Startup Spotlight #125: Klarity

Klarity is a pioneer in document processing artificial intelligence, founded in 2017 by an MIT engineer and a Harvard Law graduate.

May 25, 2021

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I got the chance to speak with Andrew Antos and Nischal Nadhamuni, co-founder of Klarity, about what they are working on at their startup, and any advice they have for emerging entrepreneurs.

Klarity was founded in 2017 by Andrew Antos (CEO) and Nischal Nadhamuni (CTO).

Antos grew up in the Czech Republic and after finishing his law degree, he worked at Squire Patton Boggs, a large, US-based international law firm, as a junior associate focusing on technology M&A and Intellectual Property and licensing deals. During his tenure at the firm, he reviewed thousands of contracts and was wondering if that process could be automated with software. He moved to the US to get an LL.M. at Harvard Law School in 2016 and met his co-founder Nadhamuni in an MIT class.

Nadhamuni was born in the Bay Area, grew up in Bangalore, India and came back to the United States for a Computer Science degree at MIT. He was always fascinated by building systems that can automate repetitive tasks with machine learning. During various internships, Nadhamuni developed a clinical decision support tool that used machine learning algorithms to assist pathologists in variant interpretation at Mass General Hospital, built a tool for detecting fraudulent ratings and reviews at the Indian eCommerce giant Flipkart and developed a framework to automatically identify and measure rooftops for a drone company.

In 2017, Antos and Nadhamuni met in a class at MIT (15.390 New Enterprises) where students are tasked to form teams and start working on a new venture. When the two met in a class, Andrew described to Nischal how much “fun” it is to review a lot of contracts manually and Nischal charted out a technical approach to solve that problem using sequence-based Neural Networks. After class, they spent 3 hours walking around Cambridge talking non-stop. At the end of their walk, they decided to start working together on Klarity.

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Startup Spotlight: Klarity

Klarity co-founders Andrew Antos (left) and Nischal Nadhamuni (right).

Problem: Finance teams at companies need to review customer contracts to extract information that impacts billing and revenue recognition. This is currently an entirely manual process that is extremely time-consuming (typically 2-3 levels of human review are required) and is composed of many small manual steps that make it very error-prone.

Market: Our initial product focused on contract review for billing and revenue recognition is approx. $11B. Eventually, Klarity wants to automate all repetitive document review workflows for enterprise, which is approx. an $85B+ market.

Solution: Klarity’s application automatically reviews all newly signed contracts using its proprietary Natural Language Processing platform, fills-in a revenue recognition and billing checklist for every contract, and pushes data automatically to ERP systems. Using Klarity, accounting teams save over 80% of the time previously spent on contract review and reduce the error rate by 98%.

Team: Klarity is currently a 14-person team located in San Francisco and Bangalore. Klarity has an amazing engineering team with several NLP and machine learning experts and an amazing product team built of several high-profile lawyers and accountants.

Recent Success:

Antos and Nadhamuni: Ultimately, we saw the convergence of three learnings that produced our recent growth. Our understanding of the problem we’re solving, our customer personas, and how to run a good sales motion. Since the beginning, we’ve focused heavily on understanding the problem which translated into reviewing thousands of contracts manually by the founders and every team member during our almost 3-year heavy R&D phase. The deep understanding of documents helped us to design the best approaches and to test those approaches. Another thing that we’ve figured out is how to understand our persona really well.

We focused on the revenue accounting persona (everybody from a revenue analyst to a Chief Accounting Officer) and built our product and sales motion around them. Our key insight was that the finance team is probably the heaviest consumer of contracts and other documents in the enterprise landscape, but there are no systems built for the finance team to help them deal with managing all these documents.

Recent Struggle:

Antos and Nadhamuni: Finding product/market fit. There were several hard things that we had to learn. The first one was how to talk to people in a way to establish what are their real pain points and which of them are the most important. The second challenge then was to really understand the user psychology - some people (and sometimes whole groups of people) will tell you that they want something but there are actually deep psychological reasons that stop them from actually articulating what are the pain points they are willing to solve by buying a product or a service. We did not understand this for a while and we kept building products that people did not really want. Finally, the last challenge was to build what people really want once we understood the pain point well. Since then, it’s just a race against time and building the product as well as we can and as quickly as we can so we can sign-up as many customers as possible.

Founder Advice:

Antos and Nadhamuni: If you don’t have sales (for B2B companies) or marketing (for B2C companies) experience, focus on developing those skills as early as you can. I was a corporate lawyer in my previous life which meant that I was terrible at selling and understanding what people truly want. Learning how to talk to people in a way to discover their pain points and how they are thinking about making a purchase would be something that I would focus on from the beginning. Ultimately, every company is 100% dependent on a good distribution strategy, which really means sales or marketing.

Three Cool Founders You Should Know About:

Antos and Nadhamuni: Here are three founders you should check out next!

Newsha Ghaeli, Founder of Biobot Analytics: Biobot Analytics develops cutting-edge technology to transform sewers into public health observatories.
Shara Ticku, Founder of C16 Biotechnologies: C16 uses microbiology to brew sustainable, conflict-free palm oil to reduce global CO2 emissions.
Omid Karkouti, Founder of Rarebase: Rarebase is a public benefit corporation pioneering a new approach to biotech.

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