#StartupsEverywhere Profile: José Padilla, Founder, LegalMente AI
This profile is part of #StartupsEverywhere, an ongoing series highlighting startup leaders in ecosystems across the country. This interview has been edited for length, content, and clarity.
AI-Powered Contract Review
José Padilla has an established track record of providing efficient, high-quality legal services at a low cost. With LegalMente AI, he’s able to provide that same quality of work to those in need, including early-stage startups. We sat down with him to talk about what policymakers need to know about the uses of AI, how to keep the U.S. innovation ecosystem the most competitive globally, and his motivation to provide the most efficient work possible.
Tell us about your background. What led you to create LegalMente AI?
Even though I was born in the U.S., I've always been told that I have an immigrant mindset, which I always take as a compliment since my parents came to the U.S. from Honduras and worked very hard to improve their lives and of those around them. I've been an attorney for over 24 years now, and began my career working in Austin for a San Francisco-based firm doing venture capital and corporate law. I've interacted heavily with startups throughout my career, been in-house counsel, and worked for large firms in different cities, including D.C., New York City, and Las Vegas. This has given me experience in multiple industries, including healthcare, gaming, acquisitions, and startup financing.
In 2019, I started my own law firm. A major reason I did this was that I felt a lot of law firms had become overpriced and out of reach for most entrepreneurs. I dedicated myself to do the same work more efficiently and at a lower cost. Our focus has been mostly on venture-backed companies, tech startups, entrepreneurs, and small businesses, as well as those that invest in them. My rates can be less than a third of that of the big law firms, but still even a few hundred dollars can be burdensome on those with less resources. Thus, I came up with LegalMente AI as a way to help democratize legal services using AI.
What does LegalMente AI do?
We offer AI-powered contract review, and right now we're expanding to be able to review several different contract types. One of my strengths is that I can review contracts quicker and more effectively than most other attorneys. This can be seen as a negative at a big law firm where more efficiency means less billable hours. When we developed LegalMente AI, we essentially put my special process for contract review into an AI model. I want to make it clear that LegalMente AI doesn't offer legal advice; instead, we offer legal education, akin to an AI-powered LegalZoom. Our objective is to minimize costs for non-lawyers, such as resource-limited founders and small business owners.
In your view, how should policymakers approach responsible regulation around the use of AI?
I’ll provide you with an example for reference: the first regulated industry in the United States was railroads in the late 1800s. That regulation was pushed for not by people using the railroads, but by major railroad companies themselves. Their goal was to get rid of their smaller competition. That's similar to what I'm seeing right now with AI—we’re bombarded with horror stories that appear designed to allow for the introduction of more stringent regulations that will make it more difficult for new competitors to the incumbent big tech companies.
In my opinion, policymakers should instead consider the creation of a principles-based framework as opposed to one of rigid standards backed up by new agencies. For me, the most important principles are transparency and risk management. Drawing from my background in the gaming industry, where regulations surrounding legalized gambling aim to guarantee that people feel confident they're not being exploited when they visit a casino—it’s all about trust. Gaming regulations may not be the exact model for an AI framework, but we can extend the same goals to make sure that people have trust in the technology’s output.
Why is it important that administrative costs are kept low for startups? How is that colored by your experience working across various startup ecosystems across the globe?
The U.S. has been the center of new technologies for a long time, partly due to the lower cost to start and run a new company. By comparison, creating a new corporate entity in France, for example, is very difficult due to their proof of identity requirements and the obligation to keep at least 50,000 Euros in the bank for contingencies. That’s why Europe has many fewer unicorns than us, and nearly none are founded by immigrants. Their society and rules make it much harder to make it above a certain level, especially if you’re an immigrant. Today, the majority of unicorn startups were founded in the U.S., and a majority of such U.S. unicorns were founded by immigrants.
I’m always proud to say it’s not like that in America, I do think there are some problematic developments. Congress and states are now passing laws requiring small businesses to disclose beneficial ownership information (while exempting big businesses from the same requirement!). I think any additional regulatory burden makes life harder for those with less resources, such as startups. Going forward, the experience of a founder—especially founders with less connections and resources—will be highly variable depending on the state where they base their company. Some states seem to perceive companies merely as mere government revenue sources and implement regulations designed to squeeze as many fees as possible from a startup as soon as possible. Instead, startups and small businesses are the engine of the American dream.
What are your goals for LegalMente AI moving forward?
Right now, we are fundraising and gaining traction with customers. The long-term vision is to become an AI-augmented one stop shop for legal services to help those who cannot afford huge hourly fees. While not everyone can afford an Ivy League lawyer, we will allow everyone to afford AI legal services developed by an Ivy League lawyer.
In addition, we need to become thought leaders in this space because we're just not seeing enough people advocate for the positive uses of AI. There's been an onslaught of publicity around the dangers of AI and big company use cases, while potential innovation by smaller AI companies are being left out of the conversation. Ultimately, LegalMente AI should evoke a different regulatory scheme than something with the biggest systems and a larger impact.
All of the information in this profile was accurate at the date and time of publication.
Engine works to ensure that policymakers look for insight from the startup ecosystem when they are considering programs and legislation that affect entrepreneurs. Together, our voice is louder and more effective. Many of our lawmakers do not have first-hand experience with the country's thriving startup ecosystem, so it’s our job to amplify that perspective. To nominate a person, company, or organization to be featured in our #StartupsEverywhere series, email advocacy@engine.is.
