# Disco Financial Model

Cloud-native AI-powered ediscovery software and managed document review for law firms and corporate legal departments.

- Canonical: https://finamodel.com/startups/disco
- Excel download: https://finamodel.com/startup-models/disco.xlsx
- Category: Enterprise/Security
- Model type: SaaS ARR / Valuation
- Funding round: Series F
- Funding: $26M
- Founded: 2020
- Geography: United States (primary); international matters referenced (China, implied global via "global fast food restaurant" and "international construction company" case studies). [DECK slides 7, 10]
- Customer: B2B

## About the company

DISCO provides cloud-native eDiscovery software and AI-assisted managed document review for law firms and corporate legal teams. Its platform covers collection, processing, search, review, and production, while its service offering applies AI to reduce the volume requiring manual review.

The company combines recurring software revenue with project-based review revenue. Its materials argue that AI can materially lower client review costs and accelerate case resolution, while the cloud architecture and lawyer-trained data create a differentiated operating model.

The model separates subscription ARR from managed-review revenue, with the latter driven by documents processed, price per document, and AI-enabled delivery cost. Customer cohorts, software expansion, project attach rates, gross margins, sales expense, and cash generation show the economics of the dual model.

## What's included

- 5-year monthly revenue build with stage-appropriate growth assumptions
- Full P&L, headcount plan, and operating-expense schedule
- Cash-flow statement, runway, and burn-rate tracking
- Valuation via exit multiple with a DCF cross-check
- Returns analysis with MOIC and IRR
- Unit economics including CAC, LTV, payback, and cohort retention

## Product & value proposition

Three product lines:
1. **DISCO Ediscovery** - cloud-native SaaS for legal document collection, processing, search, review, and production. Sold direct to law firms and corporate legal teams.
2. **DISCO Managed Review** - AI-powered document review service that replaces attorney armies; charges per document but operates at software-level margins by using AI to reduce review population.
3. **DISCO Case Builder** - referenced in market map and flywheel; early / next product.

Key value props:
- 30–50% savings on doc review legal fees vs. traditional approach
- Cases resolved months earlier via AI-prioritized review
- Centralized legal data repository with permission controls
- AI scores documents −100 to +100 per tag; pushes relevant docs to top; reviewer sees ~80% relevant docs vs. ~10% in linear review; only need to review ~30% of population to find all relevant documents

Differentiators: cloud-native multi-tenant architecture (competitors must rewrite from on-premise); lawyer-focused UX + direct sales model; AI/analytics trained by lawyer users → growing moat as data accumulates. >$75M product investment stated.

## Market

- Ediscovery software market: $14B, described as "nondiscretionary, countercyclical."
- Managed Review / productized legal services: described as "3–5× bigger TAM" than ediscovery software, implying ~$42–70B.
- No SAM or SOM figures provided.
- No independent market growth rate cited.
- Use cases described as nondiscretionary: litigation, investigations, compliance, privacy, data breach, FOIA, GDPR DSARs.

## Revenue model

**Ediscovery (SaaS/usage):**
- Sold direct to law firms and corporate legal departments
- Pricing basis not explicitly stated; likely per-GB ingested or per-user seat (common in ediscovery); not disclosed in deck
- Billed as ARR (recurring) - cohort ARR charts shown

**Managed Review (productized services):**
- Priced per document reviewed ($1/doc explicitly stated in opioids case study)
- DISCO's model: AI culls the review population dramatically → charges on smaller population → creates software-level gross margins
- Competitor comparison: $5.7M charge at $1/doc for 5.7M docs vs. DISCO charge of $484,160 at $1/doc for 484,160 docs
- >100% dollar attach rate for buying logos (Managed Review customers also buy Ediscovery)

**Professional Services:**
- Appears as a third revenue line in ARR chart (smallest segment, dark blue)

**Growth motion:** land and expand - customers added and ARR grows 2–3× over 2–3 years per cohort; multiple case studies show monotonic ARR growth over 2–5 year customer histories

## Traction & metrics

- ARR: Annual run rate shown growing steeply from Jan 2018 to Jul 2020 across all three product lines; **no absolute ARR dollar figure labeled on y-axis** - axis scale not readable from chart.
- Logos: Customer count shown growing from Jan 2013 to Jan 2020; steep acceleration from ~2017 onward; **no absolute logo count labeled.**
- NPS: 17 (2017) → 30 (2018) → 52 (2019). >50% of customers gave a 10/10 in 2019 survey (310 respondents gave a "10").
- Managed Review growth: "Eight figure scale; 500% YoY" growth - implies ~$10–99M revenue run rate growing 5× year-over-year.
- Cohort growth: "Cohorts grow 2×–3× over 2–3 years" with "7+ years of cohort revenue growth."
- Dollar net retention: Described as "high dollar and logo net retention" - no specific % given.
- LTV:CAC: Described as "compelling" - no specific ratio disclosed.
- Sales rep productivity: "Strong" - no $/rep figure given.
- Opioids case study: DISCO billed $484,160 (484,160 docs × $1/doc) vs. competitor would have billed $5.7M (5.7M docs); review completed after reviewing only 33% of review population (159,880 / 484,160 docs).

## Unit economics

- Gross margins: Managed Review described as operating at "high software gross margins" and "software-level margins" due to AI culling. - no % given.
- LTV:CAC: Described as "compelling." No ratio disclosed.
- Net dollar retention: Implied >100% given cohort 2–3× growth over 2–3 years; Managed Review has ">100% dollar attach rates for buying logos."

## Competition / moat

Competitive landscape:
- Incumbent competitors unnamed but described as: on-premise or single-tenant, non-lawyer UX, channel-sales model
- DISCO's three-axis differentiation (cloud-native, lawyer-UX, AI/analytics) described as "very difficult for a competitor to catch up on all three simultaneously" after >$75M product investment
- AI models trained by user behavior → data flywheel moat: more matters → better models → greater adoption
- Cross-Matter AI: learnings from past matters applied to new ones; enables out-of-box models, compliance programs, real-time litigation prevention
- Growth flywheel: Ediscovery usage → satisfaction → Managed Review → satisfaction → Case Builder → expansion

Named competitors: not explicitly named in deck.

## Team & funding ask / use of funds

**Team:**
- Kiwi Camara - Founder & CEO; 8 years at DISCO; prior: Camara & Sibley (law firm)
- Sean Nathaniel - COO; 1 year at DISCO; prior: Upland Software (EVP & CTO)
- Michael Lafair - CFO; 3 years; prior: Offers.com (CFO), All Web Leads (CFO & GC), Morgan Lewis
- Andrew Shimek - CRO; 3 years; prior: Epiq (President, Legal Services & Ediscovery, $500M business), LexisNexis
- Keith Zoellner - CTO; 5 years; prior: Spredfast (CTO), StoredIQ (CTO, sold to IBM)
- Kent Radford - General Counsel; 8 years; prior: Vinson & Elkins, Pillsbury, Hogan Lovells
- Neil Etheridge - CMO; 5 years; prior: Recommind (VP Product Marketing, sold to OpenText), Autonomy/Interwoven
- Melanie Antoon - VP Professional Services; 1 year; prior: Inventus (SVP US Ops), Huron Consulting, Catalyst (sold to OpenText)
- Aaron Trull - VP Human Resources; 2 years; prior: BazaarVoice, AMD, H-P, Dell

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## Recommended financial model

**Archetype + why:**
Hybrid **SaaS ARR + usage-based services** model. DISCO has two economically distinct revenue streams that must be modeled separately: (1) Ediscovery - recurring SaaS ARR with classic land-and-expand cohort dynamics; (2) Managed Review - per-document transactional revenue that is event-driven (matter-by-matter) but can be projected as a % attach of ediscovery ARR given stated >100% dollar attach rates. Professional Services is a third, smaller line. The cohort growth story (2–3× over 2–3 years) is central to the bull case and needs explicit cohort waterfall treatment.

**Forecast horizon & granularity:**
- Monthly for Year 1 (cash visibility; Managed Review is lumpy)
- Quarterly for Years 2–5
- 5-year horizon total (growth stage, pre-IPO narrative)

**Key drivers & assumptions:**

*Ediscovery ARR:*
- Starting ARR (as of Aug 2020): - not labeled; **must be estimated or sourced externally.**
- New logo adds per month:
- Average new logo ACV at land:
- Net dollar retention (Ediscovery):
- Logo churn:

*Managed Review:*
- Revenue: described as "eight figure scale, 500% YoY."
- Starting run rate:
- Growth rate Year 1: 500% YoY → deceleration modeled as
- Attach to Ediscovery logos: >100% dollar attach; model as a % of Ediscovery ARR at each cohort milestone
- Gross margin (Managed Review):

*Ediscovery gross margin:*
-

*Opex:*
- S&M:
- R&D:
- G&A:

**Scenarios (Base / Bull / Bear - which variables flex):**
- **Base:** ARR growth ~80% Y1→Y2, decelerating to ~40% by Y5; Managed Review 150% Y1→Y2; blended gross margin 65–70%
- **Bull:** Net dollar retention hits 140%+; Managed Review sustains >200% growth through Y3; Case Builder lands and contributes a third ARR stream by Y3
- **Bear:** Managed Review decelerates sharply (lumpy matters; economic slowdown compresses litigation spend); new logo adds slow; ARR growth ~40% Y1→Y2

**Required sheets / outputs:**
1. **Assumptions** - all drivers centralized, color-coded vs.
2. **Ediscovery Cohort Waterfall** - monthly/quarterly new logo ARR × expansion curve × churn
3. **Managed Review Revenue Build** - matter volume × avg. doc count × $1/doc pricing × AI culling factor → effective realized revenue and gross profit
4. **Consolidated P&L** - IS by segment and blended; EBITDA bridge
5. **Cash Flow** - operating CF; burn rate; runway (critical for sizing the raise)
6. **KPI Dashboard** - ARR, logo count, NRR, LTV:CAC, gross margin %, Managed Review attach rate
7. **Scenarios tab** - Base / Bull / Bear toggle

## Frequently asked questions

### Is the Disco financial model free?

Yes. The Disco model is a free Excel download with live formulas.

### Can I change the assumptions?

Yes. The workbook is editable and its live formulas recalculate when assumptions change.