Legal Technical Debt

Siri, please amend my charter to authorize a Series AA round, prep me an offer letter for a CTO, issue options to 3 recent hires… oh and review/execute that stock purchase agreement with my accelerator. Keep the fees under $500.”  — Not too far off from how a (confused delusional) segment of the startup community thinks startup/vc law should work.

Imagine if advisors told startup founders that, in order to conserve cash, they should aim to spend as little as possible on developers. Find cheap ones. If the non-technical CEO can code something himself to get by, do so.  Just get it done. Don’t overpay.  In fact, if we can automate our development process, do it. Keep cash spend on ‘the business.’

Anyone with an ounce of experience in building successful tech companies would recognize this advice as absurd and dangerous, as if quality and accuracy are irrelevant. Yet every so often I hear about advisors giving this exact advice to founders, about legal spend. And while fewer may acknowledge it, such advice is equally as absurd.

Of course you’d say that, Jose. You’re a startup lawyer.

Well, maybe. But let’s process it a bit.

Why would minimizing your spend on software development (like legal services) be stupid and dangerous?

It can be explained in part with the term ‘technical debt.’ via Wikipedia:

“Technical debt… is a recent metaphor referring to the eventual consequences of any system design, software architecture or software development within a codebase. The debt can be thought of as work that needs to be done before a particular job can be considered complete or proper. If the debt is not repaid, then it will keep on accumulating interest, making it hard to implement changes later on. Unaddressed technical debt increases software entropy.”

While I’m not a developer, my general understanding of the term is that bad coding becomes more expensive to fix over time, in an almost compounding way. And there are even circumstances in which it is so bad that nothing short of a complete re-write will make it scalable and useable. In other words, going cheap on developers just means you are compounding your cleanup cost and headaches for the future, and even threatening a complete shut-down of the product.

Minimizing legal spend works exactly in this way, but magnified 10x.  I frequently write on SHL about the many parallels between complex contract drafting/VC law and top software developers. Both groups involve highly skilled people capable of analyzing, managing, and manipulating large amounts of complexity. Both implement changes for which the stakes on a company are very high. Both expect to be compensated well for their skill set.

Software developers produce the code base on which your product runs. Lawyers produce the code base on which your company, including its relationships with investors, board members, executives, and employees, runs. 

A crucial difference between software code and legal code is that bugs are far easier to find and fix in the former than in the latter. Software code is constantly being revised, with thousands or millions of users revealing bugs on a regular basis. Legal code (contracts) are executed and then put away, often to be reviewed only at high-stakes moments, when fixing them is extremely expensive or even impossible.

Unlike software code, you can’t unilaterally issue ‘updates’ to executed contracts. Any experienced lawyer has seen a deal cost 6-figures more than it should have, or even completely die, because of legal mistakes made earlier in the company’s history. So think of contract drafting for a scaled startup as high-stakes software development for which virtually any material bug is completely unacceptable once the code is shipped. Still want to ‘minimize’ legal spend?

Law is Code; Not Product.

In my experience dealing with many many sets of founders, a part of the startup community carries the very deep misconception that startup/vc law has been, or even can be, completely productized. Want to ‘just’ issue some stock, grant some options, close a seed round, etc? It’s been done hundreds of times before, so it must be all ‘standard’ by now. Just click a few buttons, fill in some names and numbers, and you’re done.

This is the attitude of someone using a product for which clean, standard, predictable, pre-defined features are already in place. “Just” issuing a service provider some stock should be like ‘just’ moving some files around on Dropbox, right? There’s a serious flaw in this thinking. The clean, standard, predictable company and contract history simply does not exist, and hence full automation is pure fiction. 

  • What state are you located in? Laws vary, even if you’re a standard DE corp.
  • Are you a C-corp? S-corp?
  • Are there protective provisions that need to be complied with?
  • Any anti-dilution protection?
  • Enough authorized shares in the charter?
  • Enough reserved equity in the equity plan?
  • A well-documented value of the equity?
  • Is there a written agreement explaining the consideration and complying with securities laws?
  • Is the recipient an individual or an entity?
  • Board approval?
    • Are we confident the composition of the Board is well-documented?
  • Is stockholder approval necessary?
    • Any specific thresholds?
  • Vesting?
    • 83b?
  • Acceleration? What kind?
  • Any other special provisions/requirements implemented by past investors?
  • etc. etc. etc.

Virtually every VC, angel group, accelerator, large company, etc. has its unique variances in the contracts it executes/negotiates. States have different requirements. Laws change. Reality: people are not standardized.  They have their idiosyncrasies, and people determine what does and doesn’t get signed; what gets added to the code base.

Even if companies share 90% of the same legal DNA, the 10% variance is a massive wrench that makes automation, or even any kind of significant simplification, impossible without taking on enormous legal technical debt. That statement is not coming from a luddite lawyer who hates technology, but from the CTO of a startup/vc law practice that I am 100% certain is on the cutting edge of legal technology (the kind that actually works) adoption.

Telling a VC lawyer that you ‘just’ want to issue some stock is not equivalent to ‘just’ using a pre-coded feature in a product. It is far more like telling a software developer that you ‘just’ want to add a feature to your existing, non-standard, unique code base.  Imagine telling that developer to do it as quickly and cheaply as possible. Imagine hiring the cheapest developer you can find to implement that feature.

The contract that actually issues the stock may be 99.8% standard, but it has to be implemented into the historical set of contracts/context without blowing anything up. Contracts and laws do not sit in little, isolated modules without any impact on the other. They’re all inter-connected, with a change in one potentially resulting in a cascade of effects in others. Hence the code base analogy.  The larger, more complex the code base (set of contracts, number of jurisdictions, people involved), the greater the skill and experience required to work with it safely. And having a well thought-out, well-designed architecture implemented from Day 1 dramatically impacts the scalability and resilience of that code base.

So when a client says they ‘just’ want to issue some stock, all they might think about is opening a word document, filling some names, and signing. Of course that can be automated.  What often isn’t considered is the lengthy, complicated list of steps and analysis needed to fit that template document within the Company’s existing legal history. That, not the template stock purchase agreement, is what lawyers do, and software cannot do.

De-Valuing Law, like De-velopers, is De-lusional.

Anyone who sells a product or service into a market learns that not every buyer is willing to pay the cost necessary to deliver that product or service in an efficient manner, within the bounds of physics/reality.  Some buyers simply can’t afford it. But many others just don’t value the product or service enough to pay even the lowest possible price. As a lawyer, I learned very early on in my career that this is the case with founders looking to engage lawyers.

If I’ve been sold the lie that startup/vc law is a completely commoditized, standard product, I am going to shop for lawyers, and assess cost, the way I would for any other commoditized, standard product. I “just” want to issue some stock. Like I “just” want some toilet paper. There are founders (a minority, but many) who understand very quickly why they need to pay good compensation for software developers, and yet will question every single invoice from lawyers.

While I’m always more than happy to walk through an invoice when it makes sense, MEMN’s client intake process has been deliberately designed to filter out clients who, for whatever reason, de-value lawyers in this way.  Our website’s home page says “World Class Counsel, Brought Down to Earth.” Translation: top lawyers who are more efficient, responsive, and accessible than the large firms where they’ve historically been found. We compete with other firms who provide top-tier legal counsel to scaling tech companies; not with the unrealistic price expectations of people who, through inexperience or delusion, want Teslas at Kia prices.

The seed-stage period is the toughest time for startup legal budgeting. Things are starting to get more complex, but with only a few hundred thousand raised (let’s put aside California ‘seed’ rounds), every dollar paid hurts. Fixed fees, flexible payment arrangements, deferrals (but be careful), and good old-fashioned budgeting are the key to getting through that period with your lawyers. Any experienced set of startup/vc lawyers will know how to be flexible for seed-stage companies. Just always remember that flexibility (and efficiency) does not mean defying the laws of physics to get things as cheap as you’d like them to be. 

At the level of law that scaling companies require, technology will forever (or at least into the very distant future) remain a complement and not a replacement for lawyers. Yes, the legal industry as a whole is and will continue to undergo disruption as software eats up the more routine, commoditized parts of the profession. But VC-backed companies are not dealing with commoditized lawyers, and talented, creative VC lawyers are hardly, not even remotely, underemployed.  If anything, those of us who adopt new tools as they are developed have found our practices enhanced, not diminished, by technology.  It allows us to deliver more concentrated value with our time, which means a healthier attorney-client relationship overall.

If you engage your lawyers as the developers of an important foundation for your company – expecting effectiveness and efficiency, but staying realistic about the amount of complexity and value actually underlying their work, you’ll be surprised by the rewards.  For those who continue fantasizing about replacing lawyers entirely with apps, nothing will provide a better education than the moment the debt comes due.

Lawyers are Slow, But Firms Shouldn’t Be

TL;DR Nutshell: Don’t be fatalistic in assuming that working with good lawyers always means slow response times. But also don’t delude yourself into thinking that any particular lawyer, if she’s good, will be immediately available for your every need. Asking the right questions about responsiveness up-front will prevent a lot of frustration in your startup’s relationship with its lawyers.

In my discussions with founders re: what they look for in hiring lawyers for high-growth, investor-backed startups, I’ve found that everything usually boils down to 4 criteria (often in the following order from most important to least, but not always):

  • Quality – Top founders usually have a strong understanding that (i) decisions when the Company has $5K in the bank account can (and often will) have a material impact on the business when its hit $20MM ARR, and (ii) cleaning up legal mistakes is orders of magnitude more expensive than doing it correctly the first time.

Quality is typically the main reason that startups ‘upgrade’ from generalist lawyers. See: Startups Need Specialist Lawyers, But Not Big-Firm Lock-In

  • Trustworthiness/ Like-ability – Your lawyers will be (or should be) close advisors working with you on the most high-stakes, strategic decisions of your company’s lifecycle. That relationship will get dysfunctional quickly if you can’t trust them, or simply don’t like them as professionals.

Trustworthiness is typically the main reason startups switch lawyers/firms from those that their lead investors insisted they use. See: Why Founders Don’t Trust Startup Lawyers

  • Efficiency – Hiring good lawyers, like hiring good developers, will never be cheap. It’s a basic law of markets that top talent requires top compensation. That being said, there are a lot of ways that founders can ensure that their legal budget is paying for great lawyers and not for expenses/overhead that isn’t actually resulting in better value.

Efficiency is typically the main reason startups avoid, or stop using, very large firms with billing rates 4-5x of what top lawyers require in compensation. See: How Startups Burn Money on Startup Lawyers

  • Responsiveness – This usually comes last because many founders have, through frustrating past interactions with the legal profession, come to the conclusion that ‘dealing’ with lawyers inevitably involves long wait times. Sort of how I brace myself every time I have to enter a specialist doctor’s office, because I know a 9:30 appointment, which was scheduled weeks ahead of time, usually means actually being seen around 11.

Send your lawyer an e-mail and expect a response in 3-4 days, if he’s not too busy. That’s just what it takes to work with good lawyers when you’re a small startup with a modest legal budget, right? The big fish have their attention most of the time, so just get in line… It doesn’t really need to be this way. Understanding 3 concepts related to lawyer economics will help you avoid this scenario:

1. Appreciate institutional bandwidth – and why, for speed, firms > solos. 

If recruiting and motivating top lawyers requires competitive compensation, then with basic math you’ll see why great lawyers who work with early-stage startups must work with many startups, not just yours, to get paid. Good startup lawyers are busy people, because maintaining a strong portfolio of work allows a lawyer to get paid well without burdening any particular company with an excessively large bill.

However, while a solo lawyer who is very busy will have only one thing to tell her client when they need something done quickly – “wait” – lawyers in firms have institutional bandwidth. If I’m busy, and I often am, I have other lawyers (and staff) in my firm who can be assigned to keep work moving. Properly run law firms know how to manage bandwidth and ensure that work is “spread” throughout their roster, without a loss in quality. This allows great lawyers to stay busy (required for compensation), without burdening clients with ridiculous wait times.

This point is, however, related to a second important concept:

2. For your primary counsel, hire a firm, not a lawyer. But size of practice area matters more than the size of the whole firm. 

The old adage “hire lawyers, not firms” has a lot of truth in it, but that truth only applies with the right factual backdrop:

  • It’s usually said by in-house general counsel, who themselves maintain a roster of specific lawyers (at various firms) that they can task on projects to manage bandwidth. Founders do not have this, and trying to build it for them would be a waste of time.
  • It assumes that there is something very unique about a particular lawyer that you need that others in her firm cannot provide. If you are doing cutting edge niche legal work that is unique to your particular market – like perhaps a patent lawyer with a very deep understanding of your special technology that no one else on the market has, this may make sense. For general startup/vc law, this is flatly not true if the firm you’re working with maintains proper standards and training for its roster of lawyers.

Of course, your primary contact with a firm will be a specific lawyer. But if you want to avoid waiting days, or even weeks, for something as simple as a response to an e-mail, you need legal bandwidth, and that means a firm. Expecting a specific lawyer to handle everything you need is the fastest way to ensure you are going to wait a long time for that lawyer’s attention, unless you’ve got several hundred thousand dollars a year in your legal budget for him. That’s called “in house counsel.”

But take note: there are a lot of law firms with 500, 1000, even 2000 lawyers who are incredibly slow. Why? Because they don’t actually leverage institutional bandwidth. A lot of those lawyers inside these large firm are either (i) in completely unrelated practice areas and hence aren’t actually available to help your particular lawyer (useless to you), or (ii) working in silos (just sharing a brand) with no effective mechanism for collaborating with one another. There are deeper reasons behind this “silo” problem that span issues like technology and compensation structures, but that’s too deep for this post.

Keeping dozens of different specialties of lawyers under the same firm is massively inefficient – to use econ jargon, we can call it “diseconomies of scope.” But within a specific practice area, there are very large efficiencies – shared technology, training, templates, institutional knowledge, and access to client information  – that a focused firm has over a bunch of independent lawyers. That’s why the specialist ecosystem that MEMN leverages is made up predominantly of specialized boutique firms, not solo lawyers (although there are those as well), each with their own institutional bandwidth within their practice area. See: The Tech Law Ecosystem v. BigLaw. 

3. Don’t hire an M&A or IPO Lawyer who uses startups as lead gen. Hire a startup/vc lawyer.

There is a massive difference between a lawyer who focuses on M&A (large exit transitions) and simply pursues startup clients as lead gen for very large deals v. a lawyer whose focus is startups and venture capital. The technology law firms that have very good response times have segmented large exit transactions as a specialty that operates alongside, but separate from, emerging companies corporate work. On top of improving response times, this results in better startup/VC lawyers and better M&A lawyers.  Find one of those firms.

Compare these two lawyers:

  • Lawyer A is assisting this month on (i) a formation, (ii) two seed deals, (iii) a Series B and Series C financing, and (iv) a $500MM acquisition.
  • Lawyer B is assisting this month on (ii) a formation, (iii) three seed deals, (iii) 2 Series A financings, and (iv) a Series B and Series C financing.

If you’re a startup client w/ one of those seed deals or VC financings and have a question, or you’re just a client with a quick question on a new hire, who do you think is more likely to respond promptly to your e-mail? Lawyer A, because of the fundamental fact that large, high-stakes, fast-paced exit deals tend to consume lawyers’ attention (for understandable reasons, big fees at stake) is going to take a lot longer. Hire Lawyer B over Lawyer A, and just ensure that Lawyer B’s firm has M&A specialists for when you need them… or hire Lawyer A and take a number.

Recap: Startups move fast. It is extremely frustrating to founders when their lawyers can’t keep up.  That doesn’t mean you should expect McDonald’s like responsiveness – these are highly skilled, busy professionals managing a portfolio of clients, not your in-house assistants – but if it takes days to even get a response to your e-mail, there’s an underlying problem that should be dealt with. For primary corporate counsel, find a firm with lawyers who focus on early-stage/emerging tech work, and with institutional bandwidth within that specific practice area.

And if you want the truth on how responsive a group of lawyers are, there’s no better place to go than that firm’s client base.  Believe me, if a founder CEO is frustrated with the responsiveness of her lawyers, you’ll have zero trouble getting her to talk about it.

Converting Your Startup to a Delaware Corporation, Correctly.

TL;DR Nutshell: If you’ve accepted that you need to convert your startup to a DE corp from a different entity type, then it’s also time to accept this: there is no off-the-shelf, “click a button and file” way to convert to a DE corp. It is highly contextual. The right lawyers can do it efficiently and correctly. The wrong ones will tell you it’s simple, screw it up, and require you to pay the right lawyers 5x more in the future to clean it all up.

Background Reading:

The purpose of this post is not to debate whether your startup should be a Delaware corporation. While we do work with a decent number of VC-ish backed Delaware LLCs (sometimes LLCs really do make sense), the vast majority of technology companies that raise venture capital either start or end up as Delaware corps. And the moment a lawyer starts playing contrarian with me, talking up why Delaware isn’t needed, or C-Corps are tax inefficient, I quickly end the exchange by asking how many VC-backed companies she’s actually worked with. We are talking about scaling tech companies and venture capital. Not small businesses or companies funded by local, non-institutional investors.

So for purposes of this post, we are going to take it as a given: you need to be a Delaware corporation, but you aren’t one right now. Converting is simple, right? Just file a form?

Converting from any kind of entity to a DE Corp is not “standard.” Ever. 

Properly forming a DE corp startup from scratch has, thanks to standardization and automation, become a relatively straightforward process.  The reason, of course, is that you’re starting from nothing, and nothing is the easiest condition to automate from; no messy context throwing a wrench in the system. Conversion, however, involves a history with any number of possible permutations, and that means all the shiny templates and technology must give way, partially, to human judgment.

  • What are your state’s rules around entity “conversions”; is a “statutory conversion” allowed, or will you need to do a merger or possibly even an asset sale? It depends. 
  • What approvals does your state’s rules require? It may be a majority of all equity, it may be 2/3, it may be unanimous. It depends.
  • What specific documentation (like a “Plan of Conversion”) and filings (often in both states, not just DE) do the rules require? It depends.
  • Are there any existing agreements in place that might require a separate consent to be obtained before the entity can convert? Ok you get the idea.
  • Does the company’s existing capital structure require a (hopefully quick) discussion with tax counsel regarding possible tax hits (phantom income) resulting from the conversion? This is a crucial issue to consider when converting an LLC to a Corp. 

Converting a Non-DE Corp to a DE Corp (Corp to Corp) is generally simpler than converting an LLC to a Corp. Converting any entity in a state that allows for statutory conversions (TX and CA do, NY does not) is generally simpler than having to do a statutory merger.  Whatever the context, you will screw it up trying to do it yourself. In fact, I’ve lost count of how many law firms have screwed it up, requiring founders to pay us 5-10x in cleanup costs than they would’ve paid if they had just hired competent counsel from Day 1.

The reason you will never just push a button to receive medical treatment is that every person is different, and tailoring high-stakes treatment to individual differences is precisely what professional judgment (supported by tech, of course) handles best.  Startup law is no different. Technology and tools absolutely cut down on waste, and yes there is a lot that is standardized even in conversions.  But in the end the institutional knowledge of the law firm you choose will determine whether it gets done efficiently and correctly, or whether you’re just deluding yourself into thinking that the guy promising a cheap, simple conversion actually knows what he’s doing.

Your Startup’s Legal Bill: The Printer & The Cartridge

A client of mine recently used an analogy to explain why he dropped another small, local law firm for MEMN: their printer is cheap, but their cartridges are really expensive.  That statement explains perfectly why many founders, because of their lack of understanding of basic law firm economics, can get really screwed by firms touting their low hourly rates as evidence of their “efficiency.” The core problem is this:

  • In the short term, your legal bill is a two-part equation: hourly rate * time spent. Naturally, that means that a lawyer billing $225/hr can generate a substantially larger bill than a lawyer billing $375/hr if the “cheaper” lawyer takes 3x the time to do the same task as the more “expensive” one.
  • In the long-term, “time spent” is itself a two-part equation: time spent to initially complete the task + time spent fixing mistakes (if the mistake is even fixable).  This should come to no surprise to a CEO who’s spent time interviewing and hiring developers. One developer wants a $60K salary, and the other wants $100k. Is the $60k one a bargain, or overpriced sh**?

The above two points should help make the analogy between printers and lawyers clearer:  a printer can seem like a great deal because the manufacturer locked you in with a low cost of adoption, but you should really pay attention to how much the cartridges cost, and how many you’ll have to use – and whether it flat out sucks. Because that’s where the real expenses are. It’s the exact same thing with lawyers: an exceptionally low hourly rate can seem like a great deal, but how many hours will this ‘bargain’ rate be multiplied by? And what exactly are you getting for that rate?

The “Hourly Rate” Issue

As mentioned above, it is absolutely the case that a lawyer billing $400/hr can produce a dramatically lower legal bill than a lawyer billing $225/hr; meaning that, under the right circumstances, you should be willing to pay more if the value is truly there.  But are there circumstances in which a lower rate does not mean lower quality? Yes, as I discussed in “When the A-Lawyers Break Free: BigLaw 2.0” a lot of clients are shocked to find out that when an attorney at a large firm bills them $675/hr, only maybe 20% (if she’s lucky) of that rate actually makes it to the lawyer (the talent). The rest goes to pay for all the background infrastructure necessary to support a firm full of dozens of different practice groups, offices, summer intern programs, etc.

Thanks to new technology and business models now viable because of that technology, a new breed of law firm is emerging that (unlike their predecessors who attracted attorneys by offering jeans, MacBooks, and a more relaxed atmosphere at the cost of lower compensation) can compensate their attorneys on par with and in many cases better than larger firms.  And those small, focused firms have dramatically lower overhead costs than larger firms. The end result is that, even with significantly lower hourly rates, the attorneys are still highly compensated.  Again, in law as in the world of developers, you get the talent you pay for.

Nutshell: make sure your hourly rate pays for legal talent, not an outdated delivery model.

The “Time Spent” Issue: The Problem with Generalists and Solo Lawyers

Moving to the second part of the equation: what allows a lawyer or law firm to do something more quickly, and with fewer mistakes, than another firm?  The first and most obvious answer is of course: better lawyers (and paralegals). No shocker there. Better, more experienced doctors work more efficiently and with fewer mistakes than crappier ones.  But there’s actually more nuance here than meets the eye.


You’ve developed a strange rash on your arm, and you need someone to help you treat it. Who do you suppose will be able to get it done more efficiently and effectively – a cardiologist or a dermatologist? It seems like a stupid question, but many people don’t understand the concept of legal specialization.  Focused repetition leads to specialized domain knowledge, which leads to higher quality and efficiency.

There are an endless number of business lawyers, corporate lawyers, even IP lawyers, running around touting themselves as startup lawyers. The reality is that they’ve spent 95% of their careers doing absolutely nothing related to the venture-backed startup space, but because they either stayed at a holiday inn express or because they know someone connected to startups, they’ve started to dabble in the area. How complicated could it really be? I’ll keep my answer short: get ready to be schooled.

Process and Technology

Being a generalist forces you to reinvent the wheel when specialists have already-developed forms, processes, and technology in place to minimize time burn.  A new client of MEMN recently said a prior firm charged $1700 to draft a form contract for hiring developers (which, btw, was garbage).  The startup lawyers who just read that are laughing because they know that a client who asks them for that kind of document gets billed literally 5% of that, if anything at all.

Process and technology are at the core of why the hourly rate of a law firm or lawyer says very little about what you’ll end up paying.  I’ve seen solo lawyers and boutique firms talk about “overhead” as if it’s something to be absolutely kept to a minimum at all costs.  The problem, of course, is that if you don’t invest in technology, knowledge management resources, etc., it is 100% certain that you are going to be incredibly slow and inefficient compared to those firms who do, even if those firms have higher hourly rates.  This is the core problem with solo lawyers.  Yes, their hourly rate is low, but they practice like it’s 1995. And that’s expensive.

While we’ve done everything we can at MEMN to cut out fat and bloat, I have zero qualms about investing in technology that will enhance quality and efficiency. That’s not “overhead.” It’s called running a 21st-century business.  We also have an amazing espresso machine. Treat your talent well.

Conclusion: When you hire talent for your own startup, you don’t immediately go with the person asking for the lowest hourly rate. If you do, you’re a moron. Remember that lawyers and law firms are like printers (and developers).  What looks cheap could end up being the most expensive mistake of your life.

When the A-Lawyers Break Free: BigLaw 2.0

Nutshell: The world of transactional tech law used to be divided into A-Player lawyers earning the gold at large firms and everyone else making a decent living at second-tier small firms. SaaS eliminated that world, and small can now mean better, faster, and more lucrative; which means A-Lawyers are breaking free.

No one who operates in the startup space needs to be told that bigger does not always mean better.  In fact, the opposite is often the case. Being large often makes you slower, more bureaucratic, and inefficient. Just try getting a piece of new technology adopted at a major law firm, or getting a secretary to learn that technology.  I’ve been there.

Big Was Better

If bigger leads to better performance, there must be something about the nature of the product or service in question that requires a large organization.  In law, that “something” was historically (i) expensive, proprietary resources to properly service clients (barriers to entry), (ii) the need for collaboration among multiple specialties, and (iii) high amounts of friction in effecting that collaboration.

Before the days of SaaS and Secure Cloud Storage/Collaboration, top-tier transactional law required at a minimum (i) a law library, (ii) internal word processing, (iii) teams of administrative support and attorneys, and (iv) dozens of legal specialties under the same roof.  Without that, you would be slow and inefficient.  In that world, choosing a small firm usually meant, as a fact, that you were dropping down a tier in quality.

And then things changed. Your “library” is now a subscription SaaS service. Word processing you can outsource by the hour. Same thing for admin support.  People working remotely often collaborate more easily than people working within the same law office, if they use the right tools. When BigLawyers step back from their billing timer and realize this, two very important thoughts come to mind:

  • Why are you all here? – Why do we (all kinds of different lawyers working in different areas that require different processes) need to still work under the same structure? I’m tired of having to justify to a bunch of litigators or IP lawyers that some software that I NEED for MY practice needs to be put into the budget. Why can’t I come to work in jeans if my clients don’t care? Why do I even have to come in to work today? All I do is stay in my office anyway.
  • Where the f*** do all my billings go? I bill $600 an hour. I take home like 20% of that. Wait, you mean all of this obsolete, bloated, bureaucratic infrastructure is the reason 80% of what my clients pay disappears? They hired me, not your brand. Why am I here?

Focus Always Wins

Every variable that once made the large, full service law firm necessary and optimal has been turned on its head by the web, SaaS, and the cloud. Now, a corporate lawyer at a small firm can staff a deal just as quickly, if not more quickly, utilizing a network of smaller, more focused, more efficient and (yes) better lawyers and law firms. It doesn’t take a Harvard MBA to understand why a top trademark lawyer operating out of a trademark boutique that does nothing but trademarks is going to be vastly superior at (guess what?) trademarks than a lawyer who works alongside dozens of other types of lawyers. Focus trumps being a generalist; and that applies equally to lawyers and law firms. 

But the reality of how SaaS has changed the landscape isn’t exactly news, at least not to people who follow these topics. Why then has it still seemed as if large firms have a lock on the best lawyers?


In every profession, the best expect to be paid according to their talent. This is not rocket science, nor is it surprising. A-Lawyers have stayed in BigLaw for one very simple reason: it paid the most. Notice the past tense.  When big really did mean better, the better clients went big, and that means big paid more.

But it was only a matter of time that enough top lawyers started asking themselves “where the f*** do my billings go?” and realized that BigLaw’s overhead and bloat leaves an enormous amount of room to cut out fat, charge less, and still take home WAY more.  Yes, my friends slaving away in BigLaw trying to hit your 2000-2150 billables quota so you can earn that nice little bonus amounting to 3% of your billings, the cat’s out of the bag. Many of us at small firms earn more than you do. A lot more. And we do it with better technology, a more flexible schedule, and often working from wherever we want. All while our clients pay a lot less. Who, long-term, do you think is going to win at attracting talent?

You know what’s better than profits-per-partner? Profits in your wallet.

Networked Law: BigLaw 2.0

Examples of specialists we (corporate lawyers at a small firm) use to staff deals (i) a former silicon valley BigLaw tech transactions partner (head of his group) now operating a solo practice, (ii) a T100 in Texas trademark lawyer operating out of a trademark boutique, (iii) one of the country’s leading open source specialists operating a solo practice, and (iv) a veteran venture capital paralegal working virtually from Palo Alto. Everyone bills 40-60% less on an hourly basis than they would at a major law firm, which doesn’t even account for their ability to optimize pricing, process, technology, and staffing for their practice area. And, yes, everyone takes home more than they would in BigLaw.

You know what that’s called? D-i-s-r-u-p-t-i-o-n.  I don’t use that word lightly. This is not a piece of software that large firms can ultimately pay a consultant to help them adopt, but a fundamental restructuring of how top-tier transactional law operates.

The Future

Small firms are not just for the mickey mouse club anymore. The A-Lawyers are asking “Why are you all here?” and “Where the f*** do all my billings go?” and are doing something about it. Focused, faster, efficient, networked, and now with much bigger paychecks. Small law has been around for a while. But BigLaw 2.0 is just beginning to ramp up. As more A-Lawyers set themselves free, most of BigLaw will have to face the reality that all the branding in the world can’t save a bloated, overpriced, and now completely unnecessary delivery model.

p.s. We’re hiring.