Category Archives: Personal

Why I left a big law firm, but not BigLaw.

While I’ve devoted the majority of this blog to providing free resources on startup law and finance to startup entrepreneurs, I occasionally take the time to write about the economics of law firms and why entrepreneurs would be wise to understand it at a high-level.  This post will start out with a historical summary of positions I’ve taken on the subject, with links to applicable posts, and then branch into my decision to move my own practice and clients to a new type of firm – not BigLaw, but not quite traditional BoutiqueLaw.

  • The Economic Deflation of Startup Law – Early stage startup law, much to the benefit of entrepreneurs and top-tier lawyers, has become increasingly automated and commoditized. The end result is a form of “freemium” law practice, where (i) entrepreneurs can obtain quality representation for very little money, and (ii) quality lawyers can, thanks to automation, engage entrepreneurs early on without having to discount fees, defer, or any of the other old-school ways of obscuring the cost of legal services. Low-quality or narrowly focused “cottage” lawyers will struggle because their bread-and-butter work will have little to no margin, while higher-tier lawyers will thrive on their pipeline of later-stage, funded clients, which cross-subsidize early-stage work.
  • In Startup Law, Big Can Be Beautiful – Breadth and scalability are absolutely essential to the proper representation of a startup, and large firms have historically been where to get that.
  • Integrated Startup Law – Specialists Matter – Technology startups do not need and should not want unscalable, narrow “small business” legal representation. By their nature, they will need a broad set of legal specialties – Tax, Labor, IP, Regulatory, etc. – along the course of their business cycle, and failing to choose a firm at the beginning that can efficiently coordinate all those specialists will become a big problem. The analogy to healthcare is important. Also see – The Cost of “Staging” Your Startup Lawyers.
  • The Ad-Hoc Law Firm – The ability of networks of small law firms to coordinate efficiently will allow for (i) the replication of BigLaw’s breadth and experience, without its overhead and inflexibility, and (ii) the scalability that boutique firms alone can’t provide.

Nutshell Summary: BigLaw offers experience and breadth, but is largely over-priced and inflexible. Boutiques are cheaper, but often narrow and incapable of truly scaling, and their work is being commoditized.

BigLaw Beginning

So in my own career, I started out at a big firm with a group of fantastic lawyers whom any startup would be well-served by, but I increasingly butted heads against the firm’s (separating the lawyers from the institution is important) policies, including (i) IT policies with respect to new technology that needed to be adopted, (ii) billing policies around how to charge startup clients, and (iii) personnel that simply didn’t want to do things differently and weren’t incentivized to care anyway.

Your Boutique Can’t Scale

I watched the market, and had some overtures from boutiques in the area, but every time I came away underwhelmed:

  • Lower Pay, Lower Lawyers – Often the boutiques had very low rates, but their lawyers made a lot less income.  True innovation is about doing more for less while earning more – it should be win-win economically on both the client and the lawyer’s end. That’s why the most disruptive startups aren’t in it to make less money, they’re in it to make more money, but on a model that makes the end-price lower by cutting out fat, not bone. If your firm is built on paying lawyers less – guess what? You’re just going to attract lower-quality, less ambitious lawyers. Surprise, surprise. Anyone can lower their price tag.
  • Where are the partners? – Many firms were effectively run by senior “associates” (attorneys from big firms who never built the experience or client base to become partners) who started their own firms and donned the partner label.  Early-stage clients might not care about this because their interactions are usually with associates anyway, but they should if they intend to become later-stage clients.  A lack of true partner experience within a firm can mean (i) your late-stage startup is effectively funding on-the-job training, and (ii) that training can lead to mistakes.  A scalable firm needs true partners that have played the end-game and won, otherwise top clients will have to leave.
  • Where are the specialists? – No one had a good answer for how to efficiently provide full service legal representation to clients. Asking them to engage a dozen firms on a piece-meal basis and manage a dozen different bills is not the right answer.
  • Luddites – If you think a lot of law firms haven’t joined the 20th century with respect to technology, check out some boutique law firms.  A lower rate is often used as an excuse for being inefficient and taking longer to do something.  Smart clients realize that their legal bill is a two-part equation: rate * time spent.  And if their lawyer is taking forever to do basic stuff, the lower rate is a mirage.  Startup law is for technologists, not cottage industry practitioners.

So why did I move my practice to a smaller firm (Miller Egan)?  Addressing the above issues in order:

  • The compensation structure is designed to attract top talent lawyers, not people who are looking for semi-retirement.
  • The firm is built and run by partners who were partners at the country’s leading law firms, but got fed up with the bureaucracy and inflexibility.  This means the firm can truly handle, and investors know they can handle, scaled, late-stage clients.
  • The firm has a well-developed network and process for coordinating specialist counsel for clients when needed, so clients can get the full service representation they’d receive at a big firm, but under a far more efficient model.
  • Technology? I’m CTO. #Howyalikedemapples

The above post should be read as a clear message to both traditional BigLaw and traditional BoutiqueLaw. Big can be important, and boutique can be cheap, but small and scalable may eventually eat your lunch.  And let me tell you, that lunch is delicious.

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Gadget Addiction, Boredom and Values

Image by Martin Garrido via Flickr

Lately it seems as if every week another article comes out highlighting how society is becoming increasingly “addicted” to gadgets, and how that addiction is making it difficult to focus on tasks or people right in front of us – the irony of how “connectedness” makes us all more disconnected.  See here, here, and here.

It’s pretty obvious that the ubiquity of gadgets, smartphones in particular, has made the impulse e-mail check or article read more commonplace, but I’m convinced that all these people suggesting that we turn off our gadgets, or even get rid of them, are missing a much deeper and fundamental issue: how we value (or disvalue) the person or task that technology is supposedly distracting us from.

I don’t believe that gadgets are inherently addictive for most people.  They’ve just made it possible to do things that we actually enjoy (value) in situations where we previously had no choice but be stuck with something, or someone, we don’t truly care about.  Put differently, having an iPhone makes it harder to fake it.

When I’m sincerely bored, whether it be at some obnoxious firm meeting or waiting in line, out comes the iPhone.  But when my wife and I are at a restaurant eating a really cool dish, or when I’m laughing with my little girls, Tweetbot and Reeder just aren’t really on my mind.  My iPhone seems to be more of a rescue from boredom than something constantly nagging me to unlock it at all times of the day. If you’re constantly checking your phone while on a date with your girlfriend, it says far more about your feelings toward your girlfriend than it does about your phone.

The legal profession is full of people who, but for the (increasingly rare) paycheck, couldn’t care less about the work they do on a daily basis.  Getting rid of their iPhones or Blackberries (sadly, still popular) might get you more eye contact at a meeting, but it won’t address the fact that they’re bored out of their minds.

I don’t want to make the broad statement that authentic gadget addiction doesn’t exist – I’m sure it does.  That being said, if you’re one of those people who thinks you may be addicted to your iPhone, ask yourself: are there any situations in which you don’t find yourself constantly checking your e-mail or twitter? If so, then your impulsive e-mail checking probably says far more about your detachment from people, or your work, or whatever you think you’re being distracted from, than it does about your attachment to your gadget.

Technology hasn’t suddenly made us not care about our relationships or our work.  It’s just filling a void that’s unfortunately already there.  A little honesty and self-reflection would probably go much further than pretending that merely turning off a device will solve the problem.

Why I Chose Austin

A certain article has been making its way around the Austin twittersphere as of late, highlighting pros and cons of austin as a startup/tech hub.  I actually don’t have much to comment on Trevor’s thoughts on our city, other than that his portrayal of the angel scene is perhaps a bit exaggerated, although not entirely off mark.  Obviously in comparison to Silicon Valley there aren’t that many value-add angels walking around Austin, but I’d argue that, at least at the seed stage, capital and advice/mentoring don’t necessarily need to be linked. There are tons of highly knowledgeable mentors and advisors here, even if they aren’t the people writing checks.

On a personal level, my wife and I didn’t have to think twice about moving to Austin after spending 3 years in Massachusetts for law school.  The east coast was simply out of the question – neither of us can stand 6 months of painfully cold weather.  And to all the Bostonians out there, spare me the comments about our heat. Walk outside at 7am or 7pm on the hottest day of the year, and it’s gorgeous.  In the Boston winter, it sucks ALL DAY.

My wife grew up in Southern California, I’m Texan, and I knew that I (i) didn’t want to work for billion-dollar multi-national companies, and (ii) wanted to work as closely with tech startups and entrepreneurs as I could.  I’ve never had the classic “lawyer personality,” and to be honest, I don’t like working with them much either – though my co-workers are awesome. I prefer people who are always looking for ways to tinker with things or build new ones, and who aren’t afraid to ruffle a few feathers about it.

So Austin and Silicon Valley were really our only options. Since we both went to UT for undergrad, knew about Austin’s growing tech scene, and that you didn’t have to be a millionaire to live in something larger than a cardboard box, ATX was a no-brainer.  The legal market is small and hard to crack, particularly because every lawyer and his mother in TX wants to work here, but thankfully Andrews Kurth gave me an offer.

Best decision of my professional life… so far.  If I had to argue for Austin as an excellent startup/tech hub, here’s what I’d say:

  • No need to argue for Quality of Life – just look at how we rank on all those annoying lists that magazines/journals pump out all the time
  • UT is starting to see itself more and more as a source for pumping out entrepreneurial talent, as reflected by the growing number of startup-focused programs
  • There’s an enormous sense of community among people involved in startups.  Call yourself a startup founder, and someone will start plugging you in.
  • Bootstrapping and forming businesses that aren’t necessarily targeted at world domination gets you much more respect than in the valley. There isn’t nearly as much of a sense of urgency to slap a VC brand on your LinkedIn page.
  • Growing diversity of capital – sure, we could use more big-named local VCs, but in my own practice I’ve seen enough east and west coast money flowing in to know that we are on everyone’s radar.
  • Growing diversity of companies – I’ve seen a growing number of biotech and consumer-focused startups coming up in Austin, notwithstanding our enterprise-heavy funding environment.
  • The city itself feels like a startup.  Ask someone in Austin how they feel about the city, and you’ll often see a glimmer in their eye.  People feel invested and connected in this town, not as if they’re just one more developer or founder in a sea of others fighting for the prize.

I love it here. I get calls all the time from recruiters offering jobs in other cities, including Silicon Valley, and my response is always the same: if you hear about something interesting in Austin, let me know. Otherwise, I’m not going anywhere.

I’m Lucky

One thing that I promised myself and my wife in law school was that, no matter how much money was waived in my face, I would never be a number.  There are law firms that treat you like a human being, no matter how low on the totem pole you are, and there are law firms that expect you to shut up, do as you’re told, and salivate every time the word “bonus” is mentioned.  Take your golden handcuffs and shove it, Biglaw.

I’m terribly lucky to work not only in a city and in a field where I love (most of) my clients, but in an office where people are willing to hear you out if they think you’ve got an interesting idea.  Over the past month I’ve managed to get our leading partners to have our practice group trial various services and processes to bring some efficiency to the practice of startup law – very exciting developments in the near future.  At most firms, the thought of a 1st-year associate making a technology proposal to the firm would be laughable. I’ve made four.

Being a corporate attorney is never easy, no matter how awesome your clients are. But I’m lucky to work with people who respect everyone in the hierarchy, and who won’t infantilize a stubborn techie with some real thoughts on how to better serve clients.  You learn the most about people and institutions by observing how they treat those at the bottom.

On that note, I’ll point you to the below link from Bill Gurley, which I think explains well why, in a world where innovation and competitiveness is increasingly important, marginalizing the youth in your organization is exactly the reverse of what you should be doing:

Why Youth Has an Advantage

Here we go.

Let’s see if I can get a real post out before someone in my firm makes me clear this through “the committee.”