Copyright Business Insider
A startup wants to give attorneys a crystal ball to forecast whether a lawsuit will settle and at what amount. Theo Ai is building a "predictive engine" tool, aimed at law firms and large corporations, that it says takes the guesswork out of pricing a lawsuit. The company tells Business Insider it has raised $3 million in new funding from Run Ventures, bringing total backing to more than $10 million. Most civil cases settle out of court before a trial. There's no public repository of settlement terms or amounts. That opacity makes it hard to train reliable artificial intelligence models on case outcomes, said Patrick Ip, Theo Ai's cofounder and CEO. "The magic number is what two parties need to get to," he said, before settling. Theo Ai lets law firms and businesses use their own history as training data. It builds a bespoke model for each client that plugs into the systems lawyers already use, such as case management systems and file-sharing tools. When a new case lands, the model finds look-alikes in that history and returns a settlement likelihood and range. The company, founded in 2024, first sold to litigation funders — firms that finance legal cases in exchange for a share of settlement payouts — because they live and die by case selection. That proved an eager early market, Ip said. The fastest-growing segment, he added, is now large enterprises. Retailers, cruise operators, and hotel groups get sued regularly — over wrongful termination and wage claims, injuries on properties, and data-breach allegations. The settlement is only one line item. Months of lawyer fees, discovery, and experts can push the cost of fighting a case through the stratosphere. Knowing the "magic number" to settle in advance, Ip argued, would help in-house counsel decide when to engage outside firms and when to settle privately. Ip said Fortune 500 companies now represent the vast majority of its sales pipeline. To support that push, the startup created a general counsel advisory board that includes attorneys from DocuSign, HP, eBay, Regal Cinemas, and US Bank, among other companies. Ip isn't the first to chase predictive analytics in law. Pre/Dicta and Bench IQ model how specific judges rule, and LexisNexis has a tool that pulls together public verdict and settlement data for benchmarks. Theo Ai leans on a client's own data instead. Investors are piling into legal tech, right as skeptics question whether demand matches the hype. Critics argue that many legal work platforms can be swapped out for general-purpose AI models. Ip counters that Theo Ai's moat comes from how deeply it models legal outcomes. He says clients may use Theo Ai's settlement number and complete the work in a platform like Harvey or Legora, or even ChatGPT — making the product effectively platform-agnostic.
