TheChek News Flow

The Takeaway

• Generative AI startup Harvey is seeking $600 million

• New cash could fund acquisition of legal research tool vLex

• The startup has pitched investors on a valuation over $2 billion

In just over a year, artificial intelligence startup Harvey raised three investment rounds to develop software that takes the drudgery out of legal paperwork. Now the company wants an even bigger war chest—one that could help it acquire other companies.

The San Francisco startup has been talking to investors about raising $600 million at a valuation of at least $2 billion, more than double its valuation from a December financing, according to a person involved in the discussions. If it’s able to raise that much, it could potentially use the new money to buy vLex, a 25-year-old legal research service majority-owned by private equity firm Oakley Capital, to train its product, Harvey executives have told potential investors. Kleiner Perkins, which co-led Harvey’s last financing, plans to invest $100 million in the round, Harvey executives told potential investors.

Spokespeople for Harvey, Kleiner, vLex and Oakley didn’t respond to requests for comment. It isn’t clear if the $2 billion valuation Harvey is targeting includes the new capital.

While some young AI startups have considered selling to bigger, deep-pocketed AI startups, it would be unusual for a two-year-old startup like Harvey to buy a PE-backed firm. Harvey, whose service helps lawyers conduct research and draft and analyze legal documents, is interested in vLex’s database of regulatory and legal documents on topics such as case law and legislation, which it can use to improve the AI models it relies on from OpenAI, Harvey has told potential investors. Oakley bought its majority stake in vLex in 2022.

That would help it compete with other AI legal services. Last year, Harvey competitor Casetext sold to Thomson Reuters for $650 million, giving the startup access to Thomson Reuters’ legal content library, which it could use to improve its services.

Harvey’s fundraising, if completed, would bring its total funding to $700 million and extend a torrid streak of investments in young AI startups that’s continued unabated despite signs of reluctance on the part of businesses to pay a premium for AI-powered software. In one seven-day stretch in May, nearly two dozen generative AI startups raised almost $2.2 billion, data compiled by The Information show.

Harvey is competing with a number of other legal AI startups, including EvenUp, an AI tool for personal injury lawyers, and Leya, another AI assistant for lawyers. The crowded field has turned off some venture investors from backing any one of them.

Harvey, unlike some AI startups that have sought to raise money recently, generates revenue. In December, it hit $10 million in annual recurring revenue, or the subscription revenue it expected to generate over the next 12 months, compared to less than $2 million in April 2023.

The startup, founded in 2022 by former Meta Platforms AI researcher Gabe Pereyra and Winston Weinberg, a former lawyer at O’Melveny & Myers, has positioned itself as a safe way for big law firms to use the technological advances of generative AI. Some of its clients include legal teams at KKR and PwC. Harvey is supposedly named after Harvey Specter, the lead character in the legal drama “Suits.”

In December, Harvey announced it had raised $80 million, at a valuation of $715 million, the Information first reported. Sequoia Capital, solo investor Elad Gil, Sarah Guo’s Conviction and the OpenAI Startup Fund previously invested in the company.