Spellbook looks to scoop up legal AI competitors with $40-million USD in debt financing

Toronto-based legal AI startup Spellbook has secured $40 million USD ($54.7 million CAD) in debt financing as it looks to scoop up smaller competitors amid faster-than-expected growth.

“Growth has accelerated faster than what we expected and we do see an opportunity to acquire a lot of small competitors.”
Scott Stevenson

Scott Stevenson, co-founder and CEO of Spellbook, told BetaKit that it had raised the line of credit from RBCx, the innovation banking division of the Royal Bank of Canada, to finance acquisitions of other contract-focused legal AI companies.

“Growth has accelerated faster than what we expected and we do see an opportunity to acquire a lot of small competitors,” Stevenson said in an interview.

He added that the legal AI market has matured “really quickly” and many new companies have spun up. Spellbook expects to acquire roughly five companies within two years and spend around $60 million USD on deals, but Stevenson cautioned that these figures are subject to change.

“Once every two weeks, we hear from a company looking to get acquired right now,” Stevenson said, adding that Spellbook is currently “looking closely” at two potential targets.

Stevenson also claimed that Spellbook is on track to hit $100 million USD in annual recurring revenue in 2026, after tripling its revenue over the past year. The company aims to hire between 130 and 140 new people by the end of the year, Stevenson said, adding to its current team of 150.

The news came a day after the company announced it would serve as the Canadian Bar Association’s (CBA) exclusive provider of AI-powered contract drafting and review tools. This means Spellbook’s suite of tools will be available at a discount for the CBA’s member base of more than 40,000 legal professionals across Canada under a two-year partnership.

“The fact that they selected Spellbook as the best tool shows our leadership position in the market,” Stevenson said. “It’s hugely validating.”

Spellbook was originally founded as Rally, in 2018 in St. John’s. The company’s self-described “AI co-pilot for lawyers” (or “Cursor for contracts”) helps legal practitioners review and draft contracts through a Microsoft Word integration. Later branded as Spellbook, Stevenson said it launched the first generative AI tool for lawyers before the public release of OpenAI’s ChatGPT in 2022.

According to a joint report from Spellbook and Counsewell released in June 2025, nearly 90 percent of legal department professionals are either using or moving toward using AI in their work. Ninety-seven percent of in-house counsel teams found using AI tools effective, the report said.

That demand has borne a competitive legaltech landscape. Legal research firms like Thomson Reuters are offering AI tools of their own, but some of these giants saw their share prices take a hit in early February when AI company Anthropic released a legal AI plug-in with impressive capabilities. The battle for market share is playing out in courtrooms, as well, including the high-profile legal battle between legal software giant Clio and Toronto-based Alexi over an alleged breach of contract related to legal data access.

With its focus on contracts, Stevenson claimed Spellbook has more than 4,000 customers across 80 countries—more than US-based AI legaltech giant Harvey and Stockholm-based Legora combined. While these two companies focus on selling to lawyers, Stevenson said, Spellbook’s offering is useful not only to lawyers but to procurement and sales teams, too.

“We focus on the entire workflow of getting a contract to signing,” Stevenson said.

The startup was valued at $350 million USD following its Series B raise in October, led by prominent Silicon Valley firm Khosla Ventures. Spellbook has raised more than $80 million USD from investors including Khosla, Montréal’s Inovia Capital, and the venture arm of Thomson Reuters.

Feature Image courtesy Spellbook. Photo by Sean Pollock.