Contrary Research Rundown #95
AI value or vaporware? Plus, new memos on SonderMind, Lumafield, and more
Research Rundown
As AI hype continues to rage, companies are starting to fluctuate between demonstrating value behind the hype, and continuing to fight the accusations of vaporware. One such company is Harvey, a legal AI platform.
Harvey was founded in January 2022 by Winston Weinberg, a former O'Melveny & Myers associate, and Gabriel Pereyra, a former research scientist at Google DeepMind. The company quickly gained attention in the legal tech space, securing its first funding round through the OpenAI Startup Fund in November 2022, which laid the groundwork for a significant partnership with OpenAI.
Harvey's growth has been rapid, with three major funding rounds in just over a year: $5 million from OpenAI in November 2022, $21 million from Sequoia Capital in April 2023, and $80 million led by Elad Gil and Kleiner Perkins in December 2023. This brought the company's valuation to $750 million just two years after its inception.
Initially launched as a provider of custom large language models (LLMs) for elite law firms and corporate legal teams, Harvey has since expanded its offerings to include workflow automation and legal research tools. The company has attracted clients such as Allen & Overy, Paul Weiss, and PwC, among others, while maintaining a relatively low public profile and limited transparency about its specific products and capabilities.
Despite Harvey’s investors and lofty valuation, it has its detractors. Most recently with a tweet on July 20, calling Harvey "complete smoke and mirrors." This statement, reportedly liked by influential founders and investors in Silicon Valley, was just the latest in a series of skepticisms around Harvey's capabilities and transparency.
The tweet comes a month after Isha Marathe, a legal tech reporter, published an article titled, “The Hype Behind Harvey: How the Stealthy Startup Is Raising Industry Eyebrows” on LegalTech News. Despite Harvey's sizable funding and high-profile clients, there's a surprising lack of firsthand experience with their product. As the article notes, "the phrase 'I have never seen what Harvey does' seems to be a commonality." This secrecy has led to both curiosity and skepticism, with one legal tech expert pointing out the unusual nature of Harvey's approach: "It is bizarre that after several years in business and several impressive funding rounds, I cannot find someone in the greater legal technology market who has tested the product or received a demo." This strategy of extreme stealth, while initially creating buzz, may be reaching its limits, as the article warns that remaining "in stealth too long and people will have questions and expectations that cannot be met."
However, just days after the tweet, Harvey announced a $100 million Series C round at a $1.5 billion valuation led by Google Ventures with participation from all of its existing investors, OpenAI, Kleiner Perkins, Sequoia Capital, Elad Gil, and SV Angel. While this was less than the $600 million at $2 billion the company had hoped to raise in order to acquire a large legal research firm, it still came with the announcement that the company had tripled from $10 million ARR in December 2023 to $30 million ARR.
Ed Suh, Managing Partner at Alpine VC, chimed in, “When a company raises a significant up round from insiders, and those same insiders put their reputations on the line publicly endorsing the company, it's much more likely that that's a sign of a substantive, high quality business than a sign of vaporware.”
Ultimately, only time will tell on Harvey's success. But as AI continues to pervade every sector, from healthcare to legal and beyond, each company is working to demonstrate the quality of its product and strategy, demonstrating traction and customer delight. Some will fail to live up to the hype while others become generational companies.
SonderMind offers a mental health platform that connects individuals with therapists and psychiatrists who are covered by their insurance. To learn more, read our full memo here and check out some open roles below:
SDET/Test Automation QA Engineer - Denver, CO or Remote
Program Manager (Provider Directories) - Denver, CO
Lumafield provides low-cost industrial CT scanners called Neptune and Triton, and a companion browser-based CT analysis system called Voyager. To learn more, read our full memo here and check out some open roles below:
Senior Machine Learning Engineer - San Francisco, CA or Boston, MA
Senior Software Engineer (Embedded IOT Team Lead) - Boston, MA
Check out some standout roles from this week.
Hex | San Francisco, CA, New York, NY or Remote (US) - AI Product Engineering Lead, Backend Engineer - Supernova, Fullstack Engineer
Traba | New York, NY - Senior Software Engineer (Frontend), Senior Software Engineer (Backend)
Alloy | Remote - Senior Software Engineer, Solutions Engineer
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Perplexity is facing legal challenges from major media companies like Condé Nast and Forbes over its use of their copyrighted content in its search results.
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U.S. senators are pressing OpenAI to be more transparent about its efforts to ensure the safety and security of its AI systems, in light of concerns raised by the company's own employees.
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OpenAI has reassigned Aleksander Mądry, the executive in charge of ensuring its AI models don't cause catastrophic harm, to a different role within the research organization.
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Cohere, a Canadian AI startup, has reached a $5.5 billion valuation in its new funding round and has signed on hundreds of corporate clients, rather than focusing on a consumer-facing products.
Speaking of Cohere, the company is enlisting the help of global consulting firms McKinsey and Accenture to help it win the business of marquee clients as generative AI companies seek revenue to back up their multibillion-dollar valuations.
Meta is releasing Llama 3.1, the first frontier-level open source AI model, to make advanced AI technology accessible to everyone and enable a thriving open ecosystem.
The accuracy gap between open-source and proprietary is narrowing and open-source is cheaper, faster, more customizable & sustainable for companies.
Zepto, a grocery and consumer product rapid delivery company founded in 2021, has scaled to $1.2 billion in annualized revenue and 13 million customers in less than 4 years.
Mark Zuckerberg argues that keeping AI model weights closed is ineffective in preventing Chinese access — he believes China would likely obtain them through unauthorized means regardless of their public availability.
Investors are writing huge checks into new biotech companies, but many of the breakthroughs remain unproven.
OpenAI announced SearchGPT, an AI-powered search engine with real-time access to information across the internet competing with the likes of Perplexity.
Four companies — Meta, xAI, Tesla and Andreessen Horowitz — are holding onto tens of billions of dollars worth of Nvidia GPU chips.
Sam Altman published an opinion article in the Washington Post titled, “Who Will Control the future of AI?” in which he details the critical choice the world faces in shaping the future of AI — whether it will be used to empower democracy and spread benefits, or to consolidate authoritarian control.
Runway's AI video generation tool, Gen-3, was secretly trained on thousands of YouTube videos and pirated films without permission from the creators.
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