AI Minds #077 | Ali Zahid, CEO & Co-Founder @ LegalMate

Demetrios (0:07) Welcome back to the AI Minds podcast. This is a podcast where we explore the companies of tomorrow being built AI-first. I'm your host, Demetrios, and this episode, like every episode, is brought to you by Deepgram, the number one speech-to-text and text-to-speech and voice API on the internet today. LegalMate is trusted by some of the world's top conversational AI leaders, enterprises, and startups, some of which you may have even heard of, like NASA, Twilio, and Citibank. I'm joined in this episode by Ali, the CEO and Co-founder of LegalMate. How you doing, dude?

Ali (0:44) Good, man. Thanks for having me.

Demetrios (0:47) Well, you've got an incredibly colorful background. You've started a few companies. You've gotten kicked out of a company before. I want to hear about all of it. What was the first company you decided to start and take through Y Combinator?

Ali (1:01) Yeah, first company was called Vanhawks. It was a smart bicycle company. We did a Kickstarter, became one of the biggest Kickstarters in Canada. Went through YC, spent a lot of time in China, Taiwan. Hardware is hard, and then you put software on top of it, it becomes even harder. We ended up exiting that company. It was a crazy time. Would never do hardware again, but learned a lot from it.

Demetrios (1:25) What makes a smart bike?

Ali (1:29) Yeah, great question. It was one of the first ones ever. It had a blind-spot detection system in it, so if there was a car behind you, the handlebar would vibrate, letting you know, “Hey, there’s a car there.” It would give you turn-by-turn navigation, so you can look down and it would tell you: take a left turn, take a right turn, go straight. It would track everything—kind of how far you went, where you went.

It also had a mesh network that all the bikes talked to each other, so if your bike got stolen and there was a density of bikes in the city, they would talk to each other. This was before Apple tags were there, and we kind of came up with that same concept.

Yeah, it was a beautiful bike. Everyone would say that if Tesla designed a bike, that's what it would look like at that time. Very proud of it. It was fun and a crazy journey.

Demetrios (2:21) Sounds like so many things that you would have to get right to make that work. So you basically started off on hard mode, and then you immediately went to easy mode and tried to become a VC?

Ali (2:36) Yeah, after that, after we sold the company, I took some time off, and one of my best friends and one of my mentors was an early exec at Shopify, and he was starting up his own fund. I ended up joining it. It was called Ramen Ventures.

The whole hypothesis was we wanted to be the first check in very early and help companies get to ramen profitability. I did that for about a year and a half, learned a lot. It was kind of a humble pie because I thought the job was so easy, but being a VC is not as easy as it looks.

And yeah, you're not a founder in that way, but it’s a very different skill set. And it's hard. Returning a lot of capital is not an easy task in the windows that you get. So I learned a lot about what makes a good company, what makes a bad company, and learned a lot about myself from there too.

Demetrios (3:34) Did you say ramen profitability? Does that mean they could eat ramen?

Ali (3:38) Yeah, yeah. That was the whole hypothesis, because we would write anywhere from 50k to 250k checks and work closely with the founders and try to get them to a product that made them enough money that they could pay for themselves. And that whole point was to get you to somewhat product–market fit from selling the product, instead of just building it—going out, selling it, and seeing what works and what doesn't.

Demetrios (4:06) Wow, that's fascinating. So you got the urge after hanging out with so many founders to go and start something again?

Ali (4:12) Yeah. From there on, I helped start a company called Relay Financial. It was, and is still, a neobank for small SMBs. And the whole hypothesis came from that time when it was really hard to get a credit card for your business as a small business owner in Canada, especially because we're Canadians.

I was always fascinated with banking and whatnot, so I ended up starting that company with two other co-founders and raising a pre-seed round, but realized pretty fast that we as co-founders were just very different. And I was fired out of that company. It was very like—you kind of wake up and you're like, “Oh, I'm not part of my own company that I started.”

And it was a journey. I learned a lot. It sucked. If you’ve ever been fired, it's not fun. It's like an ego death.

Demetrios (5:09) Yes.

Ali (5:10) And, you know, as a founder, I was like, “Oh, I'm so good. I went to YC. I've raised so much money. I'm a VC.” And then you come out the other side and you just get demolished in that way. And that was—it was good. It was good for me to go through that experience to grow from it.

Demetrios (5:28) So what did you do differently this time around now?

Ali (5:34) Yeah, good question. I wanted to start a company with the people I had very, very deep trust with—in terms of, I knew, “This is somebody I want to keep building with for the rest of my life”—very different skill sets and very similar values, if you may.

That's really important because when things get hard, if you don't have the same values, you see the world in a different way, and that usually doesn't work out. So this time I started this company with my best friend and my housemate that I've spent like 10-plus years with. I knew him deeply well.

So yeah, it was different in that way. Don't start a company because you think the founder profiles plus you will make a big outcome, because when things get tough or you see things differently, or if you don't have complementary skill sets, it probably won't work out.

Demetrios (6:33) So you didn't have to do any type of work on, “Hey, what are your values? What are my values? Where do we meet in the middle?” If you knew somebody for 10 years, I imagine it's pretty clear.

Ali (6:46) Yeah. I've seen them working, and it is—it’s intuitive at that time.

It's interesting because if you live with somebody and you kind of grow up with them, you kind of develop a worldview together. Every night at the dinner table—because we would try to eat dinner together as friends even though we lived in the same house—we would argue, we would debate each other. And that kind of gets you to come out and grow and make your own worldview from that perspective too.

At that time, I was traveling a lot too, because I would do a week or two in China, come back home for a week, and then go back. I was seeing the world very differently at that point than he was, and we would talk a lot about it. Now he lives in Lisbon and he's traveling the world from that side. So we had a very different worldview, and then when we came together, we knew our values because we would talk about them and argue about all these different things.

So yeah, it's a fascinating thing to start companies with people you're very close with, because my very first company I started with my brother. And this one is with my best friend. So I have a tendency to start companies with people I have very, very deep trust with.

Demetrios (8:02) So who was the lawyer in all the mix, and where did the inspiration come from to attack this segment?

Ali (8:09) Yeah. So, you know, we were talking—I’m originally from Toronto and Shopify was a big thing in my early career growing up there. I saw a lot of my friends building companies on top of Shopify as a platform, and I was like, “Hey, what will be the next platform shift that's coming that people will build on?” Because you've got Salesforce, that was like the OG, the first one. And then you've got Shopify, and that's kind of the second one.

And then the third one I would point towards more verticalized SaaS. So that would be like the Jobbers of the world, the Clios of the world—the vertical SaaS players, if you may. And we picked legal because my best friend at that point was working for Clio, which is a vertical SaaS for lawyers.

He kind of convinced me that lawyers are—there was a misconception at that point that it was really hard to sell to lawyers. People would say, “They don't like technology.” And he was like, “That's not true.” And he worked in sales, so he knew the story really well.

So we ended up starting a company with the thesis that there will be bigger companies built on vertical SaaS software. And you can build on those platforms now because they have distribution power, and then you can utilize that distribution power to build products on top.

Demetrios (9:27) And so what exactly are you doing?

Ali (9:30) Yeah, so we've evolved a lot over the last four years. We've pivoted. We raised venture capital in the initial days; we returned the capital back to the investors after we realized that's not the path we want to take.

Demetrios (9:43) Oh, wow.

Ali (9:44) Yeah, we're a very different company. We raised money in COVID time and it was to build a firm- or buy-now-pay-later for lawyers, for legal services, especially for immigrants. I'm an immigrant myself to Canada, so I knew that path pretty well in terms of when you need legal services as an immigrant in the US or Canada or any of the countries that you immigrate to, you don't have all the money in the world to pay for the lawyers.

And you don't have a way to finance those fees because no banks want to work with you—you don't have income in the normal sense of getting a paycheck; you get paid in cash and stuff like that. So we wanted to start there. It worked really well. We were growing. We raised money.

And then COVID happened, and interest rates started to ratchet up. When interest rates ratchet up, your business model stops working and you can't help the people that you want to help. So we realized that business model is not going to work, and that's not a company we want to build.

So we ended up returning the capital back to the investors and going back to the drawing board to see what we wanted to build. We talked to a lot of our users at that point and asked them, “Hey, what problems are you running into?” And a lot of them came back like, “Hey, I'm trying to set up Zapier or Make.com to automate my practice.”

I was like, “That's a simple thing. I am a developer; I've set them up multiple times. What are you trying to do?” Then we got deeper into it and learned all these different automations that they were trying to build. And we built all these automations.

But the reality was that we were working with small businesses and they don't have really good standard operating procedures put in place. So it was always chaos. We would ask them, “Hey, what automation do you want to build?” and they’re like, “I don't know. You tell me.” And that's not really helpful when you're not a lawyer and you don't know the deep expertise that they do.

But one of the automations that was always sticky was this transcription service that we built that would transcribe their phone calls and put them into the CRM. And that was before AI. This was like, “Hey, this is useful because I'm talking to my clients all the time. I forget what they say. I need these transcripts for my filing purposes.”

And that became really, really sticky. Every time it stopped working, I would get calls right away being like, “It's not working. What the heck happened?” And that's when we thought, “Oh, there is something here that is sticky that people buy and pay money for.”

So we doubled down on that and turned off our automation platform as a horizontal platform and just started to build on top of this transcription service at that point. So yeah, that's kind of the journey of pivots and being here.

Demetrios (12:31) Well, thank you for sharing all that, man. What a wild ride.

Ali (12:35) Yeah, it's been a crazy few years.

Demetrios (12:40) And so the transcription service being super valuable to folks makes a lot of sense to me in this field, because like you said, they're always talking to clients. All of that information—it would be great to have it. I just kind of assumed that since COVID, most lawyers went to Zoom and you have a bunch of Zoom transcription products. Help me reconcile.

Ali (13:10) Yeah. Yeah. There's this big misconception about the legal world and how it works. Being a startup founder and being in business and being an entrepreneur, most of the time you work with big law. These are big law firms—thousand-plus people. They charge you like a thousand bucks an hour. They're expensive. You jump on calls with them on Zoom or, in the old days, Skype.

But the majority of the law firms in small towns are small businesses, usually four or five lawyers max, and they're working with the consumer, if you may. And these people are not sophisticated. They are in a pickle or going through hardship, and they don't usually want to jump on a Zoom call. They're calling their lawyer and trying to talk to them on the phone.

If you're going through a divorce and you're trying to talk to your lawyer, you don't want to sit in front of Zoom when your husband's in the other room. Or if you got arrested and you're out on bail, you're not going to sit in front of a computer and be like, “Hey, let's talk to a lawyer.” You're going to pick up the phone and give them a call.

Same in personal injury: you got into an accident and you're going through different medical procedures. You're not going to sit in front of Zoom; you're going to call them. So that was a big learning for us. I assumed that they just get on Zoom and talk to them because of COVID, but yes, they did in COVID and then they came back real fast to using phones.

Most of their call communication happens on VoIPs. And that's where we realized that lawyers are just different. They're talking mostly to consumers. Consumers want to talk on the phone. They don't want to sit in front of Zoom. And these are short calls—four or five minutes—and they have a few questions, they get answered, and they move on.

Demetrios (14:52) How does it work? Is it that you install an app into a lawyer's cell phone or…?

Ali (15:00) No, we work with the VoIP platforms. So that's Dialpad, RingCentral, OpenPhone, Quo. And then, depending on which platform, either the phone call gets recorded or there's a transcription service that gets provided to us. Most of them get recorded. We get the recording, we transcribe it—depending on different parameters, because, you know, people's names, etc.

We transcribe it and then we put it in the CRM, mostly Clio, and attach it to the correct contact and matter. And then we do a bunch of other things like billing for them, creating notes, creating summaries, adding context into the matter file, etc.

Demetrios (15:44) Yeah, I'm sure the billing, going back to the automation—what it started from—it just feels like, oh man, that is probably an amazing feature because you now don't have to do that manual work. If you were on a call for 15 minutes, you bill them or you add it to the CRM with all of the details.

Ali (16:03) Yeah, there are a lot of different reasons why lawyers love it. One is billing, because if you bill by the hour, you don't want to sit there and add that time. It automatically does it.

Number two is, if you're on the go, you're taking the call from your car, or you do 15-minute phone calls—phone call after phone call after phone call—you're not going to take notes and you're not going to write those down. So, if you're at court and you're taking phone calls—especially if you're a criminal lawyer, they usually work with DUIs a lot and have dockets set in place for the court time—so they'll see five or six different clients at once.

And then the paralegals need to know what happened, what you talked to the client about. So having all the information in the CRM updated right away is really, really helpful. And then lastly is bar complaints and law society complaints. The client might say, “Hey, you didn't tell me about this,” or, “You told me and that was not true.” So the lawyers have to protect themselves and say, “No, actually, I told you exactly this, and here's the phone call. Here's the transcript.” It's almost like an insurance policy for themselves.

Demetrios (17:11) Have you thought about also doing it for in-person?

Ali (17:18) Yeah, that is something that comes up. We are looking into it just because if you're working with folks in the States and they have to go in person and sign, or if you're going and seeing them in person, they might want to record it. We've seen like Plaud-style small devices—a lot of lawyers love using those for note-taking. They will take those with them.

It's weirdly very, very famous in legal circles.

Demetrios (17:46) Yeah. You know what? My dad's a lawyer and I would always laugh at him because he had one of those and he would just dictate what he wanted to be written.

And then I think—what movie was it? Fear and Loathing in Las Vegas. Hunter Thompson's using that all the time to remember things as he's going through his trips. I was laughing so hard because it's like, “Oh, the only two people that I have a reference of using these are my dad and Hunter Thompson.”

Ali (18:22) Yeah, I have seen more lawyers use that than I would like to admit. If you're doing a lot of work, there’s just so much context that you have to remember.

So, well, it feels like you could get that information pretty easily from that little device and add it to your suite of offerings.

Ali (18:47) Exactly. Yeah, that's kind of where we're going in the future. We've learned that one of the biggest things happening in legal—and in the world—is that AI is kind of taking it by storm. But a lot of people look at legal LLMs and a lot of writing and think the lawyers are going to get replaced. But that's not the reality.

The reality is it's much more practical AI and practical use cases that they have on a day-to-day basis. And the most practical one is summarization and transcription for their notes because they're just taking in so much information.

The example I like to use is if you are dealing with a personal injury case, they can last anywhere from two to three to five years. And what you talk about in the very first phone call is really important until the last bit, because the client might have told you, “Hey, yes, I want to go see X, Y, Z doctor.” And when you're putting in the demand letter for the client on the other end, you're like, “Hey, you told me that you went to this doctor, but I don't have any medical records for this.”

That becomes important because when you're asking for the demand for the money and for all the injuries, if you don't have the proof, then you're not going to get it. And if you're working like 100 cases, you're not going to remember all of that information.

So now providing that context to different AIs that are working with lawyers becomes really important. And that's kind of where we're coming in. We're almost becoming this context layer for lawyers whenever they're talking or communicating.

Demetrios (20:19) Do you think about also taking that next action? So if you don't have the information, you are sending out an email to the client also?

Ali (20:33) Yeah. So it's funny—the very first use case that came out of it was when one lawyer called me and was like, “Can you write a CYA email?” And I was like, “What the heck is a CYA email?” And she was like, “Oh, you're too young. These are called ‘cover your ass’ emails. Every time I get off a phone call, I send these emails to my client to cover my ass.”

I was like, “What?” She was like, “Yeah, because we talk about something that the client will never remember, and they'll come back to me and tell me, ‘You never talked about this.’ So if you can just write a cover-my-ass email that I can send out right away after a phone call, that would be really useful.”

So yeah, we've started to take certain actions. We write these cover-your-ass emails, we draft them, put them in your inbox so you can send them out. There are tasks that come out like, “Hey, I talked to the client about X, Y, Z. Can you task my paralegal to draft these things?”

So a lot of work comes out of phone calls and verbal communication, and we take those actions that are right. But then there's also a lot of legal information that comes out of it that becomes really relevant in the long run.

Demetrios (21:47) There's something that I'm trying to reconcile in my mind, which is: you are saving lawyers time, but doesn't that mean that they are now billing less?

Ali (22:00) Not in the same way, because they're still communicating, they're still talking. A lot of lawyers, I would say, don't like billing by the hour, and the best ones hate it. What they want to do is optimize and become more efficient so they can help more people and reduce the time they're spending on a file, because it's just an ROI equation, right?

The more time you spend, the fewer clients you can take on, because there's elasticity in how much a client can actually pay and how happy they are. But they also want to provide you the best work that they, as lawyers, can do. So it's very tricky.

We don't work with big, big law and big law firms. Over there it becomes a bigger problem because if you're working with Fortune 500, they don't really care how much you bill them, so you want to bill them as much as you can.

But for lawyers that we work with, who work in small cities and are helping a single mom go through something or go through a divorce, there's a limit. They want to help these people and still get paid and do the best work they can in the most efficient manner.