Path to establishing AI contract reviewing platform LegalForce LegalForce CEO Nozomu Tsunoda
With the declared mission of “making all contract-related risks controllable,” LegalForce is a company that deploys LegalForce, an AI-based contract review support software platform. Approximately 500 companies have introduced LegalForce into their legal affairs procedures and in February 2020 the company raised 1 billion yen in funding. At the helm of this trailblazing company driving the legal-tech industry is CEO Nozomu Tsunoda. DIMENSION Business Producer asked him about the path that led to the launch of the service and the outlook for the future.
Encounter with the legal profession and co-founders
ーーYou started your career in a big-name legal firm, after which you established your own company. Could you share some of the background that led to the founding of LegalForce?
Based on an idea to “use the latest technologies to enhance the quality of legal services,” together with Masataka Ogasawara, who was also my colleague at my previous company, we established ZeLo, a Foreign Law Joint Enterprise in March 2017.
However, operating as a legal office makes it difficult to develop legal-tech (a combination of legal experience, legal services and technology) on your own, so recognizing that we would probably have to establish another company to do this we launched LegalForce one month later in April 2017.
So in our case we didn’t have an initial intention to establish a company, rather what is closer to the truth is that after gaining our independence as attorneys-at-law it more of a natural progression to start up a company.
Born in 1987. After graduating from the Faculty of Law of Kyoto University he worked first for the law firm Mori, Hamada & Matsumoto, before established ZeLo, a Foreign Law Joint Enterprise in March 2017, and LegalForce in April 2017. He is an attorney-at-law (Member of the Daini Tokyo Bar Association).
ーーWhy did you establish the company together with Masataka Ogasawara?
Masataka was my colleague at our previous workplace and he has strong curiosity and high sensitivity to information.
When we were still at our previous employer I would discuss with him about the future of legal-tech, and so it was really a natural progression that together we decided to do something interesting in this area.
At the same time, Masataka is a really highly skilled attorney, so rather than me choosing him, my strong sense is that it is thanks to him being a close colleague that we were able to launch the company.
He still heads ZeLo today, where I am the second-in-command, and at LegalForce I serve as CEO and his role is as representative director and co-founder.
ーーYou are both attorneys and have no formal experience of service development, so how did you determine the direction for LegalForce services?
In the course of my work as an attorney and in-house legal work, I had a few points in mind that I thought could be improved with technology. Even then, I wasn’t sure whether these ideas would actually respond to user needs.
When we set up the company we started by carrying out multiple interviews with people involved in corporate law. We presented the ideas we gleaned from those interviews to engineers, and together tried to find feasible technology-based solutions.
LegalForce born from person-to-person connections
ーーI hear that initially your business was somewhat different from the AI contract review services you offer today.
For the first ten months we were in business we developed editing software specialized for legal contracts.
WE envisioned something that could automatically correct spelling mistakes and centralize comments, but once the beta version was ready and I showed it to Masataka, his feedback was harsh, saying only, “This is unusable.” (laughs)
The kind of editing function an attorney has in mind is like that on Microsoft Word, but it was impossible to try and develop something that would surpass Word in the space of just 10 months. Not to mention the fact that our editing software had the fatal flaw of not being compatible with Word. It certainly was an “unusable” service.
Looking back now, I should have realized much earlier the difficulties with developing the editing software, but it took a few hard words from Masataka to bring me to my senses. It was his reaction that led us to pivot away from the editor concept, and start to develop the AI-based contract review service we offer today.
ーーSo why did you choose to go into AI-based contract review services?
We had always know that reviewing contracts presented significant challenges. However, we weren’t sure if we would be able to create a practical system using natural language processing technology, which is why we initially didn’t follow through.
It was when we were gathering together members to create LegalForce that I first met Yuta Tokitake (current director and Chief Technology Officer (CTO)), and it was thanks to him that we could make a start on developing the technology.
After that we procured seed series funding from Kyoto University and launched joint research with the natural language processing laboratory at Kyoto University. Prof. Shinsuke Mori who heads the laboratory participated in the project as researcher and technology advisor.
Then through the Wantedly the job offer/job seeker talent site I got in touch with Ruka Funaki (currently executive officer and Chief Research Officer (CRO)), who as it turns out, just so happens to have studied in the same lab as Yuta, and once he joined the team everything started to come together towards service implementation. The rest is history. So the service might have had its origins in a concept of my own making, but it was ultimately created through a variety of fortuitous connections.
ーーIt seems that since Takashi Kawato has come on board as Chief Operating Officer (COO) growth has moved up a gear.
When I first started fundraising, I had never created a business plan or even touched a PowerPoint presentation, so everything was all so very confusing (laughs). It was at that time that a VC manager introduced me to Takashi as someone with outstanding talent.
From the very first time we spoke he was quick to understand, with a strong sense of responsibility and super-precise decision-making skills. The more you work with him the more you realize how amazing he is at what he does. As COO he is currently involved in every aspect of business, from development to organization-building and fundraising.
LegalForce’s current growth is all thanks to the fact that I was fortunate enough to find so many people who are so much more talented than I am.
ーーMany startups face challenges in bringing a good team together to establish a company. How were you able to bring such an outstanding team together?
What I would say is, if you find someone you think is good, keep on talking to them. Also, keep on receiving information from Wantedly scouts. The key point is how much you do those things. After that it’s all about how you can convince people how interesting the job is. Another point is to be honest and don’t make your company look better than it actually is.
It is the members who honestly communicated the concept of a product that at the time did not exist and those who believed in it and shared the same ideas who are the ones supporting LegalForce today.
*The contents of this article are current as of September 24, 2020.
With the mission of ``creating a society where straightforward aspirations are rewarded by focusing on people, business, and organizations,'' we are a domestic venture capital firm that invests in entrepreneurs who are serious about management from the time they are established, and supports them in expanding their businesses and going public.