AI legal technology firm Legora is pursuing a new funding round as it targets a $10bn valuation, nearly double the $5.6bn it raised in April.

The Stockholm-based startup, founded in 2023 and formerly known as Leya, builds AI tools for law and professional services firms as well as corporate in-house legal teams to draft and review documents, and is reportedly in the early stages of talks with investors to raise the funds. Because the discussions are at an early stage, the final size, terms and valuation of any round could still shift before a deal is agreed.

In its Series D round in April, the tech firm secured backing from Nvidia, with the tech giant's venture arm NVentures and Atlassian joining as new corporate investors. Additional backing came from investors including Barclays, Airtree, Insight Partners, and Liberty Global, bringing the total amount of funding raised to $866m.

The prospective $10bn valuation could involve Legora raising new capital alongside selling off some of its existing shares, the Financial Times reported.

According to analysts in the City, Legora's new funding round signals ever-growing investor interest in European AI startups, a cohort that also includes France's Mistral AI, valued at around €6bn in its 2024 funding round.

"Legora potentially reaching a $10 billion-plus valuation just months after its last funding round underscores the strength of investor appetite for a relatively small group of European AI leaders," Navina Rajan, senior EMEA private capital analyst at PitchBook, told City AM.

Rajan said PitchBook's latest research shows that AI companies "already account for around one-third of Europe's potential IPO pipeline, and Legora itself had a 90 per cent predicted probability of an IPO at a €5.2bn valuation as of June."

"A further step-up in valuation would reinforce how quickly this cohort is scaling, but ultimately these valuations will need to be supported by sustainable growth, unit economics and a credible path towards public-market maturity," Rajan said.

The talks also come amid an intensifying race in legal AI, where Legora competes with US rival Harvey — which raised $300m at a $5bn valuation in June — as well as UK-based startups Robin AI and Luminance. The sector has already produced a sizeable exit, with Thomson Reuters acquiring legal AI firm Casetext for $650m in 2023.

Legora pushes ahead with law firm partnerships

Legora is pressing forward in the legal tech race, partnering with law firms to create their own AI platforms while also offering its tool as a commercial product.

In May, Kirkland & Ellis, the world's largest law firm by revenue, revealed it was partnering with the Swedish tech company and spending $500m (£370m) on developing its own custom-built AI platform, challenging competitors that rely on third-party tools.

The US-based firm, which has a large office in the City, said it plans to spend hundreds of millions over the next three to four years building the platform, while continuing to invest in other third-party AI tools.

Kirkland's outlay is part of a broader shift among elite law firms from piloting AI tools to committing serious budgets to them: A&O Shearman has rolled out Harvey's AI to thousands of its lawyers, and a string of other top firms have struck similar partnerships with AI providers.

Legora declined to comment.