Companies with large numbers of contractual relationships may leave millions of dollars on the table because it’s not practical to customize each agreement. A new startup offers a chatbot designed to claw back that money.
What happened: Pactum, a startup that automates basic vendor and service contracts at immense scale, emerged from stealth with a $1.15 million investment from Estonian tech upstart Jaan Tallinn and his posse of Skype alumni.
How it works: Let’s say a prominent computer company develops a new laptop and hires Pactum to cut distribution deals with hundreds of thousands of computer stores around the globe.
- Pactum’s AI model reviews the computer maker’s existing contracts to establish baseline terms.
- Then it examines variables such as pricing, schedule, and penalties in search of more favorable arrangements. For instance, it may seek to improve cash flow by asking retailers to pay for orders faster.
- The AI then initiates negotiations via chatbot.
- The model automatically updates contract terms as negotiations proceed.
Behind the news: Contracts are a hot area for AI. In 2015, Synergist.io and Clause launched automated platforms that mediate contract negotiations. And last year, Dutch information services firm Wolters Kluwer acquired legal AI startups CLM Matrix and Legisway.
Why it matters: Standardized contracts can save time and effort spent customizing agreements. But they also bring costs. A 2018 study by KPMG estimated that standard contracts can soak up between 17 and 40 percent of a contract’s expected revenue.
The Tallinn Effect: Funding from Jaan Tallinn brings the credibility of a serial entrepreneur who co-founded Skype and Kazaa and invested in DeepMind. It’s also a stamp of approval from a technologist who thinks deeply about AI’s potential for both benefit and harm. Tallinn co-founded the Centre for the Study of Existential Risk and once wrote, “In a situation where we might hand off the control to machines, it’s something that we need to get right.” Apparently he believes Pactum meets that standard.