Harvey’s $8 Billion Question: Can AI Startup Match Its Hype?

Legal AI startup Harvey’s valuation has jumped by billions this year, a supercharged growth rate rare even in a climate of surging demand for artificial intelligence tools.

In February, Harvey raised a Series D funding round valuing the company at $3 billion. In June, a Series E round valued it at $5 billion. The startup raised even more at an $8 billion valuation, Bloomberg News reported Wednesday.

The big numbers in rapid succession has stirred legal debate over how the company can increase revenue to support such a valuation jump.

Harvey’s ambitions come as the legal technology industry, more than two years into an AI-supercharged boom, is starting to sort into two tiers. A handful of companies, including Harvey, have raised nine-figure sums and packed client lists with heavy hitters. Another group—generally offering more niche applications—is trying to break in. More than 1,000 legal tech companies bring in at least $1 million in revenue, and they’re all—including Harvey—seeking shares of law firm and corporate legal department software budgets.

Whether Harvey lives up to its valuation will depend on the answers to some key questions. Can its expansion into Big Law continue to rack up customers while getting existing clients to renew? Does it have a technology edge over competitors? Can it raise its prices if law firms find value that they can’t get elsewhere? How much can it grow by appealing to smaller firms and corporate legal departments?

Harvey announced on its three-year anniversary in August that it reached $100 million in annual recurring revenue, about two months after the Series E round valued the company at $5 billion. Whatever the valuation, a 10-digit number makes for an unusually high revenue multiple, but it’s less out of place amid a broader AI hype wave that has sent tech valuations soaring.

Traditional software-as-a-service companies shoot for a valuation of 10 times annual recurring revenue, according to Rob Litterst, whose company helps software vendors price their products. Harvey was at 50 times ARR to valuation in August.

“There’s nothing normal about the environment we’re in right now,” Travis Steffen, founder of multiple software companies, said about AI’s impact. “It’s so weird in tech today to really know what the hell is going on.”

Legal Transformation

A growing share of legal leaders, including innovation chiefs at Big Law firms, are true believers that AI will usher in broad changes to their business. They are prepared to spend more on the technology in coming years. As talk of AI disruption becomes ubiquitous and fuels urgency around decision-making, Harvey has a valuable commodity: attention.

Harvey’s edge in the market so far, some say, boils down to early enthusiasm and the switching costs law firms would endure to change course. But with many firms signing only one-year deals with generative AI products like Harvey, the early lead isn’t guaranteed to last.

Skeptics say Harvey’s technology is mostly legal packaging for large language models that provides little long-term advantage. The startup touts AI-powered workflows for lawyers, document analysis, and drafting tools.

Privately, some innovation leaders at law firms think the valuation attached to Harvey this early is harmful to their efforts to make law firms more efficient.

Gartner analyst Weston Wicks said that for Harvey to grow into a multi-billion dollar company, it would have to be one of the top legal tech giants—the kind that has every law firm, especially the top 100 or 500 law firms, as a subscriber.

So far, Harvey said it has 50 of the largest US law firms on its customer roster. It’s a list that’s made it the envy of competitors, along with financing from the likes of Google, OpenAI, and Sequoia Capital.

Using a typical software multiple of 10 times ARR for valuation that Litterst described, Harvey would need to grow its revenue eightfold to get to the reported $8 billion valuation.

Investors are placing bets on which companies will cash in on the demand for AI-powered legal tech, believing that long-term winners in the space are emerging now. One reason is AI could change the pricing equation, possibly transforming work in a way that would allow companies to pay for software like Harvey out of their labor budgets rather than their software budgets.

But growth among law firms—either by carving into labor budgets or simply adding more firms—isn’t without its hurdles. Harvey also has to contend with what skeptical law firm leaders see as a potential threat: They’re reluctant to use their own lawyers to train a tool that could be used to replace them.

Harvey CEO Winston Weinberg said the company’s product won’t result in fewer lawyers getting hired and could boost Big Law talent by making the profession less of a grind.

“There’s a world in which, actually, this is super good for the profession and very good for recruiting into the profession,” Weinberg said in an interview last month.

AI legal tools aren’t yet leading to fewer lawyers or dramatically less time spent on tasks, surveys have shown. But the attention being paid to AI companies like Harvey has caused clients to think law firms should already be transformed.

By Weinberg’s own admission, Harvey’s valuation rests on a much broader thesis than one solely about his company.

“Legal tech is going to become a lot larger part of the legal industry, and that is, in one sentence, the main reason that I think justifies the valuation,” Weinberg said.

Soaring Valuations

Founded in 2022 by Weinberg, a former O’Melveny & Myers associate, and Gabe Pereyra, a former Google DeepMind researcher, Harvey hit the market with early partnership announcements with A&O Shearman in December 2022 and PwC just three months later.

The quick bump in value from $3 billion in February to $5 billion in June of this year, may have been an attempt by Harvey to capitalize on maximum AI hype, Steffen said.

“There’s some level of risk any time you see that because realistically you’re not using fundamentals when you’re valuing a company that much higher that quickly,” he said.

And while Harvey might be the valuation everyone is talking about, it isn’t the only legal tech company valued in the billions.

Legora, a Harvey competitor that counts Cleary Gottlieb and Goodwin Procter among its clients, may be on the verge of its own valuation bump. It raised $80 million in May at a $675 million valuation. The Sweden-based company is reportedly in fundraising talks that would value the company at $1.7 billion.

EvenUp, which sells to personal injury firms, was valued at more than $2 billion in a funding round announced earlier this month. Eve, which makes AI for plaintiffs’ firms, was last valued at $1 billion. They haven’t released revenue information.

Clio, the maker of business software for smaller law firms, was last valued at $3 billion in 2024 and said it reached $200 million in ARR. It agreed to acquire legal research company vLex earlier this year for $1 billion.

Bloomberg Law sells legal research tools and software, including some that make use of GenAI.

Chasing Market Share

Harvey said it reached deals with top law firms including Latham & Watkins, Willkie Farr & Gallagher, and Duane Morris. Those announcements made it the topic of conversation in August at the largest annual legal tech conference known as ILTACON, where attendees speculated that the law firms that made deals with Harvey got “sweetheart” deals.

“We are firmly in the ‘market share is more important than revenue’ phase of Legal Gen AI,” said Ryan McClead, a principal at legal tech consultancy Sente Advisors.

Harvey declined to provide a breakdown of how many of its deals are firm-wide because it said some of its customers don’t want that information made public. “We do not have any plans to increase prices for our customers. Long term we hope to increase access to Harvey over time for more people,” the startup said in an e-mail last month.

Harvey’s recurring revenue from existing customers last quarter was 98%, Weinberg said late September in a LinkedIn post. Seat utilization—a metric measuring how well a business uses its available licenses—was 77%, he added. Weinberg shared these figures, in what he described as a “pretty uncommon” move, after a former employee trashed the company in a Reddit post.

Growth Opportunities

Harvey’s leadership is betting there are new customers to be gained internationally. It has opened offices in Sydney and Torontoand has announced expansion plans into Spain and India. It has sold to in-house legal departments at KKR, Bayer, Comcast and Deutsche Telekom.

“We’re hearing more and more corporations looking at Harvey or getting Harvey’s attention more,” Gartner’s Wicks said.

Harvey charges its customers on a per-seat basis, meaning if more people are using the software, it makes more money.

Macfarlanes, a UK-based firm, began its relationship with Harvey in 2023 with roughly 70 fee earners and knowledge lawyers using the tool. Today, the firm now has a license “for everybody in the firm,” which is roughly 950 people, said Luke Powell, the firm’s managing partner. It has begun building client-facing tools using the platform.

“This is more than a software license where you suck your teeth at the royalty and you don’t like the increases every year,” Powell said. “It’s more of a partnership in how we deal with Harvey.”

Honigman, a top 200 firm by revenue, has expanded its number of licenses from 10% of attorneys to roughly 35% since launching its subscription after a February 2024 pilot, said Esther Bowers, the firm’s chief practice innovation officer.

Reed Smith, with nearly 1,600 attorneys, has a growing number of associates who use Harvey, the firm’s chief innovation officer David Cunningham said.

“Our usage is growing, so I’d certainly expect to be paying more in the coming year,” Cunningham said.

Wicks, at Gartner, said market forces may limit how much Harvey can raise its prices.

“There may not be much more room to go up in price because you could go with a couple of different AI point solutions instead of paying for the big platform,” Wicks said.

Investors have given Harvey millions to grow. The more features it adds and more essential it becomes, the more it will be able to charge. But how much progress it has made on that front, and how law firms feel about it, remains to be seen.

“We’ll see when the renewals come up,” said Bill Bice, an investor and legal tech founder.