Harvey on 9 September announced a $550m funding round at a $15.5bn valuation, co-led by Diffusion and Lightspeed Venture Partners.
The raise follows the introduction of Harvey’s first post-trained open-weight model and the launch of Harvey LAB, the Legal Agent Benchmark. This valuation means that Harvey – founded in 2022 – has more than tripled in value in just over a year, hitting $400m ARR.
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Speaking to Legal IT Insider about the latest financial milestone, which has sparked column inches of analysis, chief operating officer Katie Burke said the reaction among customers and prospects has been one of enthusiasm.
“Everyone is thinking a lot about what the next era of AI looks like and how they think about a variety of variables,” Burke observed. “One of those variables is thinking about quality. Another variable is thinking about control and how they think about exerting more control over their organisation’s data. And then the third is cost. Between those three variables, we have folks asking ‘how can Harvey help with that?’”
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The market, nonetheless, has some burning questions.
Why is more cash needed?
Harvey’s last raise was in March, bringing in $200m and valuing the startup at $11bn. Before that, last year, it had raises in December, October, June, and February, amounting to circa $800m. One of the questions in people’s minds, even if they don’t share it on social media, is why is further funding required?
Burke says: “The next stage of our business has two critical needs and inputs, and our most valuable assets are two things. One is people, and two is compute. And so as we think about those, the environment is such that right now we were able to be approached by high-quality investors and have the opportunity to raise, which gives us a unique position to accelerate our growth on both.”
She adds: “With that said, from a Harvey perspective, we’re being thoughtful and diligent about how we deploy that capital, what that looks like. So the goal is not necessarily to out-spend. It’s really to out-invest in the things that we care most about. It’s giving us optionality for how we think about people and compute growth for next year.”
At ILTACON in August, Harvey’s CEO and co-founder Winston Weinberg described the massive race for compute next year given the limit on new datacentres and infrastructure, and Burke says: “I know that it seems upfront like a significant investment. I think we’re going to be grateful that we have it as organizations think about their need for compute in 2027 and beyond.”
Compute strategy
One of the big unveils at ILTACON was Harvey Tenet, the company’s first post-trained open-weight model. After years of reliance on OpenAI and Anthropic, this is a big move for Harvey, and one that Weinberg says will effectively help it to insulate customers from rising frontier model costs. What does this tell us about Harvey’s strategy going forward?
“I think of this as additive to our strategy,” says Burke. “Our strategy actually hasn’t changed. This is complementing our existing strategy. So for folks who want a great legal AI platform to help support their daily work, Harvey can support that as is, and people can use our model selector in the exact same way that they’ve done. And they benefit from the massive investments we’ve made.”
She adds: “Even if you use Harvey’s platform off the shelf, you get an incredible experience that is really transformative. [Tenet] is for a section of folks who want to try a different model that gives them a higher level of ownership or more control over cost. And so all we’re trying to do is introduce more optionality for folks who want that.”
Interestingly, Burke says that Harvey assumes that “for the vast majority of our customers, they’ll be using the Harvey platform they’ve always known and loved.”
Tenet is likely to appeal most to large multinational organisations grappling with what the next era of AI looks like, particularly those exploring a shift from buying AI products to building more customised solutions.
Is this a bubble? Will it pop?
The raise has inevitably sparked a further round of conversations over whether legal tech is experiencing a bubble – and how long it can last.
Commenting on Harvey’s raise rather than the market at large, Burke says that the best investors in the world are making a judgment call that there is plenty of room to grow.
“If you look at our last two rounds, if you take a giant step back and you look at our last two rounds, you have Andreessen Horowitz and you have Lightspeed, two of the best investors in the world. Lightspeed are also investors in Anthropic. They have both evaluated the business as net new investments. And so as you might imagine, they’ve talked to Harvey fans, but they’ve also talked to Harvey sceptics. They’ve done the analysis. And they’re betting now that the upside for their capital investment is significant. And that, by the way, Harvey has a ton of room and runway to grow and needs this investment to do so.”
She adds: “I’m not going to sit here and tell you it’s not a significant investment. What I can say is I think it’s commensurate with the market opportunity that we see.”
The legal sector is forecast to be the next frontier for AI adoption after engineering, Burke says, commenting: “I think we’re seeing that possibility really come through in the data.
Rising cost risks
Speak to any legal organisation that has been gorging on an AI diet for the past couple of years and they will tell you that top of their strategy right now is managing costs as we move towards consumption-based GenAI pricing models. How is Harvey responding?
Burke says: “What we’ve done at Harvey is we are doing seats-based pricing, but with the option to do consumption for folks who are asking us for it, because some folks, as you might imagine, want to. And part of why we’re doing it is we want to make sure that we’re super thoughtful about making our decision on this front transparent and customer driven, but also really thoughtful around where the industry is going.”
Harvey is working with firms around “what they care about, what matters most to them,” with Burke observing, “Everyone has concerns about overall cost, but some folks say, ‘I care more about the quality of output, and I want to be able to control that.’ And so as we think about the future of our pricing model, we want to make sure we do it the right, thoughtful way.”
Harvey already has customers moving to a consumption-based pricing model. Its benchmarking data published in the summer is intended to give the industry a clear insight into the performance of output by task. Burke says that the goal is to give people clear data into cost versus output to help guide their thinking.
One way of managing costs is around controlling model selection – you don’t need to use Fable 5 to draft a basic litigation brief – and Harvey is building in the ability for administrators to pre-select model per task choices.
Burke says: “We have some administrators who, as you imagine, are like, ‘no, I want control over that, and I want to make that decision for our organization.’
And so all we’re trying to do is make sure that the optionality is placed where the organization wants it and to ensure that our configuration works well for them from a choice perspective and from a cost perspective.”
Global and mid-market growth
One of the interesting things to look out for over the next few months is Harvey’s global and also mid-market growth. They just ran an event in Australia and won Kim & Chang from South Korea as a client. Burke says: “We’re adding to our international base every day.”
Given the two limbs of investment she already flagged above, Burke says: “I would say on the people side of the things, the global growth component is a critical path for us. And as we think about our team in Australia and New Zealand, the market traction that they’re seeing is something we just want to continue to invest in.”
She adds: “As we think about growth, global is a big one, and then investing in our mid-market business is a big one too.” The mid-market push has been visible for some time, with Harvey emphasising that they have the chance to reinvent how work is done, not just experiment with new tools. As always, the issue will be budget.
For all the debate around whether AI valuations are sustainable, one immediate question for the legal sector is whether AI adoption can sustain its current pace. Harvey’s latest funding round suggests investors believe it can.