was leading corporate legal teams to be a black box to the rest of the business and unfairly branded as a cost center.

Investors who had previously been operators themselves and who have been personally frustrated by the "legal black box" understood our vision right away and loved what we were building.

Our round ended up being substantially over subscribed. And the investors that we have brought onboard, including Oceans Ventures, Wilson Sonsini Goodrich & Rosati, Scribble Ventures and RidgeVentures, have added a lot of value to us.

I think in a market like this, investors are much more cautious and conservative. We had paying customers, our product was making a real difference to their work, and both my co-founder and I had personally experienced the pain we're solving — all of that helped to de-risk the transaction for our investors.

What is the biggest misconception today about legal departments and technology?

The biggest misconception about legal departments is that they are a cost center. I'm surprised to see the number of legal teams that accept this label without trying to do more to change it.

Almost every transaction or event that touches money at a company, whether it is launching a new product, closing a deal, running a new marketing campaign, acquiring assets, and much more, happens with the involvement of the legal team. Legal is not a cost center; legal is a revenue enabler. If you took the legal team out of the equation, what would likely happen?

All sorts of bad outcomes would lead to the company losing money, whether it be in breaches of contract or worse, lawsuits. The reason why legal teams have such an unfair reputation is that they are almost always understaffed and resource-constrained.

There are simply not enough hands to handle all the work.They are also highly constrained with a tiny technology budget and very limited headcount allocation. With the right tools in place to provide visibility, automation and reporting, the legal team can be right-sized for the company they are supporting and run as efficiently as any other department.

How does Streamline AI try to stand out among a growing field of legal technology companies that specialize in serving in-house legal departments?

We are seeing real results in how we are enabling legal teams to operate more efficiently. Our customer Pantheon reduced their legal team's response time from several weeks to 24 hours withStreamline AI.

"Our legal organization is never a bottleneck, we are an accelerator," their general counsel said in are cent case study. "With Streamline in place, we've created a process most companies our size only dream of."

Branch Metrics, another customer, reduced the number of days that their legal team spends processing each request by 60%.

Even in our early days, our customers are renewing for multiyear terms because they don't want to go back to how things used to be before Streamline.

We stand out because we are solving real problems and being very practical in how we are setting about achieving results.

We're not about jumping on the latest flashy trend or waving the banner of artificial intelligence tow in business. Instead, we are making a difference in how our customers work. We're seeing that difference in our 100% customer retention rate and the results that we are driving.

What features do you want Streamline AI to incorporate in the future?

We will continue integrating with other tools in the legal tech stack, such as CLM, file sharing, e-billing and intake systems.

We want to make it seamless for business people to send requests to the legal team with minimal change management. Our Slack integration has been a huge hit, and we will continue to integrate with other business tools.

We will keep upgrading our no-code workflow tools so that legal teams can keep building and automating their processes themselves without needing to wait in a queue for IT or engineering resources.

We will also be releasing our AI-assisted intake that can take unstructured data from email and Slack and turn it into a structured request with minimal user effort.

Where do you see legal technology going in 2023?

I'm very excited by all the innovation that I'm seeing in this space.

Historically, legal has been very underserved in the technology made available to them. With the rise of legal operations as a developing function within the corporate legal department and a shift in the willingness of investors to back legal tech startups, better tooling will be made available.

I hope that companies will focus on serving customers and providing exceptional service, not just building flashy features that fail to deliver meaningful results.

My dream is to see corporate legal teams become happier, more empowered within the organization, right-sized for the work they are doing, and recognized and celebrated as revenue enablers. And technology will play a pivotal role in shaping that future.

--Editing by Marygrace Anderson.

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