February 26, 2005
Dzienkowski on VLG
John Dzienkowski has an interesting post about the former Silicon Valley law firm Venture Law Group. John ponders if the demise of VLG as a standalone firm has any lessons about the viability of its unique business model. I competed with VLG in their halcyon days and then was a VLG client when I was GC at Epinions, so I have some pretty strong opinions about this question. Rather than saying something I might later regret, let me only make 2 observations.
1) John puts a partially-flattering but perhaps unsupportable gloss on the VLG model. VLG was a law firm first and foremost, and their principal value to clients derived from providing legal services. They marketed themselves as being different from other Silicon Valley law firms by claiming to be both legal and business advisors (i.e., investment banker/strategic advisor/lawyer), but in reality their services were very comparable to what most other lawyers in the Silicon Valley did for their clients (i.e., many lawyers had VC contacts and tried to help promising new start-ups find money). The principal difference is that VLG charged more than the competition—they charged hourly rates at/above the market rates, plus took an equity kicker on top of that. (Only suckers took equity in lieu of fees). Other firms took equity kickers too, but VLG was more systematic and unrestrained in their practices. Nevertheless, many entrepreneurs were willing to pay VLG's premium rates because VLG did a very good marketing job.
2) Epinions switched law firms six months after I became GC.