Denver Startup Chosen for Legal Tech Accelerator

TermScout ramps up through innovation programs

A Denver legal tech startup is among a group of nine companies selected to participate in LexisNexis’ Legal Tech Accelerator program. TermScout has already seen success through programs that sponsor innovation, and its founder hopes the national program will spark even more growth.

TermScout, originally named LexLucid, was created through the Global Legal Hackathon held in Denver in early 2018. What started as a concept to solve a legal problem through technology has grown into a startup company and a full-time job for founder Otto Hanson. The idea behind TermScout is to review boilerplate contracts and make them more accessible to regular users — both consumers and companies — and also to give a rating to agreements in order to provide users with a quick look at which companies are easier to work with, should the terms of those contracts become relevant.

TermScout is now available to business customers with a consumer version planned to launch next year. 

Hanson started TermScout in the Denver regional contest as part of the Global Legal Hackathon with Katherine Snow, then an attorney at Sherman & Howard. They both had had experience working with contracts through their legal practice — Hanson was at the time an associate at Davis Graham & Stubbs and focused his practice on startups, which included a lot of contract negotiation. He said it wasn’t unusual for a client to pay for review of a click-through agreement with a major company that would be putting those same contracts in front of countless other businesses. 

“It felt inefficient to me to have one client … pay me to do that and think there are 10,000 other businesses doing this review right this minute, thinking millions are being spent on legal fees doing the exact same analysis,” he said. “I thought, this is a broken system that is ripe for innovation. Why do that when we can do one review and license that out for a fraction of the cost?”

That idea was innovative enough to make it through the regional contest as well as the national competition. Hanson said his co-founder moved to a larger firm that required her full attention, but he later felt he had to make a decision between his legal practice or his startup. “There was no space for pet projects,” he said. So, in March, he started focusing full-time on TermScout. Since then, the company has closed a friends and family financing round and built a staff of attorneys and engineers as well as a pair of co-founders.

But taking that approach from an idea to a marketable business was no small feat. 

“The problem we’re trying to solve is a massive one,” Hanson said. “The unifying feature with everyone in our company is that we’re moving toward the idea that we should all understand the contracts and privacy policies that we sign. But how you do that, and monetize that, is the subject of much debate.”

One area the company is moving forward with is evaluating the contracts within the cloud services industry, a business that touches just about every company either through cloud storage or computing. Companies transfer data to cloud service providers, but should a data breach compromise any of that information, the agreements between the service providers and the user companies come into play. 

TermScout used that as one of its first projects that has since turned into an early business model. The company conducted a study of cloud agreements with interviews of users to guide the research. 

Hanson said the company relied on its own legal team as well as outside counsel to make sure it was using the appropriate level of sophistication. The company released the results of the study last week on its blog, finding an inverse relationship between favorability of contracts and market share, suggesting that companies trying to compete for market share are doing so in part by offering better terms to their customers. 

TermScout has so far pursued business by targeting users through search engine marketing — it targeted anyone searching for terms and conditions for top cloud service providers. Hanson said they ended up catching someone they didn’t intend to.

The company attracted the CMO of a rival cloud company who had been looking to do contract research of their own. Rather than going through with the study, they hired TermScout instead.  “I had always been of the belief that would be a really exciting opportunity area for us, but I believed we’d first need to build a compelling nationally recognized brand and then go to companies and say, ‘trust us to help us make your contracts more fair,’” Hanson said. 

“It was surprising to hear the CMO of a large company say, ‘We don’t have a way to do this now.’ It was a pleasant surprise.”

Hanson said TermScout will continue going forward by securing further financing and building expertise through the Legal Tech Accelerator. 

That program, which includes eight other legal startups, focuses on technology and product development, building company culture, selling to legal departments and law firms, leveraging legal data and identifying best practices in customer success, marketing and fundraising.

— Tony Flesor

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