I swung by the Atrium booth at the Startup Grind conference a few weeks ago. A former lawyer, I was curious to hear their pitch. It was basically: we get you cheap lawyers, and we help them find new clients.
I asked if all of their lawyers are based in the US, and they couldn't give me a straight answer. Eventually, when I said "well, of course they must all be US-licensed lawyers, right?" they said "oh, yeah, they must all be in the US then."
It was not a confidence-inspiring conversation, and I can't say I'm surprised that they're shutting down.
Legal is a notoriously sluggish industry, one that's almost infuriatingly incapable of adopting change and technology. Atrium's original pitch was exactly the opposite of what most legal teams are used to interacting with, and I can't think of a single biglaw attorney (sorry for the anecdote) who had faith in the idea or its execution.
Now it's easy to say that this should've been obvious in hindsight. (Should've been obvious to me, anyway; I cold-mailed Justin and Nick years ago looking to build a specific function within Atrium to address concerns I'd heard on background about the service offering; I never did hear anything back about that.) But that said, I can't help but think the original pitch by Atrium was just too bitter a pill for the most conservative industry in the United States to swallow. Shoot, lawyers are bizarrely resistant to moving to e.g. Signal to preserve attorney-client privilege; given this, I have a hard time thinking of many who would trust ML models with understanding case-law.
I believed that law was a sluggish, tech-averse industry when I signed up to join it. But I don't see it living up to its tech-resistant reputation. It's very easy to blame the customer that way, when you have something to sell. As a lawyer, a coder, and legal toolmaker, I've been there. But my lived and observed experience of practice is that lawyers adopt what makes them competitive.
As a result, they've often been early, broad adopters of general-purpose office and productivity technology. Sometimes to their eventual detriment overall, by standardizing on an early generation at the expense of later incremental improvements. But at the same time, I think US lawyers as a class are remarkably resistant to whiz-bang pitches of especially law-specific solutions. It's easy to sell a lawyer some technology that their counterparts are using to run circles around them. It's hard to sell a lawyer some technology with a change-the-world, techno-solutionist pep talk.
Anecdotally, I can't say how many times I've attended or watched pitches by tech-focused people, business managers, or technophile lawyers with very little practice experience hocking half-baked solutions held up as replacing or supplanting lawyers in some way. My reliable takeaway from those pitches is that the founders don't know what lawyers do. When I ask about tablet ownership, cloud service adoption, security standards, terms of use for professional ethics requirements, or Lexis terminals in the 60s and 70s, it's usually a big, blank stare.
It’s vital that tech for professional services empower the professionals. I do think venture capital fails in this regard - don’t start with “disrupting law,” start with empowering it, which may be a lifestyle business at first but very possibly a sustainable one. Then look to scale from there. Not sexy, but it’s how I think the market will be cracked.
Whoever can build tooling to help lawyers decipher a 100 page credit agreement in half the time, reliably all the time... will do way better than someone replacing those lawyers with AI-outsource hybrids that can do it in 1/10 the time, but only succeed half the time.
Nice writeup. Too many startups and founders out there w/ no idea about the industry. Thus, excuses of the type you mention ("sluggish, tech-averse, etc") predominate over critical evaluation of the extremely sticky and complicated obstacles to new innovations in the legal tech space.
That said, as a fellow lawyer, coder, and legal toolmaker, I'd posit there's more of a middle ground than you laid out:
> It's easy to sell a lawyer some technology that their counterparts are using to run circles around them.
Of course – it should be easy to sell lawyers on established technologies! In fact, one could argue competence REQUIRES lawyers/firms to adopt said technologies. It's not wrong to be disappointed with what's being defined as tech adoption in this thread by industry defenders:
> security standards, word processing, LANs, spreadsheets, aggregating data & metrics, owning an iPad, ...
These are bare minimums and best practices in every other industry, and celebrating attorneys for meeting an extremely low bar is no better than technobabble.
> It's hard to sell a lawyer some technology with a change-the-world, techno-solutionist pep talk.
Stipulating there's a difference between snake oil and actually meaningful legal-specific technologies for practicing attorneys/firms, then yes, certain players in the industry will be more conservative about adopting new innovation. Conversely, a functioning market would also imply the opposite: those who responsibly bet on the next big thing, whether in an operational capacity, to drive costs down, or with the consent of their clients.
Sad to say, that's not the current state of the legal industry. Sure, I'm likely biased since I'm still on the vendor side irrespective of how much we aim to make well-built software with solid UIX focused on the practitioner. Nonetheless, firms remain extremely risk averse, hierarchical, obsessed with profits per partner above all else, and long live the billable hour.
Once again, it's complicated, and no one really has the nuance or all the answers, so we all fall back to a bit of a stereotype which makes that middle ground elusive. Ultimately, however, it's really the industry that suffers, and I wonder if/when it will ever change, what the impetus will be, and if it truly requires another global economic meltdown to shake things up.
Well, from what I understand, (aside from the most standard of legal issues which are billed as a flat-rate,) lawyers bill clients at an usually-eye-wateringly-high hourly rate for any work done in the course of working on your case.
Say a new technology allows lawyers to do the same tasks in half the time it used to take them. That sounds like it rhymes with "half the pay for the same work" to me, which might account for some of the new-tech skepticism.
That's my take anyway. I suppose it's similar to the knee-jerk reflex to automation, where you're liable to 'automate yourself our of a job.'
This has been my experience as well. I used to work at a research group that was hired by law firms to build new tools and products to assist law firms in doing their jobs. Some of the firms I worked with were had custom machine learning based text classification & extraction tools that were written in the early 2000s; long before this kind of technology mainstream.
Obviously the legal field is very diverse. I'm sure there are 80 year old lawyers out there still using teletype terminals to do their work because that's what they know. But my experience with larger law firms is that they see technological innovation as a key to their success.
I'm a "transactional lawyer" who negotiates contracts, forms companies, handles regulatory issues, and advises on strategy. That's as opposed to a "litigator" who handles court cases. But I've actually seen practitioners outside my own specialty who've integrated newer technology much more deeply. Automated case assessment in some immigration practices, for example.
In my experience, there is some correlation between technology and age. But keep in mind that 55 year old lawyers were born in 1965, started coming out of law schools in the late 1980s, and became established in the early Internet era, before the bubble burst.
Part of what you're getting at might be down to how the role of older lawyers tends to change, especially in firms. I would say most older lawyers in transactional fields do far more advisory and strategic work, akin to consulting or even lobbying, than issue research, contract review, or routine drafting. If the senior partner's working pretty old school, but all the junior partners, associates, secretaries, and paralegals under them use their own tools, that's still a pretty newfangled picture, overall.
Part of it may also be certain specialties that deal routinely with government bodies, like court systems and regulators, with their own adoption curves. But don't jump to conclusions there based on standards for consumer technology. The websites may look clunky, and the interfaces may be pretty retro. But the databases involved are often functionally complete, resilient, and workable for the severely outnumbered public servants that use them most.
I made tools to automate parts of my Canadian immigration practice, (as a non-lawyer, licensed legal services provider), but that was only increasing my profit and ability to scale. What I really got paid for was perceiving what the customer wanted, and matching that with what they could endure / afford / likely become eligible to do, while reassuring them they could still be happy. This part could not be automated.
The point about govt systems with clunky interfaces is a good one.
I think one area that we need to improve on is handling of PDFs. It's clearly the standard for documents of record. However, the fact it can be scanned images or text data is inconvenient.
Well known clients include msft/uber. Bitcoin/cryptocurrency practice is well regarded.
I think being close to a lot of tech clients helps. We get some flack for shunning slack/teams/gchat4business/stride/chime or wtf amazon uses/workplace by fb/etc and relying on “antiquated” email. We definitely prefer to work more in thoughtfully composed emails compared to a fluid team chat. It’s also easier to organize and manage.
However, I’ve been pleased with my colleagues ability to ask relatively smart questions about ML. For example, people are pretty good at responding to ML hand wavey bullshit with specific questions about training data, labeling, features, model architecture, etc.
IMO, we have some younger, eg 40-50, people in leadership positions in my practice group.
"Our clients depend on our ability to receive their messages reliably and respond efficiently. We can't settle for less than decentralized, asynchronous communications over standardized open protocols."
Just be advised that if the prospect's head actually explodes, you may face capacity challenges to your engagement letter when you bill.
The other thing about the original vision is that it isn't even remotely clear what the hell they're doing. Are we really talk about having ML models understand caselaw? (In which case, thompson reuters is going to be way ahead anyway always, and they suck, see, e.g., the horror that is the latest version of westlaw.) Or are they talking about building a bunch of efficiency tools?
I feel like the latter model could have worked as a law firm doing the latter. Like, an actual, ordinary, perfectly milquetoast, law firm, hourly billing and all, except with an R&D division that tries to build workflow efficiencies and uses them to compete on hourly rate. Which, come to think of it, isn't that just what Dentons is doing? So maybe it's just American lawyers that are hopelessly hidebound.
It sounds as it wasn't remotely clear to them what the hell they were doing. "Disrupt all the law things!" was always a very vague pitch.
I suspect this was really a tribal play. The real plan wasn't automation, it was to pitch the company as a specialised law firm for techpreneurs that had recognisable tribal tech features - less of the "them" that tech people feel around lawyers, and more of the "us."
The problem with law is that you need the "them" parts to be at least competitive with the rest of the industry, on its own terms.
Not only did that not happen, but the "us" parts made no real difference.
Law firms use cloud software extensively and, unlike FAANG or most tech startups, actually embrace remote work.
I submit that law firms are actually far more progressive about technology than the tech world assumes, but are also a lot better at sniffing out bullshit software that doesn't provide a real-world benefit.
I left biglaw in 2014, at which time my firm had barely transitioned from Windows XP. This was because we used certain Word plugins/macros for formatting briefs, and they had not yet been updated to run on newer versions of Windows. As a result, we were all on XP way past its prime.
From talking with lawyer friends, I got the sense my experience was not uncommon.
Unless using Windows XP was somehow making them less money or costing more billable hours, why would they switch to Windows 7 or 10? I wouldn't even think about switching until an EOL notice went out. If it ain't broke...
I hear this a lot, but like others are commenting, I also hear a lot about Windows XP boxes with word 03 setup w/ the macros they need running to this very day. I'd love to see something other than anecdata.
It's not sluggish at all. Modern law firms use all kinds of tech including lots of software and even AI/semantic analysis systems. There's definitely a high bar before adoption due to regulations and security but that's for good reason.
The problem is that there's a limit to the automation. Human lawyers can't be replaced. Interpretation, strategy, communication, court dates, etc. all require the human factor. No amount of software is going to make the human go any faster here.
Several decades ago law firms were among the first to adopt PCs for word processing and then LANs for file sharing. They will absolutely adopt new technology when it actually works.
Part of the reason law firms are resistant to technological change is that they are paid hourly (for the most part) and therefore do not yearn for efficiencies. If it increases efficiency, they will literally lose money in hourly billings.
this doesn't seem like a strong argument because this is just basic market competition. Even though a law firm being more efficient would lose hourly billing they would quickly grow more clients by providing a cheaper service. The lawfirm itself has no particular incentive to operate inefficiently.
I think the much more plausible explanation is that a lot of these alleged 'productivity tools' don't add that much productivity.
> this doesn't seem like a strong argument because this is just basic market competition. Even though a law firm being more efficient would lose hourly billing they would quickly grow more clients by providing a cheaper service. The lawfirm itself has no particular incentive to operate inefficiently.
As a factual matter, you are quite wrong. Law firms rarely get reprimanded for over-billing, and in fact, the opposite can be true.
When a lawyer bills 2X more than a competitor, they can say that they just did a 2X better job, were more thorough, etc. Lawsuits are rarely repetitive, as the facts and legal principles applied vary widely, so it's very difficult to determine what's the correct amount of time to spend on something. Worse, firms that develop reputations for big bills, can even attract big bet-the-company cases where clients can justify paying top-dollar.
The economic principal behind this is that legal services are not a typical "commodity", so standard market principles are not as effective. If you can turn a legal service into a commodity (such as LegalZoom has some parts of the law), you can be much more effective.
Can they not be more efficient and still bill the same hours? What is stopping them from improving their internal efficiency but still pocketing the same amount of money?
> Can they not be more efficient and still bill the same hours? What is stopping them from improving their internal efficiency but still pocketing the same amount of money?
Generally, if you want to sell technology to lawyers, telling them they will be more efficient will not work, they are simply not motivated to spend money for something makes something they are already doing take less time.
If you want to sell to lawyers, the best arguments you have are:
- Increase Quality / Reduce Errors: There are tons of mistakes that lawyers can make, and they are constantly terrified of making them. As a lawyer reputation is everything, and even silly inconsequential mistakes hurt.
- Get More Clients: Small-time lawyers spend up to 50% of their time trying to attract clients. At larger firms, it's less than that, but it's still a constant pressure that they are judged on. They may not be willing to pay for something that makes their work 10% faster, but they will pay for something that gets them 10% more clients.
- Capabilities That Change the Law Itself: Some technology really changes the rules itself. E-discovery allowed firms to look through millions of pages of documents, and to bury their opponents in the same. If you didn't have it, you were at a disadvantage and would lose your case.
As a counterpoint, I’d like to state that being able to raise efficiency when you need it could be a huge selling point.
On slow days, I don’t want to raise my efficiency that much , I take my time and review more thorougly. But on busy days, where I bill 13+ billable hours for a week, I’d want as much efficiency as possible.
> As a counterpoint, I’d like to state that being able to raise efficiency when you need it could be a huge selling point. On slow days, I don’t want to raise my efficiency that much , I take my time and review more thorougly.
I don't think you're really talking about "efficiency" here. On slow days, you may want to spend more time to do a more thorough job, but you still wouldn't want to be less efficient.
Simple automation example: renaming files into a new format. If there was a tool that could rename a large number of files for you quickly, you would use it on slow days and busy days. There is nothing to be gained to doing it manually.
I think you're referring to tools that speed you up but sacrifice quality. That isn't a pure efficiency tool, it's tool that allows you to adjust balance your time and quality of work.
> Can they not be more efficient and still bill the same hours? What is stopping them from improving their internal efficiency but still pocketing the same amount of money?
As a lawyer, if you read and understand a document in 10 minutes and bill an hour of time for it, that's lying and you can lose your bar license over it. However, if you read that same document very slowly and carefully over a full hour, then you are considered a high quality detail-oriented attorney.
You definitely can, most of the times you can’t collect all the hours you put in. Client pays what it pays and the rest is written off. It’s the senior’s job to manage the ratio of billed hours to collected hours.
If you can and want to bill more to a client, you simply review the matter covering more depth or let the work be done by more senior lawyers who have a better hourly rate.
Big-law collects all the client is ready to spend on legal services. The more you spend, the better service you’ll get.
If you suspect foulplay in billables, review the job narratives and raise a complaint.
> You definitely can, most of the times you can’t collect all the hours you put in. Client pays what it pays and the rest is written off. It’s the senior’s job to manage the ratio of billed hours to collected hours.
I am telling you --from experience, not theory-- that many lawyers are resistant to time-saving tools. Not all of them, but many of them. They rarely voice out-loud that their concern is about reduced billables, and will instead make absurd arguments that the time-saving tools decrease quality.
Simple real life example: we were selling a very simple bulk download tool to a law firm. Instead of clicking a link and downloading a document many times, this tool would download many in batch and put them in a zip folder. They raised the objection saying "how do we know it downloaded everything", even though the zip file also had an excel listing all the documents that were downloaded, the source of where they came from, and any errors in downloading them.
> they would quickly grow more clients by providing a cheaper service
Law firm prestige is measured in part by billing rates, which firms almost never (except 2008) lower. If a firm lowered rates for any reason, associates would start getting worried/jumping ship. I'm not saying it's rational, just that the field is prestige-based, and associates would freak if they saw their billing rate drop. It would be seen as a harbinger of lower salaries or lousy bonuses on the horizon, no matter how the firm spun it.
Also they could have hired lawyers with US law degrees who passed various US bars but who live in India. Doesn't sound like whoever was at the both had the faintest idea of what was going on.
That's how radiologists could analyze x-rays and such remotely: they were actual US-trained radiologists with licenses in US states who preferred to go home to India.
True, and I actually considered possibilities like this. But it would be pretty difficult/expensive/time-consuming for people to come to the US, go to law school, study for and pass the bar, and then go back to a low-cost-of-living place to practice law.
In most states, you have to go to an accredited law school in order to even sit for the bar, and all of such law schools are located in the US (and charge commensurately-priced tuition). I believe there are ways around this in medicine because you can go to medical school elsewhere and then sit for boards in the US. Even if you have a foreign law degree, you still have to get a 1-year LLM ($60k) in order to sit for the bar.
Guessing they’d be mainly those that attended the lowest tier of accredited law school on an H-1 and then couldn’t find gainful employment here.
OTOH, after sept 11 my cousin (or, I think, his wife) decided they didn’t want to raise kids in NY so he moved back to Mumbai, but kept his job with a major ibank and salary, just working mostly remotely. I suspect though he’s an exception.
I'm not sure what your first sentence means, but you're absolutely right that some GCs go with expensive outside counsel precisely because they're expensive. If it's a legal matter that's critical for the company, the GC can get blamed for going with a cut-rate firm, but not for going with a firm that's 'too expensive'.
Not sure why the downvotes. There is literally a saying in law: "nobody ever got fired for hiring Skadden". If you think this is ridiculous, don't shoot the messenger. And if you disagree that GCs hire blue-chip firms partly for CYA, please share your experience!
I've mentored aspiring entrepreneurs in the legal tech + services space for a number of years now and go out of my way to provide additional guidance (and some well intentioned ribbing) to those who pitch any sort of legal referral idea.
The concepts are (without fail) derivative and lack novelty, equivalent to pitching "Uber rideshare, but for [INDUSTRY]" without more to sophisticated VCs.
The problem is very real, but the margins are so thin that venture shouldn't be anywhere near it. Solutions should be non-profit and left to those heroes in the A2J space (whose funding should be significantly increased).
Justin Kan got into a terrible motorbike accident few months ago [1] . He then went through lot of thoughts on meaningful life and such kind of things in his tweets later. Would that impact the performance / outcome of Atrium?
> Broke both elbows, lost a tooth & left a smear of my face on the road
That's an injury that will keep you in bed, giving you a moment to really look if you're collectively as a company making the best effort on solving the right product/market fit. Which he clearly couldn't find, nor roll off some of the law-firm tools they built I guess? But the actual law firm of lawyers they got together is still running which is good, so it's not a total loss, plus some money back to investors.
It's difficult to get proper perspective sometimes being a founder, you get mired in details and fantasy growth possibilities, and startup runners constantly need re-committing themselves for the tough fight going forward. It takes balls to finally admit defeat, especially with a solid track record.
So ultimately I wouldn't be surprised if this gave an opportunity to step back and take some perspective, while he's stuck in bed in recovery mode.
One lesson that I think is getting buried here - hiring 100+ people when you're not yet at product-market-fit makes it really hard to try and get to product-market-fit.
It's a lot easier to experiment, learn, and iterate when the team is small. Gets very difficult when you're 100+ so quickly.
I’m glad someone took a gamble on an MVP that needed 100+ to pull off. We need more of that — 100 people is still a pretty small organization, even for law firms. We have lots of problems that need 100+ to solve.
But the ability to pivot was obviously hamstrung. The team necessary for “plan b” didn’t have much overlap with “plan a.”
I contacted atrium in December to see if they could help me with an acquisition, but they didn't even want to take me on as a client because I wasn't big enough yet. I should have guessed there was some trouble behind the scenes. I ended up just going with my gut, doing my own quick study on aquisitions, and went ahead with the aquisition without a lawer on my side looking things over.
I think it turned out ok... time will tell I guess.
I have a similar-ish story. I actually just spoke on the phone with a representative from Atrium just a few days ago; I was interested in having some policies written/reviewed. I was particularly interested in their "start-up" package which seemed to offer general counsel for those looking to grow their business.
While I would have been happy to pay for this sort of concierge approach, I was also "declined" for being too small / not needing the specific services I suppose they were willing to provide. I imagine this kind of interaction with potential clients is one reason they got to this point.
Legal industry is already tech-enabled. Templates, digital docs and signatures, OCR, AI/NLP/semantic processing, collaborative editing, and more are already used by modern law firms. There's no easy software-based efficiency left to find.
The major work is still done by humans because of the liability, complexity and customization of every case. The next step requires a revolution in legal process, not just more software.
Disagree. I am pretty close to the Biglaw tech scene. While you’re correct that most firms would say they use all of those things, the actual implementation and execution isn’t there. It’s not even a nuanced critique, I mean maybe 1% of amlaw 100 revenue is even touched by anything in your list. There is a lot of work to be done, and great opportunity in the legal industry.
Agreed. For all their tech initiative claims and hiring of in-house "legal ops" people and even developers, your typical attorney uses hardly any legal tech outside of e-discovery or billing.
I can only speak for teams of attorneys, and my experience is mostly working with litigators rather than transactional lawyers, but among other things:
1) It's shockingly rare to see use of project management tools, even simple stuff like Basecamp or Notion. When multiple people need to, say, review a draft of a filing in sequence, they're typically either keeping track of it in their heads or in a spreadsheet. "Excel is totally adequate for this" is wrong for a variety of important reasons.
2) Infrequent use of file indexing, even Windows' built in. I see firms using document management software running old versions of SQL with totally the wrong kinds of indexes and which usually take forever to find anything or crash in the process.
3) If they exist I haven't seen them in use, but a lot of teams would benefit from some middle ground between nothing and e-discovery software for searching across relatively large but not enormous collections of documents. A rudimentary on-prem or local CRUD app that could ingest a variety of shit, OCR it if necessary, dump it into Elastic, and let you FTS it would probably sell like hotcakes to small and mid-sized firms.
In the case of Atrium, it also sounded like their "pivot to tools" was trying to take many of their existing (ex) employees on the legal side, and convert them into clients of the tools.
While the legal and tools companies were together, I'm sure the lawyers enjoyed the shiny tools. But after the "pivot", with the lawyers seemingly going it alone with some of the former clients, it seems likely to me that Atrium (the tool) just wasn't offering enough of a value proposition to make the tool company profitable.
Venture money needs massive growth. Selling a tool to lawyers will get an amount of money per month proportionate to the number of fee-earners. And from the sounds of things, their tools weren't exactly going to be irreplaceable. Anyone got any direct insight as to if the tools themselves were compelling but the pivot failed, or if the tools didn't deliver?
The question is over a pivot from "I'm going to provide product/service X at a profit due to my tool T" to "Well, I couldn't sell X so I'll sell T to other people who want X". If you couldn't make a go of it, is it really likely others will, or if they can that they will want your tool T to do so?
This is different from either providing a service and successfuly using your own software to do so or providing a service and developing as well tools specifically for your customers.
Slack was suggested by another poster as a company that pulled this off, though I'm not sure the communication tool was considered crucial to the game business.
Fair. I guess it depends on what you determine as a success. 37signals was probably somewhat successful as a dev shop, but obviously not nearly as successful as a project management software one.
Even if there was 75 million in the bank, what would they do with it? Burn it, keep trying to pivot, run out of investor goodwill when all the money is gone and nothing to give back? If Justin ever wanted to start another thing in the future, that would be a hard sell if this burn happened.
Not trying to attack -- just typing out the questions and consequences to think about.
> Atrium had attempted a pivot back in January, laying off its in-house lawyers to become a more pure software startup with better margins. Some of its lawyers formed a separate standalone legal firm and took on former Atrium clients. But Kan tells me that it was tough to regain momentum coming out of that change, which some Atrium customers tell me felt chaotic and left them unsure of their legal representation.
It's hard to detect my own bias of course, but this seems like a really cynical move. I understand the need to improve margins but essentially trying the train our processes so we can fire you is off-putting and borderline offensive to workers. For positions closer to the furnace of automation and jobs that are generally dangerous that people don't take pride in it can be minimally destructive but law is not one of those professions.
It's preferable to get into businesses that don't screw over anyone, but if you're going to screw over someone maybe don't screw over smart highly paid professionals that are providing your core value proposition.
When I worked there a few years back, the spin was that it'd be letting the lawyers themselves get more done, by automating or easing rote but necessary tasks like reviewing company documents &etc. I think the story around what paralegals would do was more nebulous, though.
These full-stack “cyborg” businesses are hard; seen them in many types of prof svcs; accounting, legal, recruiting, r estate, insurance. Very few have worked, Redfin as notable exception, though it took forever. The expected operational efficiencies are very difficult to come by.
It didn't really seem like they were doing anything an existing firm couldn't do efficiencies wise. And maybe already has /has found where it works or doesn't.
And the customers who want legal help for cheap(er)...just don't seem like the people who you make money off of.
Any customer concerned enough to know about this service probably wants more from it.
Anyone that would be a good customer, might never find them / isn't doing much in that area anyway...
It sucks. Not even sure they should've called it so fast, why not keep going and try to figure it out till the money runs out. Investors would be OK with that.
I wonder when Justin lost his conviction? I don't believe you can lose conviction in 2 month.
If you're already rich (as Justin is) and realize how big an upside can be, why not flush the toilet and start over? For a guy like Justin, time is the most precious commodity because money is meaningless.
One of my earlier startups had multiple acquisition offers which would have made all the shareholder employees quite happy, but since the offers wouldn't have moved the wealth needle of the already wealthy founders by an order of magnitude, they turned them all down.
Years later and $100m+ of VC money burned the place went bankrupt and I now have some very expensive toilet paper in a folder somewhere.
> One of my earlier startups had multiple acquisition offers which would have made all the shareholder employees quite happy, but since the offers wouldn't have moved the wealth needle of the already wealthy founders by an order of magnitude, they turned them all down.
This is distressingly common, and not just in the valley.
I've seen numerous film deals fall apart because the producer didn't want to take a 10-30% discount on their standard fee (we're talking in the realm of a $150k discount on a personal take of 500k-1.5m on a deal), films that otherwise would've actually been made ended up falling apart because someone wanted to extract just that much more value.
Working at a zombie company with very little chance of success isn't a great gig either. Shutting it down cleanly, paying decent severance, and letting the staff move on is a good move for them too.
I don't understand what this even means. For everyone involved in a startup, time is the most precious resource they're investing. If the startup is doomed, pretending it isn't and keeping employees on the hook is the worst thing a founder can do. And what is "blood equity"?
>> founder and team with nothing to lose is more likely to pull a rabbit out of that blood-equity-soaked hat.
> what is "blood equity"?
Even failing startups, with little cash and poor market penetration are often worth something to somebody. It could be a small client list, the team, patents, or just an attractive ___domain name. Most founders leading failing startups will try to sell to suitors for pennies on the dollar invested. Sometimes they get a small cash bump (or in WeWork's case, a small $1B), but it also means they can say they were acquired rather than simply failed. And they're right, building a company and selling it for $1.00 is far more difficult than not selling it at all.
Investors don't always like this because they recognize the loss at acquisition, which hurts their published returns. But more often, they don't care. They know the odds before-hand and prepare for events like this.
The people who lose the hardest are the employees with just stock-options or small equity stakes. Everyone's stock will be worthless, but the founder can potentially walk-away with a decent "consulting" contract. The best a standard employee can hope for is being hired by the acquiring company and that their culture doesn't suck.
From the employees perspective, the bright side is that they are often the first people to figure out that a company is doomed (before investors, customers, or the press). They have the advantage of time when it comes to planning their next move.
100 people x 150k yr = $15M. Add insurance, office, heaaavy marketing, sales commission, non-frugal everything.. I'm guessing $20-30M over their 2+yrs. Maybe even more on people bc hiring lawyers.
Weirdly, the investors are happier with that than 5 smaller series A's of money-making / real-IP companies with existing growth engines. Easier to bet on nothing vs improving.
I do find the flameout odd, and not isolated to Atrium.
Why flameout vs spinoff a small business for folks who wanted to continue? Same difference to the investors, but meaningful to the lives of the believers. Worst case, just OSS for them..
Thinking more: A good comparison is Carta, also in legal, whose funding was more correlated to revenue and growth.
The end of the first paragraph says: "The separate Atrium law firm will continue to operate." The legal talent already did spin-off with the last pivot.
Honestly surprised a bunch of VCs haven't gotten together yet and built out their own compute for portfolio companies considering how much VC money gets shoveled into the AWS fire.
Think about the hundreds of engineers they’d need to hire, purchases for hardware and software, security approvals, etc. that would all need to be spent up front with no guarantee that it’d actually be cheaper. Beating the major cloud providers requires some combination of large scale and/or cutting corners and most companies are not at the point where the infrastructure costs beat the staff time needed.
They noted in the article they didn't spend all $75M and that they are returning some to investors. That was probably part of the decision to shut down quickly to get some money back to them.
Sort of related, genuine q for the founders who've raised money and lost it (had to shutdown): how did you feel about losing investor money? Did it make you gun shy about raising again from investors? Did you retain good relationships with them? Does credibility take a hit?
Would you retain better rapport with the investors if you returned money and started something fresh rather than persisted when you were lacking conviction?
I don't think a guy like Justin lacks conviction. Justin.tv required huge conviction. If you don't recall, it was founded in 2007 -- just prior to the financial crisis -- with the unique idea of allowing people to live stream on the internet. Today, live streaming is just a feature of Instagram, Facebook, and other major services. But in 2007, it was revolutionary. Twitch was the breakthrough, but it took four years of grinding to get there [1].
In the case of Atrium, I'm sure that the investors would have had plenty of board-level conversations about the potential trajectory of the company. The decision to shut down and return funds was likely endorsed by the investors, if not proposed by them, who would doubtless remain extremely keen to invest in whatever Justin comes up with next.
I meant conviction with regard to Atrium. Was responding to the idea that he could've stuck it out and burnt through the money persisting as opposed to something new.
Let’s wait for the full autopsy but perhaps a better strategy would have been supplying tools and software to lawfirms, aggregating data and knowhow and then pivoting to an “automated” law firm as a service.
> a better strategy would have been supplying tools and software to lawfirms,
tools and software for patent law are abundant and low value. you can't just say "tools and software for [INDUSTRY]" and assume a business model exists there. you need some insight into how firms operate.
> aggregating data and knowhow
law firms are not going to give a startup access to client data. especially in any format that could be aggregated. 0% chance. confidentiality, privilege, and patentability, are essential. it goes against our business model and professional obligations.
> and then pivoting to an “automated” law firm as a service.
the portion that could be automated is 10% of the value. experience, both with the practice area and the client's industry, are 90% of the value.
think of stackoverflow, yes an applicable code snippet exists on there, but understanding how it works, what its going to do, and the larger implications is the valuable bit. you can't automate that.
Plenty of software companies make a lot of money selling to lawyers. Clio (https://www.clio.com/), for instance, is a SaaS that helps lawyers run their practices better. It doesn't try to replace lawyers; it just saves them time on the bullshit of running a firm. Kira (https://kirasystems.com/) automates due diligence, which is a labor-intensive (and hence costly) process that nobody loves doing, but which does generate a lot of billable hours for paralegals and support staff.
Indeed, Clio is absolutely crushing it. They closed a monster $250M round last September - and this is a company headquartered in Vancouver, not San Francisco, so the bar for raising that kind of money is truly up there.
The hybrid model made little sense in VC-land anyways. Gross margins were not as high as a full SaaS model. The transition to a full software model was never clearly laid out and seemed more wishful than anything.
I always wondered if the hybrid model was an experiment at ways around regulatory barriers to lawyers sharing fees/profits, a la a global multinational leasing the very expensive brand, logo, and internal software from tax-haven incorporated HQ... It's not sending away profits, it's just licensing some incredibly valuable IP, honest!
If the legal services arm was able to license the name and technology in a permitted way (like how a law firm can of course get their website and IT done by experts), it would seem to present an experiment at whether such a structure could act as a conduit to channel fees back into an investment vehicle.
I saw some reviews online here and there and it sounded like the biggest complaint was that it was expensive for what it was and it was never clear who would respond to a request and when (e.g. fungible lawyers taking random requests)
Most startups will want to build a relationship with an actual lawyer, and having something like a LegalZoom for startups didn’t make sense for most.
This. With every 'failure' of a company there come those who don't know the full picture and begin with 'guesses', 'maybe's' and other 'reasons' why it failed. The sensible thing to do is to wait for the details.
Because at the end of the war or a death of a startup, everyone is a field marshal analysing the failure afterwards.
>"It will return some of its $75.5 million in funding to investors, including Series B lead Andreessen Horowitz."
Does this simply mean it will return all funding after paying out remaining invoices and salary obligations? Or is there some significance to the phrase "some of" here?
The $75m was a 2018 series B. Atrium has been spending that money for 18 months, and probably quickly.
So A16Z isn’t getting back anything close to $75m. Just “some.”
Part of this seems like courtesy among the big boys who want to play again. I doubt Atrium wants to tick off A16z by making dubious claims to the remaining cash.
what if a startup charged $300 per month for all you can eat email legal advice backed by a rich library of templates? they would instantly dominate and there are 6M small businesses in the USA alone
Cookie cutter legal advice is a landmine/footgun for a business. Even Stripe Atlas will lead you down a dangerous path if you don't check with a lawyer when incorporating. Don't fuck around with business legalities, it ain't worth it.
Unfortunately, if you even think about your attorney, you'll be charged for it but the peace of mind is worth it.
Having a lawyer you trust, is timely to questions, and works fast is just a layer of stability you need so you can focus on the important parts of a startup. Legalzoom is garbage in this regard.
It’s not a bad service at all and the staff are lovely and have fantastic events! However, if you incorporate with them have a lawyer review your docs and ensure you hit all timelines around filing correctly: buying your equity, submitting 83bs, state and federal stuff.
The product makes you feel like it’s a one click thing but you need to check in with a lawyer to not forget anything. Most ppl who used Atlas have told me the same. I do recommend Atlas since you will save some money and you get some nice fringe benefits.
More like an hour of a good lawyer time. Mine charges $350/hr. But your point stands. I don't see how his work could be done with "templates". Most of the time I pay him for contract reviews.
That's high-end. Most of the time, all you need is a mid-level/independent lawyer that charges less than $400/hr or even bills on per-project basis.
Cost also doesn't guarantee quality. You're paying for resources, specialization, general counsel that can delegate, and insurance against mistakes. Useful but only when you really need it.
I wasn't asserting the validity or the necessity of attorney's at that price. I was simply saying that there is a market rate at that point for attorneys.
In my experience working as a consultant to probably 1000 lawyers over the last 10 years-- from solos to biglaw partners-- it's absolutely true. The most highly paid are not clustered at the far end of the skill/experience bell curve.
You don't have to use $800+ attorneys. Most people use _no_ lawyers at all, and sign shit without reading. You aren't getting three times the lawyering for three times the price.
templates for common cases make a lot of sense, but $300/mo isn't going to get anywhere for "all you can eat".
$300 might cover a simple contract review, maybe by volume you can cut that in half - so if you are talking 1-2 "tickets" a month, maybe you are covered. Sounds risky to me in a back-of-envelope way.
Of course, a bunch of people are trying variations of this idea.
You can find online legal guesswork and forms for free. $300/mo is too expensive for that.
But getting someone with experience to stand behind it - to risk their license, insurance, and future income — is north of $300/hr even in suburbs and flyover country.
One of the worst contracts I ever had was for a small company running a SaaS for divorce attorneys to help manage their cases.
The main selling point was that it would re-create state forms on the web and allow an attorney to fill them out, print them, and manage a case.
These forms would change many times a year and they were written using horrible PHP libraries that required every piece of the form to be drawn using coordinates. If one thing changed on the page (which happened often), all coordinates would shift and have to be re-written.
Aside from this, the owner had the first version written by developers overseas a few years earlier and I was hired as part of the 2.0 team that consisted of more inexperienced overseas developers and resulted in even more of a mess than version 1.
Some gems from the owner:
She once put on her Linkedin profile that one of her accomplishments was the ability to hire developers on a volunteer basis or well below marker value. It was taken down within a day.
I was finally let go and was told straight to my face that she was going to hire someone from India for 1/3 what she was paying me.
I have been following Atrium almost since its inception after being flagged by Andreessen and Justin was from the beginning tweeting pseudo-inspirational thoughts. In interviews he seemed more concerned with the story (serial entrepreneur / Twitch founder aims to disrupt legal field) than the content of the company (why the hybrid model? how is this going to move forward?).
I asked if all of their lawyers are based in the US, and they couldn't give me a straight answer. Eventually, when I said "well, of course they must all be US-licensed lawyers, right?" they said "oh, yeah, they must all be in the US then."
It was not a confidence-inspiring conversation, and I can't say I'm surprised that they're shutting down.