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Tips from Founders
Nov 23, 2016
Featured Interview - Andrew Arruda, CEO and Co-Founder of ROSS Intelligence Inc.
StartupSource's Liam Tracey-Raymont recently spoke with Andrew Arruda, CEO and co-founder of ROSS Intelligence Inc. ("ROSS"), to discuss ROSS's growth and to shed some light on the developmental timeline and hurdles associated with launching a tech startup. ROSS, initially developed in Canada and founded by University of Toronto ("U of T") students, is a cloud-based software program that assists users in answering legal questions efficiently and without relying on complicated boolean queries and keywords. While ROSS is still a relatively new product, it has quickly attracted significant media attention and immense interest from U.S. clients, which are predominantly law firms.
Liam caught up with the ROSS CEO after Andrew returned to his new home in San Francisco, California, following a week on the road.
Andrew, it's been a while. Thanks for doing this. How are thing going? What have you been up to recently?
Liam, it's great to hear from you. Happy to do an interview with StartupSource.
Lately, it's been lots of travelling. I've been all across the United States, as well as parts of Europe. Flying to Europe has been mostly to meet investors, particularly lately as we've been continuing to spread our product's scope and reach. In the United States, I've generally been travelling in order to sit down with current and potential clients, whether those be law firms, law schools or corporate clients. Client feedback has been enormously important for us, so getting face time is a necessity.
I've read online that ROSS started out of a 2015 university competition sponsored by IBM that challenged students to find innovative ways to use its "Watson" technology, made famous when it "competed" on a 2011 episode of Jeopardy. As a recent law school graduate at that time, what prompted you to get involved with the competition and how did you get introduced to your co-founders?
During my undergraduate studies at U of T, I had a good friend named Jimoh Ovbiagele who was a computer science student. He originally attended the University of Texas at Austin, but transferred to U of T because it has arguably the best Artificial Intelligence ("AI") department around. I met him at a couple of social events on campus while I was working at a small law firm to help pay my way through University.
A few years later - after I'd just graduated from law school - Jimoh called to tell me about a few breakthroughs he and a partner of his were making with AI and how they were applying it to law. He asked if I would be interested in getting involved. So I joined the team after what would eventually become ROSS was only a few weeks into development and I became ROSS's first teacher. I came up with different ways to start teaching ROSS how to understand the law and we started with Canadian employment law. From there, things really picked up and we ended up on the front page of The Globe and Mail online and on the front page of its business section. We received a lot of attention from around the world and, shortly thereafter, from Silicon Valley. We have been at it for about a year and half and everything has escalated really quickly. We spent half a year on the prototype and a year later we were off the ground in the United States. Within ten months of moving to the United States, we started commercializing the product. So things progressed very fast.
Where did the idea to use the Watson technology for legal purposes come from?
Just to clarify, Watson is part of our technology "stack," but just like any other powerful engine, it's what you build around it that makes things run. We integrated the Watson technology with our own proprietary system called LegalCognition. We will actually be making some announcements very shortly on LegalCognition, so stay posted for more on that!
Jimoh's idea for applying AI to law really stemmed from the fact that when he was younger, his parents split up and couldn't afford to finalize their divorce. They ran out of money throughout the process and Jimoh saw these huge legal bills and that stayed with him. Jimoh has also always been involved in computer programming. He actually started programming when he was around 10 years old. When he ended up getting involved with AI and seeing different ways to leverage it, the law was where he wanted to go. AI has the incredible ability to really level the playing field and democratize access to justice, and that has become part of our mission.
Prior to ROSS, did you have any entrepreneurial experience or exposure to the tech startup space?
Yes, by the very nature of the fact that I was at a small law firm, I was already very entrepreneurial. While working at a small firm through undergrad and law school, I was exposed to the realities of running a business. Attributes like service, the power of word of mouth, attending social events to meet people, etc. were all qualities that became important to me early on. I was also always fairly entrepreneurially minded. My goal by working in a small law firm was to eventually open up more branches throughout Ontario and then to grow it. This was before I got involved with ROSS. So I think that while an entrepreneurial mindset can certainly can be taught and learnt, I would say that the most successful folks are those who just have it in them from the beginning.
I understand you took part in one of Y-Combinator's ("YC") "batches." Apart from YC, what did the early stages of ROSS's development look like? Were there any other particular incubators, tech development programs or other forms of formal/informal mentoring that you and ROSS were involved with?
No, not before YC. Everything moved really fast. We started with ROSS by taking part in that Watson competition in early 2015, and then shortly thereafter we were in Silicon Valley. YC was one of our first funders, so we were in with YC very early on. Another one of our first funders was Dentons NextLaw Labs, which is not necessarily an incubator as much as it is a traditional tech investor.
We initially connected with YC after receiving advice from a close advisor of ours to reach out to them because we were moving to Silicon Valley. We connected with Dentons NextLaw Labs once word of ROSS spread through the legal community early on. So those were the early days for us.
What was it like working with YC?
It was absolutely fantastic. The thing is that in many ways, we never left YC. Seemingly every day I am either running into part of the YC family or we are strategizing on things with YC. I can reach out and contact any of the partners who have become very close advisors, so it's really awesome. Coming from Canada, it was invaluable for us to get thrown into the center of Silicon Valley and YC really helped us get tapped in.
The partners at YC have a great mindset. Do you know that it's harder to get into YC than any Ivy League school? Why I bring that up is that the people I met at YC were just like me: very straightforward, driven and wouldn't stop at anything to make their company successful. Surrounding yourself with those types of people has been fantastic.
What was the biggest challenge you faced negotiating financing terms and looking for other investors? Did YC assist in this area?
YC will give you advice, but they won't do it for you. In terms of meeting investors, they open up their network and you get to meet tons of investors through them. YC's "demo day" - the culmination of each three-month program - includes the who's who of all VCs and super angels, an extremely powerful room. YC arranges for introductions with those VCs and angels for you.
In terms of negotiating, if and when we had questions, YC has a great advisory network of people who could look over agreements so we would know what was standard, what's market, etc.
Before NextLabs and YC, how was ROSS's development funded? Were you and your team relying on bootstrap financing, angel groups or other forms of financing?
Before that, it was us maxing our credit cards and bootstrapping ROSS along. Then we got NextLabs and YC and we have since raised millions of dollars, but we haven't announced any of that"¦ I think there is this "startup" mentality of announcing how much you raised, but what we have been proud of is announcing our partners and who we have been able to work with - that's our focus.
What was the biggest challenge to actually monetizing your idea and getting in the room with potential clients?
The biggest challenge has really been concentrating on differentiating our product and in the early days, just making sure people knew what we were doing. Getting awareness out was key. I think now it's just about execution. I've never been more confident in what we are up to. We have some great additional announcements coming up. Law schools are beginning to use our product in the instruction of their students. We've announced that Vanderbilt Law is using ROSS and we'll soon be announcing some more schools. As people begin to realize that we're the first to implement what we've created, I think it now comes down to execution, execution and execution.
How has the legal industry in the United States reacted to ROSS, generally?
I think ROSS emerged at a perfect time for a new law solution. In 2008 a trend began, which has since grown even more prevalent in the United States, where you are seeing clients pushing back a lot on legal fees. In some cases, clients are not even prepared to pay for an associate's time, let alone legal research. As a result, legal research is something that most U.S. firms either can't bill to the client or are required to significantly under-bill. Legacy research systems can take up hours of research time, which ROSS can now do in minutes or seconds, providing firms a great competitive advantage. To be successful in technology, you need the right technology, the right team and it has to happen at the right time, and I think that all came together for us.
Do American investors/clients care that you're a Canadian marketing an American legal tool?
No, not at all. Canada has a great reputation for innovation and it has the best reputation for AI. So it all actually made sense. There have been other great legal tech successes from Canada, like Clio, and that product's main demographic is also American. I think U.S. investors and law firms interested in this type of technology have come to be okay with it coming from Canadians. The common law is the common law, so even when it came to the prototype we developed in Canada, we shipped product for U.S. bankruptcy within two weeks of getting to the United States. It all worked out quite well.
Do you have any idea what the next six months to a year look like for you and ROSS? Will ROSS remain focused on U.S. bankruptcy law?
A big part of what we were building when it came to our first product line, being bankruptcy law, was the basis of the platform itself. Now that the platform has been built, we are going to be releasing our product in other practice areas. Every few months we are going to be making an announcement - in fact, one will be coming quite soon - about some other areas of law that ROSS can tackle. We're now able to take ROSS's learnings from one area and, to put it crudely, copy and clone it and put it on top of another practice area's case law and legislation. Because ROSS has learnt how to be a good legal researcher within the common law, it's become pretty agnostic to the actual practice area itself.
We actually also "road map" directly with our partner firms. By that I mean we ask, "what practice areas should we go into next?" Really, legal research is just the beginning for us. We are going to start building AIs on top of AIs. We have already built the ability for ROSS to monitor the law around the clock for you. We are also working on teaching ROSS how to take the first crack at drafting some legal documents. We really want ROSS to continue developing in order to both widen its scope to other practice areas and then deepen its abilities. That's the play!
Do you have any advice for young, entrepreneurial Canadians searching for tips to jump-start their business ideas?
100%. I think there is some basic stuff that people need to do.
First, before you start going out there and raising money, whether you have a prototype or not, try to talk to as many people as you can who are in the industry or who you would target as users. Speak to 100 or 200 people. I know that sounds dramatic, but being a startup is a business. Sometimes people forget about that. At the end of the day it's about business. It takes an incredible amount of your time to make these things successful. If you are going to devote the next five, 10, 15, 20, 30 years of your life to something and you don't have enough time to find hundreds of people to talk to, even before you get started, it doesn't really make sense.
Second, bootstrap as long as you can. I think these days people are so focused on raising money, when really there is far more to creating a successful startup than just getting early money. When you do start raising capital, you should have a plan in that if you raise X amount of money, you can accomplish Y and move faster to Z.
Third, building a startup is a major commitment. It's kind of like when someone watches a really great sports game and then says to him or herself, "I want to go out and play baseball or basketball or whatever." But, to be able to play at a high level and be successful, we're talking about a massive commitment. Right now, I think that while it may be hip to be an entrepreneur, people should really think it through and decide whether they really want it. If a potential entrepreneur possesses the focus to have that difficult conversation with him or herself, I think that in itself is a great sign and they should go forward with confidence.
Do you have any other business plans/ideas aside from ROSS at this point?
ROSS is going to be my next decade or more. Since the legal industry is so vast, there are still many different directions we can go with ROSS. I look forward to ROSS getting more deals, but with many more different product lines.
Amazing - thanks again for doing this Andrew! Best of luck with everything going forward. I look forward to hopefully seeing ROSS back in Canada in the not too distant future.