The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:51:29 · Harry Stebbings, Rory O'Driscoll, Jason Lemkin
[00:51:29] S2: So wild. Rory, you'll be surprised to hear that my girlfriend is still with me. I know. My mother is shocked too. But in the legal world, woah. Mega News, one of the big law firms, the prestigious OG brands, while shut down very quickly and weirdly because of partner dispute, whatever, AI law firm Crosby, who've raised $85,000,000 from Sequoia and the like, bid to take over its assets and it's like its brand. Anything to say here? I thought that was fascinating. [00:52:03] S1: I mean, it's two separate stories. There's The Weil, Gotshal crashing, which is a, you know, American law. It's not a tech story. It's an American law story. You lose a couple of key partners. These firms are, even though they don't have a lot of liabilities other than leases, it's just a bunch of connected rainmakers and sometimes the- [00:52:18] S2: That's a flim... No offense, Roy, that's a very flimsy way of looking at it. A couple of partners leave does not mean a ninety year prestigious law [00:52:26] S1: firm. [00:52:26] S0: Yeah, if you take enough of the book of business with you, It's it [00:52:29] S1: small number of rainmakers, absolutely. It's not like [00:52:31] S0: It's worse than if you leave a VC firm, the VC firm dies but over twenty years. If the top rainmakers leave, there's nothing to pay out at the end of the year.
00:52:31 · Jason Lemkin, Rory O'Driscoll, Harry Stebbings
[00:52:31] S0: It's worse than if you leave a VC firm, the VC firm dies but over twenty years. If the top rainmakers leave, there's nothing to pay out at the end of the year. [00:52:39] S1: If you look through it, I read all the accounts, I don't know as well. As I said, it's four or five key lawyers, each of whom run a key part of the business, there seems to be a clash on a couple of them. I think the guy who ran all the PE practice, which is probably twenty-thirty percent of a company like this, left Texas Book of Business. And, yeah, it can go wrong pretty quickly. So... But it doesn't matter because that's not a tech business. That's just a wow. That's interesting. And then I did I did admire Crosby for just... That's just a, hey. If there's some attention to be paid here, why don't I put in a bid for the business? That was that was that was a bit of a fuck you, but I was I was impressively. Chutzpah, I think is a relevant word there for that. That was Chutzpah. [00:53:13] S2: I loved it. Ryan just like, yeah, we'll take it. [00:53:16] S1: Yeah. If you don't want this 100 year old franchise, we'll take it here.
00:53:16 · Rory O'Driscoll, Jason Lemkin
[00:53:16] S1: Yeah. If you don't want this 100 year old franchise, we'll take it here. [00:53:20] S0: I don't mean to be too negative on the Crosby thing. But ultimately, if you're providing slightly higher value services, it's going to have the same issues. People want to keep all the partners, the rainmakers want to keep all the money. Now, Crosby has probably has no rainmakers, And it's doing transactional stuff. But I don't know that this idea that lawyers will give up a bunch of the profits they could make for shares in a company that hopefully will IPO, I don't know how sustainable the business model is.
00:53:46 · Rory O'Driscoll, Jason Lemkin
[00:53:46] S1: For the record, I don't know if I fully buy the model, but I disagree with you in the sense that I actually think it's actually the same story. What Weil, Gotshal says is there are some parts of law where the partner that you are dealing with as a customer is so important because you value his or her personal advice that when that partner leaves Weil and goes to someone else, you take your business with them. And that's like, I'm doing a complex PE deal. I need this guy and pay them $5 an hour, some absurd sum, but he's my guy and I trust him and I'm running KKR and that's the guy I want. And then what Crosby is saying is there's a whole bunch of other law where you really don't care the name behind the thing, because it's pretty standard and transactional. And that business can be done with Crosby law. Well, I actually think they're actually very nice counterpoint. If I'm doing an NDA or a Series B stock purchase agreement, I don't need the $5 an hour guy. I don't need to know the name of the guy doing it. It's just, you know, do the usual stuff, check the usual thing. So I think... [00:54:40] S0: Yes. But but but even at the low end, incompetence hurts you. It damages you. Have you ever done a routine transaction where some idiot lawyer costs you a lot of money? I have. I've been damaged 7 figures by incompetent junior lawyers. [00:54:52] S1: But I think, I'm sorry, I'm just going to push again because I'm grumpy. That's exactly the Crosby argument, which is it's less likely to have that kind of mistake if you've got AI, like for the standard stuff.
00:54:52 · Rory O'Driscoll, Jason Lemkin
[00:54:52] S1: But I think, I'm sorry, I'm just going to push again because I'm grumpy. That's exactly the Crosby argument, which is it's less likely to have that kind of mistake if you've got AI, like for the standard stuff. [00:55:03] S0: Okay, well, me flip it around. Let's imagine I go to Crosby and I make $170,000 a year and I get 0.01% of the company for the IPO that I'm not even sure is going to happen. And then I can go to Weil Prime and make two fifty. And if I'm actually good, make every great partner now makes $10,000,000 and every good... The entry level ticket at Weil was over 200,000 for an associate for a soul crushing horrific job bind you. Like I get the Crosby. My only point is, and I'm not being critical, I haven't talked to them, I'm not convinced this is as stable as a lot of VCs might hope it would be. It's too I human
00:55:03 · Jason Lemkin, Rory O'Driscoll
[00:55:03] S0: Okay, well, me flip it around. Let's imagine I go to Crosby and I make $170,000 a year and I get 0.01% of the company for the IPO that I'm not even sure is going to happen. And then I can go to Weil Prime and make two fifty. And if I'm actually good, make every great partner now makes $10,000,000 and every good... The entry level ticket at Weil was over 200,000 for an associate for a soul crushing horrific job bind you. Like I get the Crosby. My only point is, and I'm not being critical, I haven't talked to them, I'm not convinced this is as stable as a lot of VCs might hope it would be. It's too I human [00:55:38] S1: agree. There are issues with the human plus AI delivery model, I have questions on that. But I'm just going to push back on your comment on why would I go to... That's easy, because for every lawyer who wants to be a rainmaker and work 20 fourseven and make $10,000,000 there's also lots of lawyers who are like, I want to do forty hours of good law. I don't want to be a rainmaker. I don't like that. I'm just a good lawyer. And I want to then go home. Maybe I'm dealing with kids. Maybe I'm dealing with a parent. Maybe I just want to take it easy. There are lots of people for whom being a lawyer, a well compensated, nice upper middle class salary, working for someone like Crosby, doing forty hours a week with control of your own time is a perfectly good product. So I don't have a... They'll be able to get lawyers, right? [00:56:16] S0: I just don't know if I can see a $10,000,000,000 outcome here. [00:56:19] S1: Different question. Sorry,