Atrium lays off lawyers, pivots to tools(axios.com)
axios.com
Atrium lays off lawyers, pivots to tools
https://www.axios.com/law-firm-startup-atrium-lays-off-most-of-its-lawyers-e4637120-27a7-44c5-8a52-37e2b0194928.html
84 comments
I had the opportunity to interview with Atrium over a year ago. It was very clear that they weren't doing well. Their founding team had opposing ideas about how to do things. Their CTO was fired very early on. Clearly, it hasn't worked out smoothly. To me, it looks like they just rode on the wave of eager investors.
I've seen the issue with wealthy enough employees at all the startups I've been at too. Once you get people who no longer feel a certain hunger, they lose ambition and direction quickly. I've seen it happen as startups go from mildly successful to unicorn. Where the founders were able to cash out enough to buy a house in the bay, they suddenly were way less eager about being acquired or IPOing. And I've seen it with people who are on the tail end of their careers, exiting one startup with a very sizeable amount to enter another. The hunger is gone for them, they're just coasting, and they don't seem to have any real reason to even be working beyond avoiding boredom in retirement.
And the worst part is that it feels like these types of people are way too well represented at the top of the hierarchy. The part of the hierarchy where these attitudes matter the most!
I've seen the issue with wealthy enough employees at all the startups I've been at too. Once you get people who no longer feel a certain hunger, they lose ambition and direction quickly. I've seen it happen as startups go from mildly successful to unicorn. Where the founders were able to cash out enough to buy a house in the bay, they suddenly were way less eager about being acquired or IPOing. And I've seen it with people who are on the tail end of their careers, exiting one startup with a very sizeable amount to enter another. The hunger is gone for them, they're just coasting, and they don't seem to have any real reason to even be working beyond avoiding boredom in retirement.
And the worst part is that it feels like these types of people are way too well represented at the top of the hierarchy. The part of the hierarchy where these attitudes matter the most!
I disagree with this, like anything else it’s going to depend on the person. It’s really hard to generalize when it comes to people’s ambitions.
There are so many examples of serial entrepreneurs doing it over and over. Likewise of employees of startups going on to do even better in the next startup they join.
Serial entrepreneurs do get to raise more money, markets reward success, and I am with you that it’s not always deservingly. I also think many startups can and do pivot and serial founders aren’t more likely to pivot than the non serial kind.
I would bet on Justin Khan finding a way to success, much more so than not.
There are so many examples of serial entrepreneurs doing it over and over. Likewise of employees of startups going on to do even better in the next startup they join.
Serial entrepreneurs do get to raise more money, markets reward success, and I am with you that it’s not always deservingly. I also think many startups can and do pivot and serial founders aren’t more likely to pivot than the non serial kind.
I would bet on Justin Khan finding a way to success, much more so than not.
it is late in the cycle so it’s to be expected, but yeah I actively avoid companies by serial founders at this point.
I started at a place that was mid pivot but hadn't made it too official yet. I thought I'd be working on their namesake product, which required a depth of knowledge that I'd been getting pretty close to, but apparently it wasn't selling well. So I worked on an embedded app while a bunch of people worked on something else. It was hard work, the manager was frustrating, but it was very rewarding and the most resource constrained code I'd ever managed to get to work. I didn't quite recognize how much fun I was having until after it was over.
Still not sure if it was a good thing that I didn't know, because I probably would have quit at the end of the beginning of the recession. I'll never know if finding a new job would have been any less stressful than staying, but I'm still feeling the effects of that period.
Still not sure if it was a good thing that I didn't know, because I probably would have quit at the end of the beginning of the recession. I'll never know if finding a new job would have been any less stressful than staying, but I'm still feeling the effects of that period.
I think it is a doubled edged sword. It was an audacious idea that made a lot of sense, and the fact that the founder could raise a lot of money based on name alone probably helped make the gamble on the audacious idea possible. If the startup could have reached escape velocity and be passed off to somebody else then I think you have the best of all worlds. Serial entrepreneur can shift to something else while the successful startup they helped create goes off on its own.
But I do agree with the second point, which is when the founder isn't going to have that "do or die" mentality and the startup starts to sputter, then it's straight into zombie land. Reading the blog post on the company website it sounds that this is basically a corporate structure for Justin Kan to give people advice on how to fundraise and build their companies, which might be a useful service but obviously not a growth startup.
But I do agree with the second point, which is when the founder isn't going to have that "do or die" mentality and the startup starts to sputter, then it's straight into zombie land. Reading the blog post on the company website it sounds that this is basically a corporate structure for Justin Kan to give people advice on how to fundraise and build their companies, which might be a useful service but obviously not a growth startup.
"It was an audacious idea that made a lot of sense"
I've spent my whole career in the legal field and built a number of legal tech automation tools with varying degrees of sophistication and commercial success, and I genuinely have no idea how he thought Atrium was going to work.
From the outside, the only audacious thing I see is that Atrium tried to do something that's famously impossible to do.
I've spent my whole career in the legal field and built a number of legal tech automation tools with varying degrees of sophistication and commercial success, and I genuinely have no idea how he thought Atrium was going to work.
From the outside, the only audacious thing I see is that Atrium tried to do something that's famously impossible to do.
I’m convinced serial founders develop blindspots because you end up surrounding yourself with transactional relationships where no one is incentivized to give you tough feedback about anything anymore because they don’t want to get cut from your circle if they need you in the future, so you just get a lot of vague positive feedback about everything you do, even if someone you ask for feedback from doesn’t actually think it’s a very good idea.
I'm an attorney in the Tech field. Most of my income comes from working with large established companies, or very well-funded startups. As for small unfunded startups, from my experience, it's a lot of fun to work with them, but it's hard to pay the bills that way. So, it might be good to work for a company like them if you're a developer, but not if you're a lawyer.
Based on the pivot language in the release, I suspect they ran smack-dab into the ethics rules.
Lawyers can't directly solicit funding and M&A deals. Whatever a "Fundraise Concierge" is, it can cold call founders all day long.
Wouldn't be surprised to hear they're ramping up direct sales.
Lawyers can't directly solicit funding and M&A deals. Whatever a "Fundraise Concierge" is, it can cold call founders all day long.
Wouldn't be surprised to hear they're ramping up direct sales.
All things considered, I would be surprised if that contributed meaningfully to any of this.
This
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https://www.atrium.co/inside-atrium/the-future-of-atrium/
For someone who has spent so much telling founders to cut buzzwords and speak in plain and simple English, this blog post by Justin Kan is something special. Case in point:
> Similarly, at Atrium, we’ve made the tough decision to restructure the company to accommodate growth into new business services through our existing professional services network.
Simple facts hidden in positive-sounding buzzwords, as if, they believe that the reader doesn't know better. It seems like a variation of 'Our incredible journey..' template
Honest question, why do companies do this? It seems disrespectful to everyone - employees (both fired and current), customers, and any adult for that matter.
For someone who has spent so much telling founders to cut buzzwords and speak in plain and simple English, this blog post by Justin Kan is something special. Case in point:
> Similarly, at Atrium, we’ve made the tough decision to restructure the company to accommodate growth into new business services through our existing professional services network.
Simple facts hidden in positive-sounding buzzwords, as if, they believe that the reader doesn't know better. It seems like a variation of 'Our incredible journey..' template
Honest question, why do companies do this? It seems disrespectful to everyone - employees (both fired and current), customers, and any adult for that matter.
Culture and risk avoidance. It seems a safe way to frame things because others have did it that way before and the author can't remember anything bad happening to them.
American business communication, especially when addressing mass audiences, has its own special modes. I find a lot of it gross, and I'm a native.
I will say, ability to cut the nonsense is definitely a positive distinguishing factor when interviewing, but that's hit or miss; there are lots of smart, decent people with whom I just don't "click" and I imagine that's the case for most folks.
American business communication, especially when addressing mass audiences, has its own special modes. I find a lot of it gross, and I'm a native.
I will say, ability to cut the nonsense is definitely a positive distinguishing factor when interviewing, but that's hit or miss; there are lots of smart, decent people with whom I just don't "click" and I imagine that's the case for most folks.
>Honest question, why do companies do this? It seems disrespectful to everyone - employees (both fired and current), customers, and any adult for that matter.
generally because it keeps the person who wrote it hire-able post closure, and makes those that lost money or effort on the deal feel as if their loss is actually being spun into something else, like concepts, innovation, future profitable IP, whatever.
I agree, I think it's disrespectful, but then again there's a lot about business that I feel that way towards.
generally because it keeps the person who wrote it hire-able post closure, and makes those that lost money or effort on the deal feel as if their loss is actually being spun into something else, like concepts, innovation, future profitable IP, whatever.
I agree, I think it's disrespectful, but then again there's a lot about business that I feel that way towards.
He got the same feedback on his accompanying tweet https://twitter.com/justinkan/status/1216896251754450946?s=2...
Bigger red flag from his tweet is there’s basically zero engagement from others in the tech community. For someone who is that high profile to tweet something big about his startup and get almost no responses is really strange.
Bigger red flag from his tweet is there’s basically zero engagement from others in the tech community. For someone who is that high profile to tweet something big about his startup and get almost no responses is really strange.
That does seem super strange. Any ideas why that might be the case? Most of his day-to-day tweets seem to get a pretty solid amount of interaction.
This tweet from December 10 seems pretty weird now: Justin Kan @justinkan "Early-stage fundraising: - need a great narrative - can get by with bad metrics - but MUST know those metrics"
This tweet from December 10 seems pretty weird now: Justin Kan @justinkan "Early-stage fundraising: - need a great narrative - can get by with bad metrics - but MUST know those metrics"
Digging deeper on Twitter there’s a ton of pissed off lawyers (obviously including the laid off ones) and customers who both felt blind-sided.
The corporate legalese speak made things worse, of course.
I guess I underestimated the anger this would cause, so makes sense people are not going to touch it.
The corporate legalese speak made things worse, of course.
I guess I underestimated the anger this would cause, so makes sense people are not going to touch it.
I’m not sure the author is giving much consideration to the critical thinking skills of the public—- that’s more of a big company CEO thing. A lot of founders are genuinely happy to escape a failure and are already emotionally in the future by the time the blog gets written. Save the stress for the next thing.
And this is Justin Kan. Not somebody who ruminates, and somebody who went through a ton of pivots with Justin TV. This sort of result is no big deal to somebody like him.
And this is Justin Kan. Not somebody who ruminates, and somebody who went through a ton of pivots with Justin TV. This sort of result is no big deal to somebody like him.
Wait. Is that the guy I remember seeing forever ago first person streaming his life for a while?
Yep he did that.
At CES a Ford EV on display had this printed on its window "Doors are locked for your protection". Instead of being honest and saying "it's an early prototype"
Not to get side tracked with galling examples of Corp speak but a grocery store in Seattle has these signs that read,”please allow us to help you at another register” where it used to say “lane closed” or simply “closed”.
I’m not sure why this is bad - they directly inform you of the action you need to take.
You could even imagine a case where the lane was closed to customers but perhaps in use for a training. This sign would avoid confusion, whereas a ‘closed’ sign would invite answers.
You could even imagine a case where the lane was closed to customers but perhaps in use for a training. This sign would avoid confusion, whereas a ‘closed’ sign would invite answers.
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My company used Atrium to help us think through some very complicated niche legal issues. We were on a flat rate plan, and it was nice to be able to brainstorm without watching the clock. We were pretty happy with their service, but it all came from one attorney, who also was the one who found us and brought us in. Whenever we dealt with anyone else there, it was disorganized and low quality. When our main attorney left, of course we followed them.
I had bought into their philosophy at first but the experience showed me why law firms have the partner-oriented structure they do. Legal work is built around trust in the lawyer in most cases and that's hard to automate.
I had bought into their philosophy at first but the experience showed me why law firms have the partner-oriented structure they do. Legal work is built around trust in the lawyer in most cases and that's hard to automate.
So much this. I'd arrange to pay an incredibly good and trustworthy lawyer in daily deliveries of wheelbarrows full of rolled pennies if that's how their fee structure worked. Most law firms that have tried and failed at alternative fee structures seem to have made the mistake of thinking that their clients were hiring them because of the alternative fee structure when in reality they were hired in spite of it.
It’s always been weird to me when a law firm tells me about all the services and such they have. It’s not the firm, it’s the lawyer, and if they decamp, you follow. Likewise just because I am really happy with lawyer X at firm Y Doesn’t mean I’m interested in Y’s patent practice when I need patent assistance.
For his reason I’ve always been puzzled why law firms merge. You ever pay multiples of revenue; it’s just literally a pro data merge with a little goodwill thrown in from one side.
For his reason I’ve always been puzzled why law firms merge. You ever pay multiples of revenue; it’s just literally a pro data merge with a little goodwill thrown in from one side.
> Even lawyers aren't immune to the unpredictability of working for a startup—and the appeal of generating high margins from selling software instead of human services.
Companies tend to do the opposite, though, right? Apple could increase its margins by selling iOS and the Ax processor IP. But it makes more “boatloads of money” selling hardware, even at lower margins. Instead of selling IP, Apple uses its superior IP to dominate the market for phones.
Its likely the issue isn’t margins, but scalability. Scaling a law firm is difficult to impossible due to conflict of interest rules. That’s why the largest international law firms have 4,000 lawyers while PWC has 230,000 accountants and advisors. That puts a low ceiling on how much you can scale while doing actual legal work.
Companies tend to do the opposite, though, right? Apple could increase its margins by selling iOS and the Ax processor IP. But it makes more “boatloads of money” selling hardware, even at lower margins. Instead of selling IP, Apple uses its superior IP to dominate the market for phones.
Its likely the issue isn’t margins, but scalability. Scaling a law firm is difficult to impossible due to conflict of interest rules. That’s why the largest international law firms have 4,000 lawyers while PWC has 230,000 accountants and advisors. That puts a low ceiling on how much you can scale while doing actual legal work.
> Scaling a law firm is difficult to impossible due to conflict of interest rules.
That's why I've long thought the conflict disqualification rules should apply only to individual lawyers, with suitable ethical walls. I strongly suspect that the traditional disqualification rules evolved in a bygone era where sole practitioners and one- or two-man (yes, man) law firms served as trusted advisers to clients who weren't that sophisticated about legal matters. It's not at all clear that firmwide disqualification for conflicts is still appropriate in an era of (i) giant global law firms and (ii) in-house counsel who are the client's actual trusted advisers and who use law firms strictly on a project basis as hired help.
That's why I've long thought the conflict disqualification rules should apply only to individual lawyers, with suitable ethical walls. I strongly suspect that the traditional disqualification rules evolved in a bygone era where sole practitioners and one- or two-man (yes, man) law firms served as trusted advisers to clients who weren't that sophisticated about legal matters. It's not at all clear that firmwide disqualification for conflicts is still appropriate in an era of (i) giant global law firms and (ii) in-house counsel who are the client's actual trusted advisers and who use law firms strictly on a project basis as hired help.
Conflicts of interest rules make it harder for law firms to scale but it is possible by setting up Chinese walls (https://uk.practicallaw.thomsonreuters.com/3-100-8763?__lrTS...) ensuring lawyers from the same law firm can work in parallel.
Ultimately, conflicts of interest rules apply to each lawyers individually, not to the law firm.
The US has stricter conflicts rules, and typically impute conflicts to the firm, except inherently personal conflicts (spousal conflicts). Chinese walls require client consent, and some jurisdictions, like Texas, do not give effect to Chinese walls at all.
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Wrong. Apple sells its software for an extremely high margin already.
When you buy Apple hardware, you are locked in to use Apple software and nothing else. A hardware vendor like LG/Oppo/Xiaomi would rely on Android, a commodity software, and thus, have very little pricing power against its competitors. Even though the technical specs of these phones might be better than the iPhone, they would struggle to sell for half the price.
The software lock is further amplified by those custom chips that are used across the Apple ecosystem. You're likely to pay exorbitant prices for the software on MacBook and iPad as well.
Remember, Apple usually doesn't touch a single phone throughout the manufacturing process (Most of the components are manufactured by third-party vendors squeezed into razor-thin margins). After paying these vendors off, they get to turn around and sell the same hardware for $600-650 more on the market. That wouldn't have lasted if they had licensed iOS out, their pricing power would be severely diminished.
When you buy Apple hardware, you are locked in to use Apple software and nothing else. A hardware vendor like LG/Oppo/Xiaomi would rely on Android, a commodity software, and thus, have very little pricing power against its competitors. Even though the technical specs of these phones might be better than the iPhone, they would struggle to sell for half the price.
The software lock is further amplified by those custom chips that are used across the Apple ecosystem. You're likely to pay exorbitant prices for the software on MacBook and iPad as well.
Remember, Apple usually doesn't touch a single phone throughout the manufacturing process (Most of the components are manufactured by third-party vendors squeezed into razor-thin margins). After paying these vendors off, they get to turn around and sell the same hardware for $600-650 more on the market. That wouldn't have lasted if they had licensed iOS out, their pricing power would be severely diminished.
As far as I can tell, Kan fundamentally misunderstood the nature and value of automation in the legal services industry.
Kan was quoted in 2018 as saying "The goal with the tech side has always been...to help attorneys spend more of their time on meaningful work and less of their time on crank-turning work."
Time spent on "crank-turning work" constitutes a relatively negligible portion of billable time for any attorney billing at a reasonably high rate. They delegate as much of it as possible to people who bill at lower rates, like assistants, paralegals and junior associates. So you're not really automating much of the attorney's work at all. Even if you build an ergonomic software platform for routine tasks (like Atrium's glorified Dropbox), the amount of time/money it would save over the course of a large engagement is de minimis. And if you aren't dramatically saving time, you can't dramatically reduce client costs under any fee structure.
So they end up with this software group making tools that don't help the legal side make more money. And the tools don't contribute meaningfully to the legal side's pitching for work in part because they don't save the prospective client much money. Meanwhile, the software side can't sell the tools to other law firms because the software side is tied to a law firm. Ultimately, they end up with a bunch of lawyers and software developers who can't help each other. This outcome is so predictable that it's downright hilarious they ever thought it would be a money-making strategy, and apparently the investors didn't understand or think it through, either.
What Kan mostly got wrong was thinking that automation would be profitable for a law firm. There are lots of automation tools that would be extremely valuable to a law firm, but that usually means you should be selling them to a law firm, not from a law firm.
Kan was quoted in 2018 as saying "The goal with the tech side has always been...to help attorneys spend more of their time on meaningful work and less of their time on crank-turning work."
Time spent on "crank-turning work" constitutes a relatively negligible portion of billable time for any attorney billing at a reasonably high rate. They delegate as much of it as possible to people who bill at lower rates, like assistants, paralegals and junior associates. So you're not really automating much of the attorney's work at all. Even if you build an ergonomic software platform for routine tasks (like Atrium's glorified Dropbox), the amount of time/money it would save over the course of a large engagement is de minimis. And if you aren't dramatically saving time, you can't dramatically reduce client costs under any fee structure.
So they end up with this software group making tools that don't help the legal side make more money. And the tools don't contribute meaningfully to the legal side's pitching for work in part because they don't save the prospective client much money. Meanwhile, the software side can't sell the tools to other law firms because the software side is tied to a law firm. Ultimately, they end up with a bunch of lawyers and software developers who can't help each other. This outcome is so predictable that it's downright hilarious they ever thought it would be a money-making strategy, and apparently the investors didn't understand or think it through, either.
What Kan mostly got wrong was thinking that automation would be profitable for a law firm. There are lots of automation tools that would be extremely valuable to a law firm, but that usually means you should be selling them to a law firm, not from a law firm.
Kan tried to sell $36k/yr fixed price legal packages as "efficiency" to early stage startups. He generated leads with bait-n-switch tactics - by pretending to be a startup accelerator with a YC-style application - afaict the accelerator did not actually exist. I will never forget that he tried to pull that on me.
I wrote about this years ago, I think on HN. I guess I wasn't cynical enough at the time because even as an outsider what you're saying seemed obvious to me, and I assumed the founders knew that. I thought maybe this pitch was useful at the beginning to get market penetration or something, but the real thing was to phase lawyers out almost entirely.
Maybe they really poured years and millions of dollars into a stupid idea, or maybe they just failed in a planned pivot?
Maybe they really poured years and millions of dollars into a stupid idea, or maybe they just failed in a planned pivot?
Yeah, selling TO law firms is very lucrative, I know a story (second-hand) where some lawyers had learned word / excel macro programming to organize their own case work (esp. with regard to appeals, deadlines and reference management etc.) and then started to sell it to their peers.
FWIW - This was my product hunt review 3 months ago, after using them for about 4 months. Reads like a post mortem now.
All in all, I actually feel I overpaid for subpar legal services.
I will credit them with a smooth and enlightening (albeit overpriced) corporation formation, and maybe they are pearing down the product to just that - because that was the only thing that worked, IMO.
I felt as if they were taking advantage of early stage startups preparing to raise capital. You can’t bill their rates and then ghost them, those are precious dollars and precious time.
“I have been trying to cancel for over a week, and more of the same. NO ONE RESPONDS FOR WEEKS! These are ATTORNEYS! Waste of money.
I’ve dealt with many lawyers coming from my last startup which was in a highly regulated space.
Atrium is like an expensive legal zoom, but overpriced. Understand it’s cheaper to use a lawyer at any other law firm because your retainer is a deposit on future services.
With Atrium your paying $6k a year in subscription fees for “legal advice” which is otherwise baked into any other law firm, and they don’t provide much advice.
They really specialize in financing, using ycombinator docs. These docs are publicly available templates. All other services are limited to their “al la crate menu”... again all templates. It takes days to get a email back from them. It takes a week to get a call setup, if they have the time, and if they will even discuss the matter.
Litigation? Find someone else
Overseas? Find someone else
Doing something outside of California like an asset purchase? Find someone else
So you basically need other lawyers anyways if you use atrium, The rest of their menu is boiler employment agreements, NDAs, and terminations - all of which are 2x local rates.
They custom quote TOS and privacy policies - and again it’s all template based - and 2x local rates.
I asked them about the impact of California’s new AB5 and yep, ask someone else! Save your money - don’t buy the hype.
All your doing is helping VCs cover their recurring legal expenses by paying Atrium to overcharge you and build valuation based on their “tech” which is just a drop box and bad customer service, and no legal support.”
All in all, I actually feel I overpaid for subpar legal services.
I will credit them with a smooth and enlightening (albeit overpriced) corporation formation, and maybe they are pearing down the product to just that - because that was the only thing that worked, IMO.
I felt as if they were taking advantage of early stage startups preparing to raise capital. You can’t bill their rates and then ghost them, those are precious dollars and precious time.
“I have been trying to cancel for over a week, and more of the same. NO ONE RESPONDS FOR WEEKS! These are ATTORNEYS! Waste of money.
I’ve dealt with many lawyers coming from my last startup which was in a highly regulated space.
Atrium is like an expensive legal zoom, but overpriced. Understand it’s cheaper to use a lawyer at any other law firm because your retainer is a deposit on future services.
With Atrium your paying $6k a year in subscription fees for “legal advice” which is otherwise baked into any other law firm, and they don’t provide much advice.
They really specialize in financing, using ycombinator docs. These docs are publicly available templates. All other services are limited to their “al la crate menu”... again all templates. It takes days to get a email back from them. It takes a week to get a call setup, if they have the time, and if they will even discuss the matter.
Litigation? Find someone else
Overseas? Find someone else
Doing something outside of California like an asset purchase? Find someone else
So you basically need other lawyers anyways if you use atrium, The rest of their menu is boiler employment agreements, NDAs, and terminations - all of which are 2x local rates.
They custom quote TOS and privacy policies - and again it’s all template based - and 2x local rates.
I asked them about the impact of California’s new AB5 and yep, ask someone else! Save your money - don’t buy the hype.
All your doing is helping VCs cover their recurring legal expenses by paying Atrium to overcharge you and build valuation based on their “tech” which is just a drop box and bad customer service, and no legal support.”
I worked at a company that experimented with them. We had a lot of legal spend to white shoe firms (multiple) and wanted to give Atrium a try.
They had a flat monthly rate, and then a la carte billing if you needed extra things, IIRC. The real problem was, when we needed something reviewed or worked on, they couldn't deliver on time or promise any guaranteed deadline. My CEO was very frustrated.
They had a flat monthly rate, and then a la carte billing if you needed extra things, IIRC. The real problem was, when we needed something reviewed or worked on, they couldn't deliver on time or promise any guaranteed deadline. My CEO was very frustrated.
It's kinda like buying something that saves you money by cutting support....and then calling support.
I get that this shit is hard but who thinks that saying "[o]ur in-house attorneys will shift to have the option to become preferred providers in our professional services network" is ok?
This is such a gross way of putting it.
This isn't a publicly listed company ffs, just say what everyone knows it means: "our startup's Plan A performed unexpectedly so some of our great colleagues, who believed in us and worked hard for up to 2.5 years, are losing their jobs, and this sucks, but based on what we all learned, including thanks to the valuable work the in-house guys did, we're kicking off Plan B today".
This is such a gross way of putting it.
This isn't a publicly listed company ffs, just say what everyone knows it means: "our startup's Plan A performed unexpectedly so some of our great colleagues, who believed in us and worked hard for up to 2.5 years, are losing their jobs, and this sucks, but based on what we all learned, including thanks to the valuable work the in-house guys did, we're kicking off Plan B today".
I will always remember them for their outreach emails that pretended to be from Justin and included “Sent from my iPhone” to deepen the illusion. After talking to them - and already having competent counsel - it was clear they wanted to turn legal services into a predictable cash flow SaaS business more than they were actually solving anything.
It's not looking good for self-driving cars if we can't make a self-driving lawyer.
so what exactly is Atrium now? A dev shop?
tech tools it developed for lawyers and law firm clients, and for new areas it will expand into.
Could NEVER understand what the heck they do and how they got $75M. Just sounded like they were a law firm specialising in start ups. Big whoop.
> how they got $75M
Justin Kan sold Twitch to Amazon for nearly $1B after 7 years, Socialcam for $60M in 18 months, and Exec for "under $10M" in 2 years.
That's how he raised $75M. The company/product was completely irrelevant.
Justin Kan sold Twitch to Amazon for nearly $1B after 7 years, Socialcam for $60M in 18 months, and Exec for "under $10M" in 2 years.
That's how he raised $75M. The company/product was completely irrelevant.
That downward trend is a little concerning. And honestly, "under $10M" is probably a bad exit (although I don't have enough context to say for sure).
Same thoughts here on the downward trend. It feels like a good concept, luck and good timing re Twitch exit. A bit less about the product per se.
Did they prove or felt like they proved product market fit before they hired loads of lawyers? I wonder how that worked. (Serious question, not trying to be critical).
They're probably now on the long list of law firms that tried and failed at alternative fee structures. Legal services consumers have shown time and again that they like regular old hourly billing.
Can you expand on this? It sounds plausible, but then so does the narrative being pushed by the “new law” firms – that clients want alternative fee structures because they don’t like the open-ended cost of time billing.
Not OP but former litigator turned programmer here. This gets very complicated because saying "legal work" is a giant generalization for a broad field. But talking about this with my peers (still a slice of the market) we arrived at this:
There are three types of legal work (exceptions, yada yada, but mostly):
1. Normal people shit. Parking tickets and most criminal law, etc. Flat fees fine and usually nice so your clients understand (and understand their ability to actually pay your rate). Work itself can be pretty predictable, or taken on contingency for civil stuff.
2. Line of business legal work. If you fuck this up it sucks, but rarely is it a material risk to the value of the company. This work is usually brought in-house ASAP, to control costs. Before that point, you see both hourly and flat fee work, mostly based on client sophistication to negotiate such things.
3. Bet-the-company (and white collar/wealthy criminal) work. Here clients only care about one thing: WINNING. You win M/A by closing. You win regulatory work by clearing the way for profit making activity. You win bet the company litigation by....winning. The cost of legal services, even at hourly rates, are negligible compared to the profit making ability success unlocks (or unlocks the continued existence of the company, a guy not going to prison). Clients rarely give a shit what or how you charge as long as you win. They will pay whatever "winners" charge. They will only bitch about costs if they percieve themselves to not be winning.
You cant talk about this as if legal work is the same. That's probably why you percieve a disconnect as an outsider.
There are three types of legal work (exceptions, yada yada, but mostly):
1. Normal people shit. Parking tickets and most criminal law, etc. Flat fees fine and usually nice so your clients understand (and understand their ability to actually pay your rate). Work itself can be pretty predictable, or taken on contingency for civil stuff.
2. Line of business legal work. If you fuck this up it sucks, but rarely is it a material risk to the value of the company. This work is usually brought in-house ASAP, to control costs. Before that point, you see both hourly and flat fee work, mostly based on client sophistication to negotiate such things.
3. Bet-the-company (and white collar/wealthy criminal) work. Here clients only care about one thing: WINNING. You win M/A by closing. You win regulatory work by clearing the way for profit making activity. You win bet the company litigation by....winning. The cost of legal services, even at hourly rates, are negligible compared to the profit making ability success unlocks (or unlocks the continued existence of the company, a guy not going to prison). Clients rarely give a shit what or how you charge as long as you win. They will pay whatever "winners" charge. They will only bitch about costs if they percieve themselves to not be winning.
You cant talk about this as if legal work is the same. That's probably why you percieve a disconnect as an outsider.
So, contrary to the OP, you would argue that clients don’t like time billing, but when the stakes are high, the price doesn’t matter. That makes more sense to me than the idea that clients actually like a pricing model that encourages inefficiency.
It's not really open ended. The client can stop any time they decide the legal fees are no longer worth the benefits. And even traditional law firms do often work on a fixed fee or contingency fee basis for certain types of cases.
You cannot stop any time you like once you start litigating. Capitulation, or paying new lawyers to get up to speed and continue fighting for you, will both result in very large immediate costs. In that situation many people will feel compelled to continue paying their lawyers long after the budget that supported the initial decision to litigate has been spent.
That's not how it actually works in expensive litigation. The type of litigants who can afford such legal fees at all do understand the sunk cost fallacy and are capable of making fairly objective decisions about whether to continue.
Companies who raise $75mm don't lay off massive chunks of their workforce because they found product-market fit.
Justin raised $75mm because he's Justin, and for all VCs posture like they're contrarian risk-takers, they're absolutely not and would have invested in shit in a box if Justin said it was his.
Justin raised $75mm because he's Justin, and for all VCs posture like they're contrarian risk-takers, they're absolutely not and would have invested in shit in a box if Justin said it was his.
Being willing to back a founder primarily based on who they are is absolutely a viable form of risk-taking.
It may be a viable form of risk-taking but then it isn't contrarian risk-taking. However, has anyone ever actually ran the numbers on serial founders, the entirety of the cohort and not just the success stories?
I believe first round did a study that showed that companies founded by people who'd previously had a successful exit had better outcomes, but they also raised at higher valuations, and those effects canceled each other. So returns from investing in successful serial founders vs new founders are similar
Just as the efficient market hypothesis would predict.
Sure. But in my experience, the amount in which investors posture that they're contrarian and look for unconventional opportunities versus how much they actually do is quite notably different.
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>Its goal was to improve on the traditional law firm model, by developing software to improve efficiency for both its attorneys and clients.
Any word on what they actually were doing to gain these efficiencies?
Any word on what they actually were doing to gain these efficiencies?
If I had to guess based on parsing these articles, Atrium went up against incentives in the legal industry and lost. [0,1]
Legal firms bill hourly. Efficiency means less billable hours.
(warning: moving into personal experience and conjecture) Yes, boilerplate forms for repetitive use cases seems like it should be a thing, but in my experience building businesses, every lawyer I have dealt with has found any reason possible to have custom documents.
It's also not clear they ever found Product/Market Fit. [2,3] > This week Kan confirmed that the company has completed its fundraising process, raising $10.5 million > as Atrium goes through its product development phase and tries to achieve product-market fit.
[0] https://abovethelaw.com/2017/09/competition-is-for-losers-th... [1] https://abovethelaw.com/2017/10/justin-kan-answers-the-call-... [2] https://techcrunch.com/2017/06/15/justin-kan-atrium-lts-fund... [3] https://techcrunch.com/2018/09/10/atrium-legal/
Legal firms bill hourly. Efficiency means less billable hours.
(warning: moving into personal experience and conjecture) Yes, boilerplate forms for repetitive use cases seems like it should be a thing, but in my experience building businesses, every lawyer I have dealt with has found any reason possible to have custom documents.
It's also not clear they ever found Product/Market Fit. [2,3] > This week Kan confirmed that the company has completed its fundraising process, raising $10.5 million > as Atrium goes through its product development phase and tries to achieve product-market fit.
[0] https://abovethelaw.com/2017/09/competition-is-for-losers-th... [1] https://abovethelaw.com/2017/10/justin-kan-answers-the-call-... [2] https://techcrunch.com/2017/06/15/justin-kan-atrium-lts-fund... [3] https://techcrunch.com/2018/09/10/atrium-legal/
The initial pitch (from your link) contradicts the rationale for the pivot.
The premise they started with was that its hard to sell efficiency enhancing software to lawyers because the billable hour discourages increasing efficiency. The solution was to become a law firm, offering fixed fees to secure business and leveraging the software to increase efficiency and enhance profitability.
> Atrium LLP is trying to solve this by charging fixed pricing for work. It plans on doing this by building models to predict how much work will be needed for different types of projects. Even if the models aren’t perfect at first, it doesn’t really matter: regardless of whether it is higher or lower margin initially, the point is that when are have a fixed price for service, it is your internal incentive to reduce cost over time. That is how the market drives lower cost for customers. When you have buyers who pay suppliers based on cost plus, you get high prices that don’t trend down over time (think government contractors). When you have fixed pricing, costs generally come down over time.
By shifting away from charging for services to selling software, you’re back to the initial problem: law firms don’t want to pay for efficiency enhancing software because the billable hour discourages it.
The premise they started with was that its hard to sell efficiency enhancing software to lawyers because the billable hour discourages increasing efficiency. The solution was to become a law firm, offering fixed fees to secure business and leveraging the software to increase efficiency and enhance profitability.
> Atrium LLP is trying to solve this by charging fixed pricing for work. It plans on doing this by building models to predict how much work will be needed for different types of projects. Even if the models aren’t perfect at first, it doesn’t really matter: regardless of whether it is higher or lower margin initially, the point is that when are have a fixed price for service, it is your internal incentive to reduce cost over time. That is how the market drives lower cost for customers. When you have buyers who pay suppliers based on cost plus, you get high prices that don’t trend down over time (think government contractors). When you have fixed pricing, costs generally come down over time.
By shifting away from charging for services to selling software, you’re back to the initial problem: law firms don’t want to pay for efficiency enhancing software because the billable hour discourages it.
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I wonder what the yin and yang in customer's minds are with
"Thank goodness my law firm is saving me money by generating these documents for cheap!"
And
"You know this is kinda important but I'm not sure I want discount lawyer's on this who automate paperwork...."
"Thank goodness my law firm is saving me money by generating these documents for cheap!"
And
"You know this is kinda important but I'm not sure I want discount lawyer's on this who automate paperwork...."
Most/all law firms have templates they hold internally and modify slightly for their clients. Very few billable hours are going into handing you your standard agreements like NDAs, offer letters, CIIAA, and so on. Your lawyers are really there to help you when things go non-standard, which is inevitably going to happen with any non-trivial business.
I evaluated Atrium out of curiosity when I was looking for a law firm for incorporation purposes. I filtered them out after the first call because they weren’t set up to handle the slightly unusual setup I had, which other law firms had no trouble with.
I evaluated Atrium out of curiosity when I was looking for a law firm for incorporation purposes. I filtered them out after the first call because they weren’t set up to handle the slightly unusual setup I had, which other law firms had no trouble with.
Yeah I have some limited visibility to a very large law firm. Paperwork you can just script never comes up as a problem and it's not like these organizations would just duplicate effort like that if they could avoid it / save themselves money.
Also I never got the impression that the really profitable customers are shopping for those kinds of efficiencies....
Also I never got the impression that the really profitable customers are shopping for those kinds of efficiencies....
Good question.
The asymmetries of the cost of improper legal work versus saving some amount upfront may not seem worth it.
There is probably some cognitive bias in play here.
The asymmetries of the cost of improper legal work versus saving some amount upfront may not seem worth it.
There is probably some cognitive bias in play here.
> Yes, boilerplate forms for repetitive use cases seems like it should be a thing, but in my experience building businesses, every lawyer I have dealt with has found any reason possible to have custom documents.
Good lawyers in the Valley should indeed be giving startups the boilerplate for free, not charging for board meetings, not charging for the partner time (not that you’ll get much — or need it) but charging for associate time. This is what I’m used to and expect, whether Gunderson Dettmer, Cooley, Orrick etc. From startups they make the money on the financing even though those docs are mostly boilerplate too. Oh no billable hours until you get a term sheet.
Then if you get big they also make the big bucks, especially on exits.
But it’s not worth chasing the scraps of billing from startups. I mean how much lawyering do you typically need in the first couple of years anyway?
Good lawyers in the Valley should indeed be giving startups the boilerplate for free, not charging for board meetings, not charging for the partner time (not that you’ll get much — or need it) but charging for associate time. This is what I’m used to and expect, whether Gunderson Dettmer, Cooley, Orrick etc. From startups they make the money on the financing even though those docs are mostly boilerplate too. Oh no billable hours until you get a term sheet.
Then if you get big they also make the big bucks, especially on exits.
But it’s not worth chasing the scraps of billing from startups. I mean how much lawyering do you typically need in the first couple of years anyway?
There are a great many things in legal practice that are ripe for automation but the vast majority are junior associate-level tasks at best. Nobody is going to automate a non-negligible portion of a $500+/hr partner's job. The best you can realistically accomplish is automating work that large groups of people billing $150/hr or less would perform in parallel.
They didn’t. If they had, they wouldn’t be ‘pivoting’ now.
Last I heard part of the idea behind the lawyering was that it'd give valuable in-house experience to develop the tools. What changed there? Did they get a big contract with Orrick to replace the in-house lawyers?
"Startup Straight Talk"
https://pbs.twimg.com/media/EONrLRRUYAATmAp?format=png
https://pbs.twimg.com/media/EONrLRRUYAATmAp?format=png
So now they are competing with Relativity? (Chicago based)
These founder raise pre product market fit because they can, and often raise too much money. Having too much money when you don’t really have a viable product that people want can easily turn your company into a zombie, where people are just sort of going through the motions because there’s nothing else to do but chug along.
I’ve seen it many times. Some end up eventually finding the market after a few pivots but it’s really not a fun place to be as an employee with little decision making power. And the founders are usually wealthy enough at that point independent of the success of this current company that it isn’t “do or die” for them which creates another layer of zombie-esque behavior.