The Story Behind Haystack’s Investment In Norm AI

In the throes of summer ‘23, our team caught wind of a larger seed round for an AI company led by John Nay. As soon as we had our first interaction, we decided we needed to fight to be in his round. Oftentimes at the pre-seed or seed level, we do need to spend at least some time evaluating the opportunity, founders, and market; in this case, we immediately moved into a different gear to build a relationship with John and convince him to let us along for the ride. We are thrilled he did.

John’s vision for Norm AI is to combine his impressive legal background and exposure to financial services with advancements in AI to build a vertical yet broad industry solution. More specifically, the core of John’s insight was to use regulations (laws that govern various industries) as a blueprint to create AI agents that can help institutions in regulated industries comply with the relevant regulations. It’s a thesis that immediately made sense to us, and the combination of John’s legal research and his experience in financial services fit like a glove.

To see a snippet of this, consider the opening line of Norm AI’s post today:

Over the last 50 years, the U.S. Code of Federal Regulations has more than doubled in its number of restrictive words, from 400,000 to over 1,000,000. As our economy has become more complex, we’ve layered on additional protections for citizens and the environment. But the growth in regulation means compliance has become extremely costly. Even the most earnest and well-resourced organizations struggle to comply with the routine thousand-page regulation, and American citizens have a paperwork burden of more than 10 billion hours a year.

Today, John and the broader Norm AI team come out of stealth today and announce their seed financing. For those of you who know Haystack, you know that for the past decade our entire focus has been set on very early and relatively smaller investment rounds. Of course, occasionally there are exceptions to that rule, and Norm AI is one of them. The spirit of Haystack is to back specific people that we meet along the way, and that usually fits a tight pattern – but 1/ we can’t control exactly “when” we meet captivating people and 2/ we have earned the ability to make exceptions when opportunities present themselves.

John and his team at Norm AI present one such exception. We are also grateful to our friends at Coatue, in particular Vibhor, who entrusted us with an introduction as their lead investor. As I think about Haystack’s evolution over the last decade, while our fund sizes have grown over time, they remain relatively small compared to most of the ecosystem, and that small sizing endows us with a great superpower — the ability to be flexible. John wanted to raise a larger seed round for Norm, one that broke our normal rules — but John’s background, his precision in planning, and his choice of market made it easy for us to break our rules.