Long Tail of Legal AI and Market Segments

Scott Stevenson is the Co-founder and CEO of Spellbook.

Spellbook is an AI copilot for contract review and drafting, essentially “Cursor for lawyers.” They have 4,000 customers in 80 countries, and to my knowledge is the fastest growing AI company in Canada, and the largest company in the world built on a Microsoft Word plugin.

Scott has been building in legal AI longer than almost anyone. We talk about why legal software was essentially untouched before LLM’s, why the market is so hot right now, if it’s sustainable, and how Spellbook navigates product differentiation compared to horizontal AI products like ChatGPT.

We talk about why fine-tuning your own models was one of the biggest mistakes early AI companies made, how to build a network effect as a vertical AI product, and Spellbook’s philosophy of “Don’t sharpen your axe when the chainsaw is coming out tomorrow”.

Spellbook spent a few years finding PMF before really taking off in 2022, and Scott shares their playbook for launching over 100 product experiments in three years, how to know when to lean in, and what it’s been like scaling Spellbook post-PMF.

Thank you to Numeral and Flex for supporting this episode.

Try Numeral, the end-to-end platform for sales tax and compliance: https://www.numeral.com

Sign-up for Flex Elite with code TURNER, get $1,000: https://form.typeform.com/to/Rx9rTjFz

Timestamps:

(0:30) Spellbook: “Cursor for Contracts”

(3:08) Building the world’s largest Microsoft Word plugin

(14:06) Why legal software was untouched before LLMs

(18:32) $30 trillion moves through contracts annually

(20:51) Why ChatGPT won’t replace vertical tools

(25:15) Fine-tuning was the biggest mistake in AI

(30:00) Differences between pro and amateur gamers

(37:38) Top-down vs. bottoms-up in legal AI

(42:27) The long-tail of legal AI software

(47:24) Building for models that don’t exist yet

(51:20) Skating where the puck is going

(1:01:35) The legal bill that cost 50% of his bank account

(1:09:33) Testing 100 landing pages in 3 years

(1:14:06) The moment Spellbook hit PMF

(1:19:17) Building new brands for each product experiment

(1:23:10) Raising a Series B with a tweet

(1:27:41) What Scott learned from Keith Rabois

(1:31:16) Scott's favorite new AI tool

Referenced

Spellbook: https://www.spellbook.legal/

Careers at Spellbook: https://www.spellbook.legal/careers

Playing to Win by David Sirlin: https://www.amazon.com/Playing-Win-becoming-David-Sirlin/dp/1413498817

Find the Fast Moving Water by NFX: https://www.nfx.com/post/find-the-fast-moving-water

Spellbook’s case study with Replit: https://replit.com/customers/spellbook

Twin: https://twin.so/

Follow Scott

Twitter: https://x.com/scottastevenson

LinkedIn: https://www.linkedin.com/in/scottas

Blog: https://blog.scottstevenson.net/

Follow Turner

Twitter: https://twitter.com/TurnerNovak

LinkedIn: https://www.linkedin.com/in/turnernovak

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