The Carta SAFE for Seed Rounds

Background reading:

As I’ve written in various places (see above), a significant problem that has emerged in startup ecosystems involves certain investor organizations pushing startups to adopt their preferred financing templates. Predictably those templates are often riddled with issues that favor the interests of the money. Of course these organizations are far too clever to come out and state transparently, “we want you to use this document because it makes us and other investors more money,” so they spin other narratives about saving founders time, or reducing legal fees; even though the “cost” to founders is often orders of magnitude higher than whatever they might be “saving” by mindlessly signing the templates.

This dynamic was most visible with YC’s announcement of the Post-Money SAFE, which implemented economic concepts exorbitantly favorable to seed investors (including YC of course), but was marketed as a way to (air quotes) “help” founders have more “clarity” about their cap table. YC, their long list of positive impacts on the ecosystem notwithstanding, is still an investor with lots of mouths to feed. No one should’ve been surprised that it would use its brand leverage to push a more investor-favorable document onto startups, particularly now that, with its brand having significantly matured, it no longer needs to rely as much on “founder friendliness” to attract startups.

Carta, the dominant (by far) capitalization SaaS used by startups, recently announced that it is enabling automated SAFE financing on its platform. Interesting news, and I’m sure it’ll save teams planning on closing SAFE financings a bit of hassle. But automated SAFE closings have been available on other platforms, like Clerky, for some time, and realistically the technology behind it is hardly earth-shattering. Given that SAFEs are utilized far more in California than in the rest of the market, that’s probably where the automation will have the most impact.

What I find much more interesting, and relevant to topics I write about, is that Carta chose to tweak the YC SAFE docs and create a “Carta SAFE.” Companies can still close on YC’s Pre-Money or Post-Money SAFE templates, but they also have the option of a Pre-Money or Post-Money “Carta SAFE.” The changes themselves are fairly innocuous, but helpful and balanced. More importantly, I think it’s worth recognizing the valuable role that an organization like Carta could play in promoting various template financing structures to startups.

YC is a venture capitalist, and thus highly biased in the terms it purports to offer as “standard.” They lost tremendous credibility among the legal and startup community – although surely gained favor among VCs – with their 180 on the Post-Money SAFE. They absolutely deserve respect for their track record of picking successful startups, but lines have been crossed with respect to any facade of “founder friendliness” in their template standards.

Carta, however, is a technology company that (as far as I know) is not investing in dozens of startups every year. Carta has far less reason to favor an investor-biased document, and thus potentially has far more credibility in swaying market “standards” in a more balanced direction. This is visible in how they’ve implemented their automated seed financings and templates, relative to how YC pushed out the Post-money SAFE.

Go to YC’s website, and you can’t even find the old pre-money SAFEs with more company-favorable economics and terms. All you have is the new (profoundly investor-biased) Post-Money docs for download. This simple fact has actually caused huge confusion among inexperienced founders, who often aren’t even aware that YC dramatically changed their forms and economics, and thus (thinking they are doing themselves favors) simply download and execute the forms on YC’s site. YC could’ve very easily offered up the new Post-Money SAFEs, while leaving the old forms also available for download, with clear prompting to founders to work with advisors to decide which form they prefer. Instead, YC consciously chose to promote only the new forms, signaling a clear desire to change the market “standard” in favor of investors.

Contrast that with Carta. The Pre-Money v. Post-Money distinction is front and center in their UI, with both types of forms easily accessible to startups, and with helpful tools for comparing dilution from the different structures. This is a far more honest and transparent way for helpful templates to be offered to startup teams, without shady gimmicks or marketing spin to nudge them in favor of the money. It should be applauded.

Of course, I’m not going to wrap up this post without acknowledging that Carta still has bias. Who doesn’t? As an automation tech company, they are obviously biased toward automation and templates that enable automation. There are countless ways in which financing documents can (and often should) be negotiated and tweaked to make them a better fit for the unique context of a particular company raising money from particular investors. Sometimes convertible notes of various flavors make more sense. Other times seed equity. Other times the full suite of NVCA equity docs.

Despite growing traction among public templates, an enormous amount of investors and startups still take advantage of flexibility and customization in their deal docs, because the stakes are so high, the context and people involved so nuanced, and the terms so permanent, that it’s worth doing a bit of negotiation. If a few thousand dollars of legal fees can save you a few million in the long-run on your cap table, it doesn’t take advanced calculus to arrive at a decision.

In saying that, I’m obviously reflecting my own bias as company counsel to startups (and not investors). My job is to ensure startup teams are aware of all the options on the table for their financings and corporate governance. That of course includes bringing up when an automated template might make sense. Sometimes it does, often times it doesn’t. We can all stop pretending that serious lawyers are in any way threatened by tools like Carta or Clerky. I love these tools, because the last thing I enjoy spending my time on is shuffling cookie-cutter forms. Use the cookie-cutter when it makes sense, but make sure you really understand the tradeoffs and limitations, because a lot of very smart teams decide to put the cookie-cutter down and take a more “custom fit.”

Venture capitalists, together with Startups, are biased in favor of their own bank statements. Automation tech companies, like Carta, are biased in favor of hyper-standardization and automation. And high-end ECVC (Startup) lawyers, like me, are biased in favor of flexibility and customization. There’s no need to hide any of this. Every party has an important role to play in the ecosystem, and the interaction of all the moving parts ensures we all arrive at a reasonable equilibrium. All of that being said, I’m glad an organization like Carta has entered the template financing arena, because a well-branded but less biased player was sorely needed.

Moving (Too) Fast and Breaking Startup Cap Tables

Related Posts:

As I’ve written many times before, the “move fast and break things” ethos, which makes absolute sense in a software environment where fixing “bugs” is quite easy and low-stakes, becomes monstrously expensive and reckless when applied to areas where the cost of a mistake is orders of magnitude higher to fix (if it’s fixable at all). Silicon Valley got a very visible and expensive (to investors in terms of capital, and founders in terms of legal errors and terrible legal advice) lesson in this reality a while back with a very well-funded (but ultimately failed) legal startup heavily promoted as enabling (via over-hyped vaporware) startups to “move faster” and save significant costs. That legal startup was, perhaps unsurprisingly, controlled by money players with all kinds of reasons to profit from startups (that they invest in) getting weak legal and negotiation guidance. No one wants an in-experienced founder to move fast and mindlessly do what investors want more than… those investors.

That fundamental point is one that inexperienced founders need to keep their eye on throughout their entire fundraising and growth strategy. Notice how, for example, certain Silicon Valley groups adamantly argue that SV’s exorbitant rents and salaries are nevertheless worth spending capital on, and yet simultaneously they will howl about how essential it is that startups minimize their legal spend (a small fraction of what is spent on rent and salaries) in fundraising, and move as quickly as possible; usually by mindlessly signing some template the investors created? Why? Because they know that the one set of advisors most capable of “equalizing” the playing field between inexperienced startup teams and their far more seasoned investors is experienced, independent counsel. Aggressive (and clever) investors say they want you to adopt their preferred automation tools and templates because they care so much about saving you money, but the real chess strategy is to remove your best advisors from the table so that the money can then, without “friction,” leverage its experience and knowledge advantage.

At some obvious level, technology is an excellent tool for preventing errors, especially at scale when the amount of data and complexity simply overwhelms any kind of skilled labor-driven quality control mechanism. But there is a point at which people who sell the technology can, for obvious financial incentives, over-sell things so much that they encourage buyers to become over-dependent on it, or adopt it too early, under the delusion that it is far more powerful than it really is. This drive to over-sell and over-adopt tech for “moving really fast” is driven by the imbalance in who bears the cost of fixing “broken things.”

Ultimately the technology seller still gets paid, and puts all kinds of impenetrable CYA language in their terms of service to ensure that no one can sue them when users zealously over-rely on their products in ways clearly implied as safe by the tech’s marketing. Founders and companies are the ones who pay the (sometimes permanent) costs of a poorly negotiated deal or contract, or in the case of cap tables incorrect calculations and promises to employees or investors.

In the world of cap tables, automation and tracking tools like Carta (the dominant player, justifiably, by far) are enormously valuable, and doubtlessly worth their cost, in helping the skilled people who manage the cap tables keep numbers “clean.” In the early days of Carta’s growth (once called eShares), there was a general understanding that cap tables rarely “break” before the number of people on the table exceeds maybe 20-30 stakeholders as long as someone skilled at managing cap tables (in excel) is overseeing things. That last part about someone skilled is key.

There are in fact two broad sources of cap table errors:

  • Using Excel for too long, which creates version control problems as the number of stakeholders grows; and
  • Management of cap tables by people who are simply too inexperienced, or moving too quickly, to appreciate nuances and avoid errors.

Technology is the solution to the first one. But today it’s increasingly becoming the cause of the second one. The competitive advantage of technology is speed and efficiency at processing large amounts of formulaic data. But the advantage of highly-trained people is flexibility and ability to safely navigate nuanced contexts that simply don’t fit within the narrow parameters of an algorithm. In the extremely human, and therefore subjective and nuanced, world of forming, recruiting, and funding startups in complex labor and investor markets, pretending that software will do what it simply can’t do –  delusionally over-confident engineers notwithstanding – is a recipe for disaster. The combination of new software and skilled expertise, however, is where the magic happens.

The Carta folks have been at this game long enough to have seen how often over-dependance on automation software, and under-utilization of highly trained and experienced people in managing that software, can magnify cap table problems, because it creates a false sense of security in founders that leads them to continue flying solo for far too long. Sell your cap table software as some kind of auto-pilot, when the actual engineering behind it doesn’t at all replace all the things skilled experts do and know to prevent errors, and you can easily expect ugly crashes.

That’s why Carta very quickly stopped promoting itself as a DIY “manage your cap table by yourself and stop wasting money on experts” tool and evolved to highly integrate outside cap table management expertise, like emerging companies/vc law firms and CFOs; who spend all day dealing with cap table math. They realized that the value proposition of their tool was sufficiently high that they didn’t need to over-sell it as some reckless “you can manage cap tables all by yourself!” nonsense to inexperienced teams who’ve never touched a cap table before. The teams that use Carta effectively and efficiently see it as a tool to be leveraged by and with law firms, because startup teams are rarely connected to anyone who is as experienced and trustworthy (conflicts of interest matter) in managing complex cap table math better than their startup/vc law firm.

But as is often the case, the cap table management software market has its own “race to the bottom” dynamics – but a better name may be the “race to free and DIY.” If I’m a company like Carta, and I know that truthfully very few companies need my tool before maybe a seed or Series A round (excel is perfectly fine, flexible, and simple until then), I’m still extremely worried that someone will use the time period before seed/Series A to get a foothold in the market and then squeeze me out as their users grow. That someone is almost always a “move fast and break things” bottom-feeder that will, once again, over-sell founders on the idea that their magical lower-cost DIY software is so powerful that founders should adopt it from day 1 to save so much money by no longer paying for expertise they don’t need.

Thus Carta has to create a free slimmed down version, and they did. But they’ve stuck to their guns that cap tables are extremely high-stakes, and even the best software is still extremely prone to high-cost errors if utilized solely by inexperienced founders. That’s why Carta Launch has heavy ties to a network of startup-specialized law firms. It’s free as in beer, but honest people know that it still needs to be used responsibly by people who fully understand the specific context in which it’s being used, and how to apply it to that context.

But the bottom-feeders of cap table management are of course showing up, with funding from the same people who were previously happy to impose costs (errors, cleanup) on inexperienced teams as long as their software gets adopted and their influence over the ecosystem therefore grows. The playbook is tired and predictable.

Why are you using that other (widely adopted and respected) technology that still relies (horror of horrors) on skilled humans? It’s 2020, you need :: something something automation, machine learning, AI, etc. etc. :: to stop wasting money and move even faster. Our new lower-cost, whiz-bang-pow software lets you save even more time and manage your cap table on your own, like the bad ass genius that you are.

We know where this is going. Many of us already have our popcorn ready. While before I might run into startups who handled only a formation on their own, and show up with a fairly basic and hard-to-screw-up cap table, I’m increasingly seeing startups who arrive with seed rounds closed on a fully DIY basis, and totally screwed up cap tables involving investors and real money. They also often have given up more dilution than they should’ve, because no independent, skilled expertise was used to help them choose and negotiate what funding structure to use. Clean-up is always 10x of what it costs to have simply done it right, with a thoughtfully chosen (responsible) mix of technology and skilled people, on Day 1.

Technology is wonderful. It makes our lives as startup/vc lawyers so much better, by allowing us to focus on more interesting things than tracking numbers or inputting data. The stale narrative that all VC lawyers are anti-technology really gets old. We were one of the first firms to adopt and promote Carta, along with numerous other legal tech tools. Not a single serious law firm views helping their clients manage cap tables as a significant money driver. But that’s like saying no serious medical practice views X or Y low-$ medical service as a significant money driver. Something can be a small part of a professional’s expertise, and yet still way too contextual, nuanced, and high-stakes to leave to a piece of software pretending to be an auto-pilot.

When the cost of fixing something is low, move as fast as you want and break whatever necessary. But that’s not contracts, and it’s not cap tables. In those areas, technology is a tool to be utilized by still-experienced people who regularly integrate new technology into their workflows, while maintaining skilled oversight over it. Be mindful of software companies, and the clever investors behind them, who are more than happy to encourage you to break your entire company and cap table as long as you utilize their half-baked faux-DIY tool. Their profit is your – often much larger than whatever money you thought you were saving – loss.

Legal Office Hours for Remote Startups

TL;DR: I’ve become particularly interested in, and connected to, the distributed/remote startup ecosystem; and decided to throw in a few hours of my time each week to support new teams growing specifically under that model via free virtual office hours. Info on that is near the end of the post.

Over the past several years, I’ve become fascinating with the idea of a startup ecosystem largely detached from geographic constraints, with companies recruiting talent based on fit and merit, regardless of where they live. For years I lived in the Hill Country outside of Austin, barely ever working from the firm’s downtown office because I just didn’t see a need to; and my clients didn’t care. Highly regarded Startup Lawyers don’t really need to spend much time in coffee shops or conventional offices. All they really need is a solid internet connection. Sidenote: I think Elon Musk’s StarLink (high-speed broadband anywhere) could be a game changer.

As my family – particularly my wife, who grew up in SoCal – realized that my growing client base didn’t care at all about my physical location, their willingness to continue putting up with Austin’s mosquitoes and deadly snakes (big problem outside of urban core), humidity, horrible traffic, decidedly limited outdoor beauty (save for a lake) and seemingly endless scorching summers (Mid-May through mid-October really sucks) reached a breaking point. Austin is an amazing and thriving city for many reasons, but it is not for anyone who likes needs the outdoors. No city is for everyone.

Because my wife and I had already decided to homeschool our three young kids, we had almost total freedom to pick a destination; and ultimately we landed on living near the mountains about an hour outside of Denver. Amazing weather and mountain views, literally limitless outdoor recreation, and a short flight or road trip to almost anywhere we needed to go. And yes, still rock solid broadband so I can close deals and work with clients just as easily as I did before. Little did we know that with both “homeschooling” and “remote” work, we’d started riding waves that would suddenly turn into a massive tsunami because of a pandemic.

I bring up this background to highlight how escaping the “tyranny of geography,” and the growing comfort with distributed startup teams, is not just an intellectual curiosity to me; it’s a core part of my life. When we’d announced that we were leaving Austin, there was no shortage of people who thought I was absolutely nuts and lighting a match to my legal career. They didn’t know I’d already been living in “the Texas countryside,” with a thriving ECVC client base and firm, for years. If my clients – all scattered across the U.S. and world – didn’t care that I was living on acreage in the Texas hill country, I knew they wouldn’t care about my living in the mountains of Colorado.

As our own adventures with remote/distributed work have continued, I’ve watched the broader ecosystem of “remote” startups mature as well. The number of companies using a distributed team, with few if any people in the Bay Area, has grown exponentially over the past 5 years or so; and we’re also increasingly seeing institutional investors who are happy to “venture” outside of their local markets in search of high-potential businesses that aren’t on the classic Silicon-Valley style VC circuit. Suddenly the distributed startup ecosystem has moved from a fringe quirk to a desirable asset with distinct competitive advantages.

But there’s one distinct disadvantage of “remote” startups that I keep seeing come up over and over again: they don’t connect as easily with serious lawyers. Most ECVC (emerging companies and venture capital) lawyers are still heavily tied down to local geographies, particularly the Bay Area. Strong teams in non-traditional markets often end up either using nearby lawyers who are totally lacking in the appropriate expertise/specialization, or they just wait until their investors happily “recommend” their favorite $1,000/hr Bay Area lawyer whose firm represents Uber and Apple. People who read SHL regularly know that I’ve discussed ad nauseam the deep problems (conflicts of interest) with using your investors’ pet lawyers; and also how the Bay Area market often promotes norms/practices (“unicorn or bust”) that are a poor fit for “normal” startups.

As I’ve been living through this pandemic and watching the growing zeitgeist around distributed startups, it occurred to me that I’m in a place where I could contribute some of my time to supporting the ecosystem. So I’ve decided to allocate a few hours of my time each week to free virtual “office hours” specifically for distributed teams outside of the Bay Area. We can spend, via a phone call or Zoom, up to an hour talking about any legal/strategic issue on the team’s mind: formation, founder relationships, fundraising and structuring, governance, hiring, etc. No expectation of billing or future engagement. I really just want to get more visibility into how this growing ecosystem is evolving, and how existing market players can help it thrive.

My personal thesis is that America’s size and unique geo/climate diversity is an enormously under-utilized asset in tech. Why should entrepreneurs and employees be forced to live in a handful of narrow, crowded, and increasingly over-priced concrete jungles when there are an endless number of beautiful, affordable, perfectly livable places that need high-potential residents but just don’t have the “tech” base to employ people locally? Because of some nonsense about the importance of “body language” and regular in-person meetings? Please. I think this pandemic is not just helping everyone realize the superficiality in some of their assumptions about remote work, but about a lot of virtual interactions: education, healthcare, and even connecting with the investor community.

A secondary thesis of mine is that the more geographically diversified a startup team’s network becomes, the less exposed they are to local startup power politics. Every geographically constrained ecosystem has organizations that have consolidated a level of influence/control such that it can feel like you need to kiss a brass ring in order to access resources you need. That dynamic is the opposite of what a real ecosystem should be; a decentralized resource where no single player can play gatekeeper and extract more value than their own value-add really merits. Promoting a more distributed startup ecosystem reduces the influence of overly self-interested power players, and enhances the kind of transparent meritocracy that helps teams access the right people with minimal wasted time.

Startup ecosystems are ultimately about relationships and people; not about artificial city or state borders. It’s time we talked more about the American ecosystem, and freed entrepreneurs and talented employees to work and live wherever is best for their companies and families. In the process, we’ll spread economic opportunity further across the country, and reduce many of the ills that have resulted from cramming people into too few of cities with not enough space and resources to make “living” affordable and accessible.

Info on participating in virtual legal office hours for remote/distributed teams:

My bio: here.

E-mail: [email protected]

Criteria (please explain in intro e-mail how you meet the below):

  • HQ is not in the Bay Area
  • You already have, or expect to have, a distributed team. Not a 1 or 2 people that you “let” work remotely, but a full orientation around enabling remote work such that no one outside of whatever you might call “HQ” is disadvantaged in opportunities, because the whole team is included in events/meetings.
  • The market you are going after has a credible shot at producing an at least $50 million (enterprise value) business.

This isn’t any kind of formal program with a hardened schedule, because my own availability varies day to day with deal/client work and firm admin, and I’ll scale my time allocation up or down as the number of teams fluctuates. Looking forward to getting to know new teams that reach out.

Startup Cap Tables

TL;DR: Just use Carta, and spend your time on more important questions. Before your seed round closes, Excel is usually OK too.

Years ago we were one of the first early-adopter firms to promote what was then-called eShares, and now Carta, as an option for reducing costs on 409A valuations and also getting scaled cap tables in order. See: 409A as a Service: Cash Cows Get Slaughtered (from early 2014). Today, Carta is a much bigger company, with far more adoption across the country and world. Brief humblebrag about my track record at early-picking legal(ish) tech winners. Doxly also just got acquired by Litera.

Over time, I’ve seen cap software competitors come and go. Sometimes it’s fun listening to the arguments they make for why you should use their whiz-bang-pow tool over something that’s easily becoming a market standard.  Let’s keep this simple: there are very few pieces of technology that lend themselves to fundamental network effects like cap table software. Cap tables are math. Math, unlike subjective and contextual human-oriented things, scales very well with technology and automation. You want the cap table tool that is most recognizable, and most widely adopted, because every single person on your cap table is going to have to interact with it. That’s A LOT of people who might bug you because some random feature isn’t working, or they simply don’t understand the interface.

Less-known options, no matter how incrementally better they may be at this or that little nuance, are just full of enormous headaches. There are a few candidates, most of them concentrated in Silicon Valley, that have tried to use their connections to some well-known accelerator or law firm to corner a distribution channel, but tech nepotism (which seems to be surprisingly common in Silicon Valley and other tech ecosystems) is a poor substitute for facts. When clients ask us what cap table software they should use, we say Carta, and move on. It’s a tool for tracking routine math at scale; not a financing or M&A deal contract with tons of variables to consider. Not that complicated of a decision, and if founders start to make it complicated, that’s often a red flag.

Start with random B-player cap table tool just because your accelerator’s leadership knows a guy who knows a guy (they’re usually guys) at another cap software company, and there’s a 99% chance someone will eventually make you switch to Carta; which will cost you money and waste time relative to having just made the right decision from the start. Buying the nonsense advice of people who in the background are just referring startups to each other in a self-interested tech bro circle often gets founders into huge problems.

All that being said, I’m not going to lose an opportunity to share some love for our tried-and-true old friend, Excel. Yes, it’s old and isn’t in the cloud, and it doesn’t give you that slick “cutting edge” feel that techies love so much, but where Excel has won, and will continue to win, is its simplicity of use and flexibility when the number of parties involved is fairly small; or when you’ve got some really nuanced situation that requires maximal flexibility to model future scenarios and a universal template isn’t going to work fast enough. There is always a fundamental tension between automation and flexibility, and sometimes flexibility really matters; particularly on high-stakes legal issues.

While Carta has started offering their new pre-seed free tool (in Beta) through law firms (of which we are one) – which I know is in response to other bottom-feeder tools offering free versions – Excel isn’t going anywhere. We will continue to use it for pre-seed companies who don’t need outside valuations, and really just have a handful of people for whom a basic excel model is perfectly fine. Excel goes off the rails at scale. At very early-stage, it works, and keeps things super simple. I don’t expect Carta to fully agree with me here, and the incentives there make that disagreement perfectly reasonable. As a power user unencumbered by economic loyalties, I can talk freely about when tools are useful, and when they’re not.

But once you’re closing a seed round and/or need a valuation, and it’s definitively time to get off the Excel train, Carta is the only realistic option for anyone who knows what they’re talking about; and how the dynamics of cap table software require there to be one dominant player.

This is not a sponsored post or paid advertisement for anything. Don’t hate me if I just disappointed your friends offering that random cap table tool you’ve been shilling for. This market has been won.

Luddites v. Tech Utopians: 409A and Legal

Background Reading:

TL;DR: Luddites pretend that technology can’t out-do them at anything. Tech utopians pretend tech can do everything. The truth lies in the middle.

In my sphere of the world, I interact with two profiles of people, both of whom I find somewhat obnoxious.

The first are luddites; often lawyers. These people cannot fathom the idea of clients wanting anything less than hand-crafted, white-glove attention to every legal matter. The compromises on quality and customization brought about by software and automation tools are an offense to their professionalism. They’ll walk you through 10 ways in which they can beat a piece of software, completely oblivious to the fact that 99.9% of the market doesn’t give a damn, if the software’s output is good enough.

The second are the opposite of luddites; what I’d call tech utopiansoften young founders or engineers. To these folks, effectively everything legal professionals do is hand-waiving non-sense, charging hundreds of dollars an hour to fill in forms.  Build a simple automation tool, or DIY checklist for them, and their eyes light up; enraptured with how ‘smart’ they are for not ‘wasting’ money on legal services. And I happily admit to a bit of schadenfreude when they end up paying 10x later for cleanup, as part of their education in the value of legal counsel.

Luddites are in self-denial regarding how much of their work can actually be done quite well, and sometimes better, by technology. Tech Utopians are in denial about how much work still requires, and will require for a very very long time, highly-trained, highly-intelligent people who aren’t conflicted, and who can analyze and deliver things that even the most advanced technology cannot. And yes, those people are way more expensive than software.

The bottom 25% of most professions is probably dead in the water relative to software; think TurboTax and LegalZoom. As AI becomes more sophisticated, that will probably move up to something closer to 50%. This is quite visible in law as lower ranked schools (many of which are a racket) are getting sued by debt-saddled graduates who can’t find jobs, and the credentials of lawyers at well-paying firms edge up each year.  To some extent, it’s never been better to be an elite lawyer. It’s never been worse to be any other kind.

Tech-Enabled Lawyers

The truth about almost every profession, at least when you move beyond the lower rungs, is that technology is a supplement, not a replacement, for people. It’s a tool. And a very powerful one for those who can figure out how to leverage it.

E/N’s recruiting process is designed to systematically filter out luddites. That’s because, not only do I simply not have the time or desire to waste hours of my life trying to train them, but technology (automation, machine learning, communication tech, project management, etc. etc.) is so deeply integrated into our workflows that to add anyone who doesn’t ‘get it’ into the mix would cause a total breakdown. Before I look at emotional or analytical intelligence, or communication skills (all of which are important), I want to know what kinds of technology this person already uses in her/his life.

When lawyers from other firms ask how they might operate and scale leanly like E/N, my answer is as swift as it is depressing: “first, you have to fire half of your payroll.” They usually start laughing, until they see the dead serious look on my face. The legal profession is full of luddites, everywhere; even among the younger generation and in firms that service tech clients. And there’s no room for them in tech-enabled law firms. “Get it” or get out.

And yet with all of the technology that we leverage, I tell every single E/N client that we are not cheap, and never will be. Cheaper than our true competitors, certainly. And dramatically more responsive. But talent costs money.

409A: Trim that fat

When I wrote 409A as a Service: Cash Cows Get Slaughtered a few years ago, highlighting how eShares was using their own technology to trim the fat in an industry that (in my opinion) really was in many cases extorting startups, the response from the luddites was predictable. “Here are 10 reasons why you can’t automate a 409A valuation.”

Over the years, eShares as a platform has grown (as I knew they would), and many of our clients have been thrilled to take advantage of their service. Tech-enabled 409A; not fully automated. They recently published a blog post called The art and science behind an eShares 409A breaking down how automation is used in their reports, and how it’s not.

The future of professional services belongs to people who embrace technology and let it do what it does best, without diminishing the areas where human intelligence and creativity are superior, and will continue to be so for a very long time. Not tech-less. Not tech-only. Tech-enabled.