A venture capitalist complains that law firms hired to assist in start-up financings almost seem to want to make work for themselves. (Jason Mendelson, Jun. 1, reprinted at Private Equity Hub)(via The Recorder). (Title altered so as not to leave the impression that the originally invoked “Silicon Valley” was a geographic reference.)
3 Comments
It is an excellent article. I’ve had the pleasure to meet Jason, and he’s actually lucky enough to be based in beautiful Boulder, Colorado rather than Silicon Valley.
On the topic of startups and legal costs, can I interest you in my own rant on software patents, since I don’t think you’ve covered the new book Patent Failure yet? The statistics on the low ratio of licensing revenue to litigation costs shocked me.
http://petewarden.typepad.com/searchbrowser/2008/06/whats-makes-sof.html
Pete
In the spectrum of risk/cost mitigation, legal professionals have achieved a state of hegemony; a lot of client-companies simply accept the cost as opposed to analyzing and figuring out ways to reduce it or at the very least manage it. So long as lawyers (lots but not all) continue to project the illusion of their field being esoteric and highly convoluted and clients continue to buy in to this kind of thinking – and thus have little to no bargaining power over rates/fees – then these rates will continue to rise. The vendor has succeeded at convincing the buyer that there is no alternative. This is the the ultimate position of power. It’s analogous to being the only oncologist on “Lymphoma Island.” Everyone has to see you and do as you say…or else.
[…] compounds, generates relatively high litigation costs and low benefits (Pete Warden, Jun. 3, via our comments section; Tim Lee, guesting at Megan McArdle’s, has a three-part review of “an important new […]