Deal Velocity, Not Billable Hours: How Crosby Uses AI to Redefine Legal Contracting

Ryan Daniels and John Sarihan are reimagining legal services by building Crosby, an AI-powered law firm that focuses on contract negotiations to start. Rather than building legal software, they've structured their company as an actual law firm with lawyers and AI engineers working side-by-side to automate human negotiations. They've eliminated billable hours in favor of per-document pricing, achieving contract turnaround times under an hour. Ryan and John explain why the law firm structure enables faster innovation cycles, how they're using AI to predict negotiation outcomes, and their vision for agents that can simulate entire contract negotiations between parties. Hosted by Josephine Chen, Sequoia Capital Mentioned in this episode: Data processing agreement (DPA): GDPR-mandated contract between controllers and processors. Crosby handles DPAs as part of B2B contracting. Credence good: Economic term for services whose quality is hard to judge even after consumption. Used to explain why legal buyers value lawyers-in-the-loop and malpractice coverage.

• 0:00Speaker 00

  I think lawyers are quite good at learning. But in a law firm structure, as much time goes into apprenticeship, it's a teaching hospital. You don't actually spend that much time getting really good at teaching because you just do it through reps and reps and reps and reps. And so actually explaining things is something that like I think is going to be a very prized skill for not just lawyers, but for any domain experts, but in particular lawyers. And we're seeing it like when you can make an AI do this thing that you've been doing and not enjoying doing, it is like the most magical experience ever. And we're watching that like on a weekly basis.

• 0:46Speaker 01

  In this episode, we explore a fascinating approach to building services as software with the founders of Crosby, an AI-first law firm focused on legal contract automation.

• 0:56Speaker 01

  Ryan and John share why they chose to build a law firm rather than legal software, and how doing the work themselves creates unique telemetry and feedback loops that traditional evals don't capture. Ryan and John also discuss their approach to agent orchestration from paralegal level routing to senior associate level contractor view, and share their vision for a Robin Hood-like future where anybody has access to high-quality legal services thanks to AI. Enjoy the show.

• 1:23Speaker 01

  John and Ryan, welcome to the show. Thank you so much.

• 1:25Speaker 00

  Thanks for having us.

• 1:26Speaker 01

  All right, first question, maybe. Kick us off. What is Crosby? Tell us a little bit about the company you've built.

• 1:32Speaker 00

  Great, so Crosby is an AI-first law firm. We focus entirely on contracts. So the theory is that we can automate human negotiations. So getting people to agree on terms. And the best way to do that is with a contract. Contracts, turns out, are everywhere. They're your lease, they're your offer letter, and they're under most business transactions. And it turns out the best way to do this and to automate it is by building in-house a law firm, understanding how lawyers work, and then trying to replace as much of that agentically to get contracts closed faster.

• 2:04Speaker 01

  Can you talk about the decision to build a law firm versus to build legal software? Because many entrepreneurs in your path, you know, not in the legal space necessarily, but have chosen the path to build software companies. Why build a services company?

• 2:17Speaker 00

  So maybe I'll talk about like structurally why we sort of chose this and then John, you can talk about on a more applied level how we've built the team and how that works.

• 2:24Speaker 02

  For sure.

• 2:25Speaker 00

  So I think structurally, zooming out a little bit, you know, the market for legal services has always put a huge premium on human capital. And it's in some ways like a VC firm, I think like you're really investing in the people who work there and getting them better and better and better and trying to keep those experts or your partners around for as long as possible. And that made a lot of sense where a lot of that work was very specialized and couldn't really be offloaded to our technology. And there's a growing sense in the last 30 years, but in particular, the last three, that's changed. And you're looking now for a new model that allows you to actually innovate in the kinds of tasks you can offload from humans to technology. And it's just like has never happened in a law firm before. But all the raw materials are there.

• 3:09Speaker 00

  The experts that know how to build things are there. But a law firm partnership, for example, doesn't allow you to invest in speculative things like building technology because you can't sell equity and only law firm partners can take loans that are recourse. So it just doesn't work. But we had this theory from a structural standpoint that if we get the structure correct, and Adrian proved this five years ago, you would start to see really quick iteration cycles in the way that you can actually innovate. So that's the theory at least.

• 3:35Speaker 02

  Yeah. And then putting that into practice, I think having your domain experts sit side by side with your engineers creates such a unique feedback loop where it's more than just evals, it's actually using the product, experiencing it, doing user research and understanding what are the critical workflows, what are the biggest gaps, and actually being able to, you know, recognize and say from start to finish, like, you know, it's more than just a benchmark, it's actually like an environment to create that opportunity to, whether it's innovate on like the specific like, how do you review a contract faster? But also the individual bits and pieces of like, hey, is this red line exactly correct? Or is that the right word choice for what we need here?

• 4:13Speaker 03

  I think, you know, historically, people have attempted this. They've combined some software as well as the services side together. Tell us a little bit more about why some of these previous attempts might not have worked, but also today, operationally, you have AI engineers sitting next to lawyers. How actually does that work? Like, how do you make that successful?

• 4:33Speaker 00

  So maybe on that first part of the question, why hasn't this exactly worked before? And what might be different now, other than the obvious, which is, you know, the state of the art for, for AI?

• 4:45Speaker 00

  I think it actually hasn't been tried that much. And it's an extremely daring thing to do. And we've seen great innovation in accounting, actually, in management consulting. And when you even look at the corporate entities, fewer and fewer of those entities are partnership structures and they move to C corps. And that's a really good proxy for how much they invest in long-term technology. And in technology, we've had two, or in law, we've had two or three companies, Atrium and before that, Clearspire, actually tried this in a meaningful way. And a bunch of things didn't quite pan out. One was that tight coordination, which I think, John, you should speak more to, between lawyers and engineers. And we literally, in our office, have desks staggered, lawyer, engineer, lawyer, engineer, in order to get those feedback cycles and to incent them to really collaborate.

• 5:29Speaker 00

  And the other piece, I think, is, and this is what is truly unique, is that huge chunks of the qualitative, thoughtful work that lawyers are doing each day can actually now be delegated to machines. And this is like, it's hard to overstate how complex it is and how new it is.

• 5:47Speaker 02

  Yeah, and then putting that into practice, you know, I think that means two things. It means product velocity and it means actually instrumentation. How do you think about metrics? What we're doing is an operationally-heavy business, right? You can actually instrument and think about, we get a contract, it comes in, we send it out really quickly. We need to make sure we're meeting things like our SLA, which is measured by our turnaround time, how many human touchpoints were involved in actually every contract from start to finish. And if you can actually understand and say, hey, here are all the individual touchpoints, here's how long each touchpoint took, and here are the highest value touchpoints we can automate today, and just start, you know, hammering away at those. I think the other thing, when you think about product velocity, is it's more than

• 6:30Speaker 02

  just, you know, shipping product for the sake of shipping it. It's, do these leading inputs actually lead to customer metrics? Because even though this is an operational-heavy business, you need to be thinking about, what is the end customer goal that we're trying to solve for here? Ultimately, our customers come to us because they trust us and we do high-quality contract reviews for them. And, you know, it's companies like Cursor because they're growing so quickly. Like, these companies are growing faster than ever before and we really need to just, like, be able to meet their standards and their bar of, like, what excellence and what speed looks like. And actually taking, you know, all this product velocity, these input metrics, and actually converting those into these lagging indicators of like, are we meeting their SLAs? Are we delivering on time? Are we reducing the number of human touchpoints?

• 7:13Speaker 02

  And then that's actually how you can drive the impact.

• 7:16Speaker 00

  Maybe I'll just add something that we've only started to like really get our hands around now. I think a year ago, when John and I started working on this idea, we had a strong intuition that structuring this like a law firm was just accessible for companies who wanted to buy some sort of AI-enabled service because there's so much excitement and people want to try it. But there's something subtle, which is legal services. I think economists call it a credence good, which means that you only know how good it is after you've experienced it and consumed it. And you need an expert to actually tell you the quality. A layperson or even not a layperson, a sophisticated CEO often doesn't know by definition, how good their legal work is. And so you want to know that a lawyer is looking at it. And so by structuring as this law firm,

• 8:01Speaker 00

  I think we're taking like the most promising aspects of what AI can do, but still putting all of the sort of right safety parameters around it and structures of having an expert to tell you this is good quality or this, you know, and this is safe.

• 8:16Speaker 01

  How do you think about innovating on the pricing and packaging layer? Like, I think of law as, you know, one of the most interesting for the AI wave because it's one of the most, you know, technology disruptive. But also in terms of pricing model, if you're billing by the hour, making it more efficient doesn't, doesn't really help anything, right? And so say a word on how much pricing innovation you're doing.

• 8:37Speaker 00

  Yeah, so this was an early decision that we almost made without thinking too hard about it. And it's just, and then it's just been a constraint, which is no billable hour. And that's like for us, very dramatic, but for us, it was so obvious that it would be an interesting wedge to get people's attention. And it would align incentives within the company that we didn't think twice about it. And so what that looks like today is billing by the document. And I think there's a few things to say about that. The first is the billable hour. People have been predicting the death of the billable hour for like 70 years. It only became popular in the 50s, it's kind of novel. But it's just really durable and it makes a lot of sense for really sophisticated work where it's hard to ex ante predict how much work it will be.

• 9:21Speaker 00

  So actually, I think part of what we're innovating on, which we didn't, we really could not have guessed a year ago, is being able to predict from time zero, how long this piece of work is going to take, so that we can price it and still, you know, make sure that we're doing the work properly, that we align with the value that we're giving the clients. And, you know, that's like where things get really interesting because you have to predict, you know, how many times will this contract go back and forth? We have to look at it five times, three times, two times, in order to price the amount of, you know, in order to price the document properly.

• 9:51Speaker 01

  Yeah, so interesting.

• 9:52Speaker 00

  Yeah.

• 9:53Speaker 01

  And you've been a lawyer before. When you say you guys are automating legal contract work, maybe just take us through what a human lawyer does today when negotiating a contract? And what types of contracts are we talking? Are we talking NDAs? Are we talking merger agreements? Employment agreements, everything in between?

• 10:10Speaker 00

  Yeah, so so many points I could, I could go on, so don't cut me off.

• 10:16Speaker 00

  So, right now, we focus on NDAs, MSAs, DPAs. I think every tech person will be very familiar with this because you're selling a B2B product. This is what you're dealing with. And I'd say NDAs are sort of, from a complexity standpoint, you know, a good deal less complex than MSAs and DPAs. It's actually quite a step to get to the MSA DPAs. You know, NDA is two pages, MSA is 15, but they're probably, what would you say, like maybe 80 times more complex? There's just so many more terms to negotiate. And then you can go all the way up to the merger agreements, which is, you know, probably 1,000x more complex. Lawyers today

• 10:54Speaker 00

  really try to predict in looking at all the terms in a contract, the right things you should and shouldn't agree to, based on mental models of what's safe and unsafe and kind of having to calibrate for your business. You know, we want to get you to sign this contract. And so some of the clients we're dealing with are signing dozens of contracts a day, right? User Cursor and Clay and Unified that are growing so quickly. But you want to insulate the business from too much risk. And I think, so that's what lawyers do. And there's a lot of guidelines and general benchmarks consensus on like what is sort of market here. But it's really like ethereal. It exists in the minds of lawyers and two reasonable lawyers will disagree on what those things are. And this is a subtle last point that I'll just touch on, which is, you know, lawyers. Are essentially these private actors that are building a public good,

• 11:38Speaker 00

  which is the legal infrastructure, which is all the contracts that ever get negotiated, go into this public domain, sort of, of like, what is a reasonable allocation of risk? And so by automating this, and this is where, you know, I think John gets really interested in the generalizing benchmarks, we can start to actually say quantitatively, here's what that infrastructure should look like, not like here's my best guess of what's a reasonable contract, but like, we can actually give you a metric or a statistical guess on like, here's a risky or a safe bet to take.

• 12:07Speaker 02

  Yeah, I think concretely, taking the vibes and heuristics inside of a lawyer's head and converting that into an actual probabilistic quantitative number and saying like, hey, how likely should you be to accept Delaware or California or New York governing law when you're in the specific negotiation? I think there's something innately, you know, human about that in terms of that agreement. But at the same time, there's a lot of market data and you can actually start dissecting and understanding like, what are the levers you have to allocate risk in your business? And, you know, circling back to what founders should be thinking about as they're thinking about these businesses, like, you know, which state you go to court in is like, you know, there's only 50 states, thankfully, for now.

• 12:51Speaker 02

  Extending that into, you know, the long tail of what work you could do, I think it's really easy to confound like PMF of like, your customer is asking you to do this thing and will pay you to do this thing versus like being an actual services business, like, you need to actually understand what is automatable, what is repeatable? What are the specific signals and levers you have to push that automation forward?

• 13:15Speaker 03

  Maybe let's dig into that, actually. What, what parts of even the product today, what parts of it are the LLM or AI model? What parts of it are the lawyer? What parts of it are more workflow software? And how does that change over time, too?

• 13:28Speaker 02

  Yeah, I think it's been so interesting in the past, you know, five, 10 years, the amount of investment, I'm sure you guys have seen this firsthand, so I'd love your take on this, too, like, the amount of investment in NLP research. It's just like, you know, problems that were state of the art five years ago are now like warm-up problems in a Stanford like freshman year class.

• 13:49Speaker 03

  Yeah.

• 13:50Speaker 02

  And I think it's just been so interesting to say like, okay, this is what tools we have available to us now.

• 13:58Speaker 02

  In terms of like zooming back out into like the specific models and what we can automate today, you know, it comes down to context. When AlexNet and all the first models were starting to do image classification, right? You had a picture of something and you tried to classify it. All you needed was the picture. You know, now you start thinking about like you're looking at an MRI and you're trying to classify it. Well, you're looking at the MRI, but you also might get some additional context from maybe the patient's history and some other metadata about the patient. I think language models are now taking that to the extreme.

• 14:29Speaker 02

  The language models say basically, give me as much context as is necessary to understand this problem and make some type of decision on it. And to answer your question around the workflows versus the language models, today it starts with how can you context engineer for a human lawyer, right? How do you give all the right tools and these building blocks to expand what's available to the lawyer? And actually automate their manual workflows that they were doing. Once you have those building blocks, then it becomes a question, okay, what are the parts that a lawyer is doing? That you can now align the language model with and say, hey, how accurately can you replicate what behavior this human is doing? And I think my hot take here is I think everyone focuses on these general like, you know, reinforcement,

• 15:13Speaker 02

  like RLHF and all these general purpose, like aligning it to the maximum amount of data available. Really what you want to do in some of these specific scenarios is align it to a specific person, right? Because like Ryan said, like even getting two lawyers to agree on one specific contract may require a lot of back and forth intention, even if they work for the same firm. And if you can actually align it more accurately with one individual, you can start to say like, this is correct, this is wrong, because that person is internally consistent, even though two people might disagree on that.

• 15:44Speaker 03

  So you would have almost individualized models for each of the different lawyers? Is that kind of this scenario?

• 15:49Speaker 02

  Exactly. So I think the two, the two theses here are, I think also fundamentally, people are not thinking about per customer evals or per customer fine tuning enough. I think per customer fine tuning and evals are a really high ROI way, especially if you have a large ACV, to make your product reach multiple nines of accuracy. One of the dangerous traps of language models today is they get to 90% for basically free. The foundation models have done an incredible job and we love our partners at OpenAI, Anthropic and Google for giving us such wonderful tools.

• 16:22Speaker 02

  But one of the dangers is they get to 90% and getting them to 99 or 99.99 is actually extremely difficult. And part of all the levers you have are thinking about like, what are the ways I can adjust these prompts per customer? What are the ways I can fine tune this model per customer? And then you can actually deliver, you know, not just a four star experience, but a five star product experience. Cause really that's what you're trying to achieve at the end of the day. But I'd be curious for your guys' read in terms of like the amount of, you know, the investment for the language models and how you've seen it shape in terms of like these per customer, like these more enterprise focused verticals.

• 16:56Speaker 03

  I think it partly depends on what you know, data is actually in distribution for them. Cause I think whatever data is in distribution, they will, I think they are continuing to improve at a rate where they will probably get there very, very far. Versus, I think if your point is for a certain enterprise, most of their data, the really interesting data for their contracts, you will never have access to as a foundation model company. And we could get access to individuals specifically, and I can create, you know, more like our old fine tune model for you. That understands your context. Like, I think that makes sense because it is data that is not in distribution for the large model companies.

• 17:34Speaker 01

  I agree with that. Good take. You guys have some very discerning customers. I think I heard Clay and Cursor mentioned.

• 17:43Speaker 01

  Tell us about what they, what they like most about you. Is it that you're smart AI people? Is it that you can turn around the contract extremely quickly? Is it that you can turn around the contract cheaper than somebody who's not using AI? Like, what is the customer facing value prop?

• 17:59Speaker 00

  For these companies, it's, we've really crystallized this over several months. It's deal velocity. And what we think a lot about is just the, the acceleration of startups today. And everything is going faster, right? The sales motions are going faster. I mean, you look at Clay, right? Like they're, you know, enabling sales teams to move that much faster, the way that you hire, everything. And contract negotiations, which is like the sort of critical piece. It literally is the sort of way you plug in with your customers, the API for business is what we call it. Is kind of unchanged for 40 years, basically since the word processor came out. And so this idea that we can unlock speed in two ways, from the time that they send us a contract to the time that they get it back.

• 18:44Speaker 00

  This is typically the AE or the salesperson, we're just unlocking their speed that they get back to their client. Or also doing reviews in a more thoughtful way, so that rather than doing five or six back and forths, we can sort of predict, okay, if we just agree to this term and only push back on these three, we're going to save one turn. So this will be a whole week faster. These are the main things. And what's kind of interesting is, you know, as John was saying, sort of quality and taste are these somewhat intangible things that are threshold questions for these kinds of agreements, right? You have to hit some reasonable amount of quality, but the, but, but I think, and I think most great lawyers, the one, the GCs that I really admire and spend a lot of time with, understand their job as business drivers, right?

• 19:28Speaker 00

  And they are unlocking the growth of their companies and they, they position themselves that way. And so that's the key. And structuring ourselves with lawyers in the loop in a really clever way

• 19:39Speaker 00

  allows us to have the oversight of lawyers and kind of all the safety and the quality is what I mentioned before, but see how much we can really push the limits on, you know, right now we do a contract review and median times are a little under an hour. Can we get that to minutes, like while still having, making sure that the right terms get in front of the right lawyers at the right times? And these are like the fascinating questions. Yeah.

• 20:00Speaker 03

  And what does it take to get there, you think? Like what needs to happen for, for that to be possible?

• 20:05Speaker 00

  So I think what's really nice, and I think the reason why John and I were so excited about doing this interview together and why we typically speak together is we have this really unique marriage of, you know, technical expertise, really understanding the cutting edge of AI, as much as I love chat GPT. And, and like, and like what lawyers are really good at. And what's interesting is like when John and I started working together, I don't know if this is a fair call out, you know, John was constantly asking for evals. And I was like, that's fine, we'll work on this, but I can look at it in 10 seconds, tell you, right? Like just put it in my hands. And lawyers have a very visceral sense, because it's taste based, based on their training, based on their risk profiles, which is a little unique to each client, just immediately what looks good. And so the more we've been able to get, you know, prompting tools and actual sort of input and outputs in the hands of the lawyers that we have at Crosby,

• 20:50Speaker 00

  it's amazing, just like, it's just, it's just velocity. Like we had, we actually hired more engineers and lawyers at the beginning. And we were sort of. I felt like a little bit like we were sort of revving the engine a little bit without clicking to gear. And then lawyers came and it was like we stepped into gear. They just had people to give them like all the inputs of no, no, that's like right. That's sort of, we should go that direction.

• 21:11Speaker 00

  So that's, that's like a high sort of structural thing in terms of what it takes to get there. I do think that because lawyers provide almost an insurance to make sure that an expert said something looks good. They'll always be in a loop for most, for a lot of types of legal work. There are like, and you know, I can get into hot takes on what kinds of legal work is going to be fully automated. But I think the key here is knowing exactly when to escalate something up to a lawyer and to get their thumbs up. And to know that that liability is covered. And you know, right now we have malpractice insurance. We take liability for all the work we do. I don't think we exist as a business if we don't do that. That's just, that's the key here is we have to be so certain about the quality that we're able to, to, to stand behind it.

• 21:47Speaker 01

  So cool. Can you give us a peek at what's happening under the hood on the technology side? You mentioned, you know, you have three beloved foundation model partners. Like what are you using each of the different models for and what scaffolding have you built on top?

• 22:00Speaker 02

  Yeah. I think what we've found is the state of the art is not specifically tuned for contracts because there's not enough data

• 22:09Speaker 01

  Yep.

• 22:09Speaker 02

  in the corpus out there.

• 22:10Speaker 01

  Yeah, diversity of data is like bitter lesson. Even if it's just for the legal domain, you want models that are trained generally.

• 22:18Speaker 00

  And these contracts are so hidden away. The best data set is Edgar. It's when you attach SEC filings and that data has just been

• 22:27Speaker 00

  so overutilized.

• 22:28Speaker 01

  Yeah.

• 22:28Speaker 00

  And doesn't apply to these smaller. So yeah, it's been an issue.

• 22:30Speaker 02

  I think the other part is in terms of infrastructure really is constantly, like Ryan said, benchmarking this with all the environments we set up for these agents to understand what they're good at, what they're bad at. And bringing that back to that quality score that I mentioned earlier. This is why I think every team needs someone, both the domain expert and The engineer, and I think this is why we'll see more of these vertical AI startups. Is because having that person in-house gives you such a competitive edge, rather than maybe buying a data set from a large company that outsources a lot of like labeled data to contract lawyers or things like that.

• 23:07Speaker 00

  And then in terms of like, so you know, the way it's set up today, right, we have lawyers. Most of them have big law experience and are pretty proficient in these kinds of agreements.

• 23:18Speaker 00

  Who are driving, right? And so they're seeing, and this is what's quite interesting and to John's point, like the subtleties of the ways you change language within a contract are something that AI seems to struggle with a bit more than we'd imagined. So John and I like to joke, the difference between the term commercially reasonable and reasonable are actually substantively different things to a lawyer. They look very similar in the betting space. So those are like, but these are the nuances you really have to pick through. But what AI is amazing, so you have lawyers sort of driving there and really measuring, kind of intervening for the quality on actual edits to a contract. What AI is great at is summarizing, right? So being able to predict the right comment to make, to explain a change. Interesting thing we learned in about May, if you can give a really thoughtful explanation as to why we can't accept this language, or we

• 24:03Speaker 00

  or we really are pushing for that language, the counterparty will get, will sort of understand what you're getting at and accept it. It reduces turns, right? So it's worth investing in AI to explain what you're doing. Another thing we realized is this is actually very specific to a company. These aren't legal questions. This is like, you know, some of our clients are not super sophisticated, but you have to understand the fundamentals of the cursor IDE or the fundamentals of how Clay, you know, uses sales data. It's just like to, if you're a procurement person, to know what you're buying. So this all, and this happens in the contract, right? And so you can unlock a lot of speed for lawyers to feed them all this data in the right place, at the right time, in the right parts of the contract. And these are huge unlocks. As the client experiences it, it just feels like we've made it supernatural.

• 24:47Speaker 00

  You just, I mean, by that, I mean, very natural. You know, it's right in Slack. You just tag Crosby. We've made a big bet on Slack, I think, more and more apps. It's just so easy to use. And tag Crosby, you send out the document, you get it back, you know, within a couple of hours with some thoughts, with some comments and with an explanation. And so we've built quite a bit on top of that. I think email is the other obvious choice. But we didn't want any interface. We just wanted to feel like you're talking to somebody who's looking at this for you. And yeah.

• 25:13Speaker 02

  And circling back to the point on infrastructure. You know, getting an agent to be really good at NDAs and MSAs and DPAs and all the, like I said, coming back to the point around the long tail. You really want to, one, give agents really good tools. And then, two, give them really good context and make sure they're trained and set for a specific task. And when you're thinking about the specific task, whether that's an NDA agent for Cursor and making sure they're set up for success and actually able to review those contracts really, really quickly. Today, we've basically built a paralegal agent, which is like in charge of routing all the work from like, you know,

• 25:53Speaker 02

  that comes in from our customers in the same way that a paralegal would at a law firm and then routes it to a human lawyer and make sure the work is assigned effectively. The next step is like, how do you think about a junior associate, a senior associate and a junior partner at a law firm? And, and think about like actually replacing these roles in that way? And the actual specialty jobs that they're focusing on.

• 26:14Speaker 01

  Makes sense. You have any favorite workhorse models?

• 26:18Speaker 02

  I really like ChatGPT-5. I don't know.

• 26:22Speaker 01

  That's a hot take. Yeah. Me too. My teammates make memes for me about it. Wait, why? Yeah, you say more.

• 26:30Speaker 02

  I think it's actually been pretty good in terms of the thinking and pro models for some legal tasks. And Gemini 2.5 Pro has been really good at legal tasks as well.

• 26:40Speaker 01

  Super interesting. Do you think that the path to the promised land for you will be kind of RL tuning to each individual law firm and lawyer? Or do you think it's going to be prompting? Like, any religion or any gut instinct on what's going to take you to the promised land for automating these contracts fully?

• 26:59Speaker 02

  Well, I think, like Ryan said, the thesis is how do you still keep that human touch for like psychological safety? I think the promised land comes from really good context engineering and providing it to the, right? Because what great product counsel do and what great commercial counsel do is keep just a ton of information in their working memory about here's how this company works, here's the background on this specific playbook, here's how this NDA last time went when we negotiated against this company. Loading all that into the working memory is going to be really important. I think I'm really optimistic about a lot of these reinforcement learning techniques. So reinforcement fine tuning was something we experimented with early on for common generation like Ryan mentioned, and have experimented with it for

• 27:43Speaker 02

  a lot of other opportunities as well. And so, pretty optimistic there.

• 27:46Speaker 00

  My take is like, let the lawyers cook, you know? Get them writing prompts.

• 27:52Speaker 01

  Do your lawyers cook? Say more.

• 27:54Speaker 00

  Yeah.

• 27:55Speaker 01

  Are they writing prompts?

• 27:56Speaker 00

  We speak to so many lawyers, you know, who are like, all I hear about is AI. I want to learn more. I'm curious. I want to be part of it.

• 28:04Speaker 01

  Yeah.

• 28:05Speaker 00

  And, you know, you're like, have you used it before? No. And we're like, okay, how's this going to play? And they're like, it's like, it's like, the look on their face, we have, I'm thinking of one lawyer, particularly on our team, the look on her face, the first time she saw some of the tools we were doing, and she's just like, like, the lights are on. Like, it was so, it was so neat. And so, like, to get them access to like, actually like, write prompts, give instructions, teach all these things that are like, in your head, but you wouldn't even know how to explain them to someone. And it's actually quite complicated to like, try to tease these things out and explain them. I think lawyers are quite good at learning. But in a law firm structure, as much time goes into apprenticeship, it's a teaching hospital. You don't actually spend that much time getting really good at teaching because you just do it through reps and reps and reps and reps.

• 28:47Speaker 00

  And so actually explaining things is something that like, I think is going to be a very prized skill for not just lawyers, but for any domain experts, but in particular lawyers. And we're seeing it like they love, when you can make an AI do this thing that you've been doing and not enjoying doing, it is like the most magical experience ever. And we're watching that like on a weekly basis.

• 29:07Speaker 03

  What's the coolest thing a lawyer has created? And maybe just like, describe how you even create a culture where lawyers are prompting themselves. You know, they're, they're actually playing with this themselves.

• 29:18Speaker 00

  So I like, I'll, I'll give a big shout out like I, like, we have to give credit to Harvey for building a, building like such a center of gravity to show that like lawyer, that you know, they invented this job title, I think called,

• 29:31Speaker 00

  Applied Legal. Applied Legal Research, which is brilliant. And like, that is what lawyers are doing there, right? And you create this culture that really praises that, you know, it doesn't just praise. You know, you look at lawyers at law firms, they're measured really on one vector, which is ours building here. We're trying, and so we give a lot of public praise for being sort of meta-aware of the work you're doing and trying to measure it out. So we have, so we have one lawyer who like, you know, kind of mentioned, he thought we could be doing things better. And I said, tell me a bit more. And a week later, he built this like, I, I, I taught him Miro, which was like a huge aha moment for him. And he made this huge process map that like, it was like, we, we have to get it printed professionally. It's so big.

• 30:15Speaker 00

  And like, it was one of the best moments for all the engineers like, but like, we like, we, we were so excited about it. And so we created this culture, like, we really praise, you know, we're doing a lot of repetitive, the same kinds of work, but there are ways that we can just like step out of that and think bigger. And so we're really, and so you really incentivize lawyers, again, because your incentive is to get the TTAT, the total review time, lower and lower, to be the ones driving that. And so it's been neat and you know, there's so many other things that we're just beginning to scratch the surface of, like organizational design, structuring your team so that there's both lawyers and engineers all towards the same outcomes. And so they all have to collaborate together, but these are the keys and these are the really hard things.

• 30:51Speaker 03

  Let's talk about New York. You're building an AI company in New York. That is contrarian. Tell, tell us more.

• 30:57Speaker 00

  It's not contrarian to us.

• 31:00Speaker 02

  I think the New York tech scene has gone through a lot of different arcs. The first arc of, you know, the early 2000s, a lot of these ad tech companies that were emerging after, you know, the dot com, dot com boom where, you know, these like AppNexus and all these other companies that just exploded. And then there was a second wave of all these, you know, deeply technical engineers that came out of these ad tech companies spinning off and creating, you know, these more dev tool, you know, like MongoDB's of the world. In parallel, there were a lot of also training firms in New York, right? So you can think of the Jane Streets, the HRTs, the Citadel's. So the New York tech scene had this as like its base framework.

• 31:43Speaker 02

  What happened in the last five to 10 years is a lot of, you know, more and more senior engineers were coming out of those places. To the point where a lot of what building a startup is about is actually knowing what a great growth trajectory looks like. And understanding how do you not just go from like one to 10, but zero to one? And so these were great breeding grounds. And now we've seen a ton of companies start spawning out of like these, whether it's in dev tools and dev X or thinking more, you know, I think a really great example is Ramp where I remember one of the first, Kareem told me the story about how they had a YC company. It was called Paribus and it was based in New York. They said that I think they might've been the only YC company in New York in 2013 or something like that.

• 32:26Speaker 02

  The reason it's so interesting is because they had a candidate who applied, extremely talented developer, incredible resume. They asked him, why did you apply to work here? And he said, one simple reason, I filtered by New York City on YC and you were the only company there. And so we've come a long way since then. I think, you know, Ramp has been just an incredible place. And there's many other companies in New York now coming out of that as well. I think where you can take a lot of great young talent, teach them right from these people who worked at these places like AppNexus and all these other places of like other startups that have scaled. Apply those learnings and create a truly generational company like Ramp is.

• 33:08Speaker 02

  There was an interesting survey, I think Pat talked about this as well, or you might've mentioned it, where there was a survey from Neo or someone else where most new grads wanted to be in New York in 2021, 2022. And it's so interesting where if you just follow that as a leading indicator of like, where do all the really smart, hungry, high slope, you know, young engineers want to be? And I think that was New York.

• 33:33Speaker 01

  It also allows you to break out of the AI echo chamber a little bit and do things a little bit differently. And just hearing how you guys speak, it is, you know, it's refreshingly first principles.

• 33:45Speaker 00

  I do think like we, you know, we're probably here every few months for various reasons. And I feel like we come here to dream and then we go back to New York to build. And, and like, and the subject matter expertise there is so dense in finance, in the creative fields.

• 34:01Speaker 02

  And healthcare.

• 34:01Speaker 00

  Healthcare and law, obviously in law.

• 34:05Speaker 00

  And you sort of distill like all the really crazy ideas. Like you come here and you're like, it's not AGI, it's ASI. Like you, like you learn all this, like, right? And then you go back and then you like, you really apply it. And you sort of like, you know, like the water goes through the sand and it comes out with something that kind of just works. And that's been really special to be part of.

• 34:21Speaker 02

  Yeah. And I think for us, really, you know, taking these domain experts with really deep expertise and combining them with these like high slope new grads, as well as these people who are like either experienced founders or want to be founders again. Our entire founding engineering team like is all either previous founders or wants to be founders. I think that mentality is really what it takes because in some ways, like Ryan said, you're like building these pods and like these, you're working with one or two lawyers and your customer is sitting right next to you is like such a unique opportunity in terms of like the amount of dev cycles and like product loops you get. And I think that's really special.

• 34:57Speaker 01

  I mean, I think your name itself kind of echoes your, your like tie to New York. Maybe tell us a little bit about the story of the name.

• 35:05Speaker 00

  Well, there's a lot of myth and a lot of lore over the name of Crosby. One of the myths is that John and I were going these long, searching. Existential walks back last summer through SoHo. And we kept finding ourselves on Crosby. And it's a beautiful old street in a very modern neighborhood. And it kind of to us spoke about being an essentially New York company that has all the best artisanship of the old and all the modern steel glass of the new. And it combines it nicely. But that's just one. It could be after the hockey player also.

• 35:36Speaker 03

  Could be after the hotel, could be anything.

• 35:39Speaker 02

  Our office manager's dog was named Crosby.

• 35:41Speaker 03

  Really?

• 35:43Speaker 00

  Yeah.

• 35:43Speaker 02

  Her dog.

• 35:44Speaker 03

  Maybe tell us a little bit more also in terms of just having built in New York. Like, what is different about the company culture, actually? Like, how do you think it is distinct from a typical AI company, maybe here in SF?

• 35:57Speaker 00

  I do think, I don't know why this would be a New York thing, but I'm seeing it more and more in some of our friends' companies, other Sequoia companies in New York. There's a huge bias of starting things, to being founders. And the way that we've been able to convince people to join us is by saying, this will be your stepping stone for four or five years. And we have to live up to that, by the way. Like, it's actually not, it's like, it's not trivial. We have to make sure that, like, when we get invited to a founder dinner, we send someone else in our stead, which I think annoys people, but it's pretty awesome for them. But what's interesting is in this type of company, which is in a lot of these in the application layer, as John mentioned, you need that level of autonomy and agency and creativity of that founder mentality of like, this is my thing and I'm going to figure out how to build it with my pod of lawyers and I'm going to solve this and then I'm going to come back.

• 36:41Speaker 00

  And so, I don't know why, but we keep seeing more of this. I do think Ramp's a big part of the story. I think Ramp has become a founder factory and sort of culturally that permeates all throughout New York and we feel it. So I'm actually like really excited and I'm curious to watch the next four or five years of like all of these kind of, like the next wave of folks coming out and starting things.

• 37:00Speaker 02

  Yeah. I think one other uniquely New York thing is just the emphasis, it feels like, on design. You know, Ramp is a product that's really prided for its like great design and product taste. I think a lot of that can be traced to just the depth and creativity levels at these design agencies and other great firms. One last thing. People in New York like pizza. I feel like it's really hard to get a proper New York slice or any slice in San Francisco.

• 37:25Speaker 03

  That's how we celebrated.

• 37:26Speaker 02

  That's how we celebrate.

• 37:27Speaker 03

  Pizza.

• 37:28Speaker 00

  So we have real two pizza teams in New York, not like Domino's teams.

• 37:32Speaker 03

  Yeah, no, very real. Okay, we need the hot takes. What type of legal work is going to be completely automated?

• 37:38Speaker 00

  So, legal work.

• 37:41Speaker 00

  There's about 11,000 law firms, which account for 8% of all law firms in the US, that account for about 75% of revenue. Still a lot of law firms, but there's this huge tail of these other, you know, 92% that make up the rest. And those 92% focus on individuals, helping you with child support payments and leases and like all the sort of human things. And they're like horribly underserved by lawyers. It's almost immoral. And we talk about it all the time in law school. And everybody has really lofty dreams to kind of do something about this and it's not really being touched.

• 38:17Speaker 00

  And I think this work will be automated entirely because the alternative is nothing. And I think, and I just, and like we'll have, and like, and like, I suspect that anybody right now can negotiate a landlord kind of lease with ChatGPT today. And I think a lot of people do. I think that the corporate law firms are gonna, are here to stay for quite a while. And those jobs are quite safe. So it's like sort of a net new type of legal SKU that's going to be totally automated. But it's not that we're taking a lawyer's job and automating it. It's just, nobody's doing it today.

• 38:55Speaker 01

  It's net new market creation.

• 38:56Speaker 00

  Totally.

• 38:56Speaker 01

  Why isn't it just ChatGPT that does it though? I already kind of turn into it for legal advice. Maybe, maybe bad strategy, but I.

• 39:02Speaker 00

  I think, I think for a lot of this work it is. I think like the, again, the alternative is nothing. The alternative is having nobody look at it. And my hope is that if you can add so much leverage to lawyers that like, you know, rather than looking at two contracts an hour, they can look at 500. Like, shouldn't we be able to have more and more people getting serviced? Like that, I think, when we talk about the, our mission of Crosby is very lofty. It's building a better legal infrastructure with technology. This is what we're talking about. This is like, just so leveraging the lawyers that we have. This is, it's an optimistic, I think, I think it's the golden age for what lawyers are going to be able to do in the next five, 10 years, being unlocked by this.

• 39:38Speaker 01

  Yeah. Do you have any North Star metrics that you run the company on?

• 39:41Speaker 00

  Yeah.

• 39:43Speaker 02

  We run on total turnaround time, which means time in to time out. How long does the contract take across all of the back and forths? So like Ryan said, you know, a contract negotiation might have five back and forths or two back and forths. If you add up all the time that Crosby has spent looking at a contract, that's our North Star metric. And that's very counterintuitive, right? Most law firms are not trying to maximize that number, but like that's how they earn their billable hour.

• 40:13Speaker 01

  Yep.

• 40:14Speaker 02

  For us, it's about aligning incentives. We want to not only do a faster job on each individual term. It's also about how do we do a better job? How do we like understand the right negotiation levers for the business? I'm sure you all have negotiated your fair share of term sheets that are really high velocity coming back and forth. For us, it's really thinking about like, how do we minimize those back and forths and also get faster every time?

• 40:40Speaker 01

  How do you make that incentive align for your customer? Like if you, if you go back to the term sheet example, the fastest way I have of getting a term sheet signed is to increase the, increase the post money valuation. So like, um, how do you make sure that, you know, you're not giving on your customers negotiating leverage in order to kind of maximize that North Star?

• 40:56Speaker 02

  Exactly. It comes back to guardrail metrics as well. And so we really pride ourselves. We have, I think, one thing that most, you know, startups that think about these vertical AI opportunities is they should have some type of team focused on either environments for their AI agents or quality metrics for their agents. And the reason that matters so much is because it's very easy to get misaligned incentives of like taking shortcuts or doing work that's like halfway there. We have people on the team, both lawyers and engineers, only focused on how do we make sure quality is consistently meeting our customers' needs? And that means not just doing good legal work in an objective sense, but also, hey, is this aligned with our customer's risk profile?

• 41:40Speaker 02

  Is this, you know, in the best interest of the customer's negotiation? And distilling all that down into a guardrail metric, combining that with the total turnaround time, we call it T-TAT. And then. I've learned that also from Ramp, you know, if you have pithy metrics that you can really like rally behind that are fun to say, it actually does help. Just because people start, we, yeah, we just came up with it, you know, at one meeting and now the entire office, we just go around saying tit tat. We also called this other metric, it's called HRT, which stands for human, H U, review time, R T. And so we're also trying to reduce the amount of hurt. I like the puniness of this. And I think,

• 42:22Speaker 02

  it's funny because I think metrics, you know, you can talk about them from a product perspective, but there's something very innately human and you want it to feel empathetic, right? Like reducing hurt feels more value aligned with how our lawyers should feel and also the same way like quality is so aligned with what our customers are expecting from us.

• 42:39Speaker 00

  I think one thing maybe I'll add.

• 42:42Speaker 00

  What you're, the other ways that you have to increase leverage in a negotiation, you know, in a fund raises, like set deadlines, like increase the pressure, like there's a lot of ways and

• 42:55Speaker 00

  I think contracts are so interesting because they're so human. Fundamentally, it's just like an abstraction of a human to human conversation about like, what can we agree on? And so last summer, when we were kind of researching the idea, I'd actually spent time in India. John said this story countless times. And there's a lot of offshore legal services that do sort of back office, very routine contract negotiations for Fortune 500 global companies. And they just take five rules and apply those to a contract and just kind of go back and forth. And like negotiate against them is like negotiating against a wall. They just, you know, they kind of don't get creative. But I had this one guy and I said, so like, what do you do if you get stuck? He's like, I have this really creative thing I do. I just call them and tell them that they're not going to want to say no to, you know, this company. And we have a really long life and we're going to want to interface. And I was like, are you allowed to do that?

• 43:39Speaker 00

  He said, I don't know. I just started doing it. It works. Like it was so human and it made me so appreciative of like the human element of these back and forths. And so I do think like, We're unbelievably optimistic about how much time we can reduce and how much more efficient we can make the transactions between entities. But also, there's an essential role for those counterparties to have in interfacing with each other to have what we call meeting of the minds, right? To really get to agreement.

• 44:07Speaker 01

  Totally.

• 44:07Speaker 02

  And at the same time, I also wonder if we had an AI agent with some type of reinforcement learning, if it just would reward Hack and realize that picking up the phone would 100% invert if I give it a tool call for phone calls, but who knows?

• 44:21Speaker 01

  Well, how do you think this plays out, though? Like, let's say, I imagine your agent has never negotiated against another one of your agents before in the field, but like, eventually, I'm guessing, people will have their agents negotiating NDAs on both sides, right?

• 44:33Speaker 00

  So I think this is the most beautiful essence of what we hope we can achieve here, is being able to capture each party's preferences with their own sets of agents and have them simulate the negotiation.

• 44:46Speaker 01

  Yeah.

• 44:46Speaker 00

  And be able to show an auditable record of here was the first back and forth, and then the fifth and the seventh, and here's where we netted. And what do you think? Is that reasonable? And that's your starting point. And these are fundamentally collaborative negotiations. These are not adversarial. And so the goal here is actually to be the collaboration platform to get people to agreement faster.

• 45:04Speaker 01

  So interesting. So each agent will kind of have a sense of everyone's risk preference, their bottom line, their tolerance for waiting out the negotiation.

• 45:13Speaker 00

  Exactly. And I want the agent that's gonna like bang its hand on the table.

• 45:16Speaker 01

  Yeah. And like, that's the one that you're only gonna spend more compute on.

• 45:20Speaker 00

  The high inference agent.

• 45:22Speaker 01

  Yeah.

• 45:23Speaker 02

  And yeah, I think fundamentally, you know, partitioning the data, making sure like this agent doesn't have access to the other agent's data and making sure, like, it's just really taking what law firms have already figured out of like, you, you know, set up a wall between different teams and say negotiate against each other. You can apply that even in an easier way in a system setting because you just don't need the agents to talk to each other unless through their specific guardrails.

• 45:47Speaker 01

  Great. I love to bring it home by asking a bit about the future of how you're gonna see Crosby and how you see the legal industry playing out. What do you think the legal industry looks like in 10 years?

• 45:55Speaker 02

  You know, I think, coming back to the point on taste. Increasing the leverage of these senior partners at law firms. I get a little worried about, you know, the junior associates and the paralegals and the opportunity for them. I can imagine it just looks like a senior associate managing an army of agents who can increase their leverage. Maybe for a personal injury firm, it's managing intake and someone managing actually drafting the demand letters and then actually reviewing them. The main job of the person is to show up in court and everything else is handled by an agentic system. But I'm curious for your take.

• 46:33Speaker 00

  All right, I'm going to try to do this quickly. In the 10 year period from 2007 to 2017, in-house legal teams grew 200% and law firms grew 30%. And then again, from 2014 till 2024, they went from about 320,000 to 440,000. In-house teams are really, really expanding. And the narrative seems to be that legal work is getting more complex and companies need much bigger in-house teams. And in-house teams have a lot fewer constraints than law firms. They can have not just lawyers, they can have paralegals, they can have legal operations, they can have different types of work specializing. And they've become really creative and it's this kind of huge change that's been going on quite quietly. My hope is that, you know, because these are not companies that specialize in legal services. They're just, you know, this is the legal function.

• 47:16Speaker 00

  You'll see more and more specialized companies that are AI first, because it's just so obvious, that are truly changing the way legal services get delivered. We are like a small part in this and I'll go back to what I said, this is the golden age. I think like this is like, we've never seen true innovation in the legal market. And we're just at the beginning. I think things are going to look very different.

• 47:38Speaker 03

  And maybe given that future, what should somebody in law school today do? Should they drop out? What should they be doing?

• 47:44Speaker 00

  I think this will go back to the fabric of our company. I think you want to question absolutely everything. I mean, like, question the way your professors tell you to write footnotes. Like, is that really necessary? Question all, there's so much dogma. And then balance that. Like, it's so fragile with understanding the brilliance of legal academia. This is what makes society run. Professors, my professors at Stanford truly are some of the best mentors I've ever found and some of the smartest people. And so, don't be arrogant, but question everything. And come, take time and do an apprenticeship with Crosby. We'll teach you how to prompt. But like, it's important. Like, these are the skills that I think are really gonna matter is how to harness all the power of AI.

• 48:28Speaker 00

  And there's so much room to change things and there's so many things that are accepted as just facts that can all be permeable and it's hard to see when you're in it.

• 48:37Speaker 02

  Yeah, I think, I won't say which company, but I went to a conference. It was all general councils. Imagine Fortune 500. I won't name the conference because I would like to go back. But I sat next to this gentleman. He was the general counsel of a very large telecoms company. Maybe one of our phones runs on this telecoms company. And I said, hey, have you like ever tried any of this chat GPT or AI stuff? And he said, no, of course not. My CEO keeps telling me to. I refuse. I do not want to try it. And he's just, you know, I think to Ryan's point, like, there's arrogance on both sides of like, you know, questioning everything, but also like, you know, being stuck in the old ways as well is dangerous.

• 49:19Speaker 03

  Makes sense. Well, I think question everything and try everything seems to be a good theme for all of us. So, thank you guys again for coming on. Appreciate it.

• 49:26Speaker 02

  Thanks for having us. It was really fun.