201. What can lawyers teach tech founders?

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Episode Transcript

SM: Hello smart people!

How are you today?

I have just returned from Barcelona, and it was fabulous! I taught a class on tech for non-technical founders there at a VC and founders conference.

And, this week, I am teaching another class, that you can actually come to, and it’s free! The class is called Get Tech Clients! Introduction to tech for lawyers.

Did you know that less  than 10% of today’s Fortune 500 companies are considered to be tech companies.

We are still at the beginning of the tech opportunity.

This is exciting because:

1. If you are feeling left behind, you are definitely not. We are still in the early days.
2. If you’ve learnt something about tech, you’ve got a gift that will keep on giving for the rest of your career.
3. You don’t have to be a technologist to benefit from this rising tide.

So, if you work in professional services and you’re wondering which client niche to pick, the tech sector is a very good bet.

There will be new companies being formed and bought, stock market IPOs and licensing deals to be made.

By the way, I also include tech investors in the tech industry, because without angel investors and venture capitalists, many tech companies would not be able to exist.

And as the tech sector grows, innovators and their investors will need to work with lawyers, bankers and accountants.

They will obviously chose those who understand the industry.

So if you want that to be you, then come to my free class on Thursday. The link is in the show notes, or just go to https://www.techfornontechies.co/lawyers-class

And inn today’s episode, you are going to learn from a lawyer, who is a master at advising tech companies and venture capitalists.

You are going to hear from Daniel Glazer, Managing Partner of Wilson Sonsini's London office. Wilson Sonsini aren’t just another big law firm.

They are a law firm literally from the heart of Silicon Valley, so their approach to working with clients is different, because they specialise in working with tech companies and venture capitalists.

These types of businesses are different to traditional businesses. They are often either huge successes, or total failures, and this level of binary outcome is quite unusual in the normal business world. And that’s what makes them so interesting, right!

This episode is obviously useful if you’re a lawyer, or if you work in professional services in general. If you are a founder or a tech investor, you also absolutely have to listen to this, because you will need lawyers, so you need to see what good looks like.

And now, let’s learn from Daniel.

Sophia Matveeva

Hello, Daniel Glazer and welcome to the Tech For Non-Techies podcast. I'm so happy to have  you here. 

Daniel Glazer 

Great to be here. Thanks for having me, Sophia. 

Sophia Matveeva 

So, you know, I know that you and I have known each other for ages, but, uh, the reason why  they, I, my idea for this interview came up is because I was speaking to a contact of mine  who's a venture capitalist in New York, and I was basically asking him, what do you think of  the lawyers that you work with? Do you think that the lawyers that you've worked with as a  VC, do they know enough about software, do they know enough about venture capital?  Because I've been doing some. 

trainings for law firms. And so I just wanted to see, well, what do the clients think? Right.  Because that's at the end of the day, kind of what matters. And he said, well, you know, in  general, not like in general, they don't really know what they're talking about apart from the  people at Wilson, Suncini and Cooley. And I thought, I know them. I'm, and I'm going to, I'm  going to call Daniel. And so why do you think? 

Wilson Sonsini has this reputation because literally this guy said, well, you know, they could  teach us. And so why does a law firm have this reputation that they could teach, you know,  venture capitalists about technology? Because that doesn't, that doesn't seem to make sense. 

Daniel Glazer 

So I'm not going to be so presumptuous to say that we can always teach venture capitalists  about technology, or certainly. 

Sophia Matveeva 

Depends on the venture capitalist, right?

Daniel Glazer 

Well, I'm not going to make that statement. But what I will say is that Wilson and I would say  a group of mostly Silicon Valley headquartered law firms are very focused on working on  high growth sectors, specifically tech and life sciences. 

Daniel Glazer

and those other firms as well, is to work with those companies often from early in their life  cycle through late in their life cycle, the latest possible point of their life cycle. It is not  uncommon. 

to work with companies that are raising venture capital, scaling, exiting, to work with them,  let's say, at the seed or even in corporation stage, work with them on their various financings,  maybe help them buy a company or two, and then eventually help them with their exit, either,  let's say, a sale to a buyer or a US IPO. And then perhaps, if it's a US IPO, continue to work 

with them as a public company. 

And if you're going to work with a company through that life cycle in that way and get  involved with that company and their business, because as Sophia, as you may know, it is not  uncommon for lawyers in the US, for venture-backed companies, to attend their board  meetings on a monthly or quarterly basis. 

Daniel Glazer 

legal advisor, but as a strategic advisor to the business, you can't really do that without having  an understanding of the company's business model and then of course just the nature of its  product or service offering, like the business model and the underlying technology that leads  to the business model. How can you help a company properly? 

as a strategic advisor unless you understand what it's doing. And maybe also importantly,  how do you be a strategic advisor to a company if you can't help them see around corners a  little bit? In other words, a firm like Wilson, we've been working with high growth  companies since the early mid-1960s. I mean, the firm first started in 1961. We've got right.

Sophia Matveeva 

So that's the chip, that's when the chip, that's basically the beginning of Silicon Valley with  the Silicon chips. 

Daniel Glazer 

What? 

Right. And that's when the firm was formed, right? And that's when the first venture funds  were formed. And that's not a coincidence, right? Is that the approach was there are these  early stage companies building very interesting technology businesses, and they need  funding, and they need strategic guidance on how to build, right? And that's where the VCs  come in, and that's where a certain type of law firm 

comes in and you know that means that we've been doing this for what 60 something years,  right? And so when the net when another company comes in and says look we're we we've  built now The better mousetrap and it's our turn to go on that journey Raise money build the  company massively right change the world as they say we we've got that experience To say  look this is how other similarly situated companies have done it 

the past. And I think that what you've got in the U.S. in particular is a relatively small group  of law firms that is particularly focused on advising in that way and advising that type of  company. 

Sophia Matveeva 

And so I'm just thinking as a lawyer, like you've basically just now mentioned three skillsets.  I mean, you actually have to know something about law, I'm assuming. So, you know, I  mean, you went to law school. That's a good assumption, right? And then you also talked a  lot about business. So I don't know, then you go and get an MBA and then you got to also  learn about technology. So how does that all fit basically into one lifetime? You know, if  you're learning all of this stuff, how... 

Daniel Glazer 

It's a good assumption. A good assumption. Yeah. 

Sophia Matveeva 

You know, how do you have any time to do actual work? What I mean is like, how did you  learn all of these? Because yes, you go, you start with a law degree and then what has to  happen to a person who graduates from law school in order for them to become a strategic  advisor to a tech client. 

Daniel Glazer 

So look, part of it comes with the American model of training lawyers is that you go to four  years of university. 

And then you go to three years of law school. So it's a full seven years until you even qualify  to go out and practice. And there is no, for the most part, there is no sort of legal or law major  that you would take in university or in college for those Americans listening. It's more that,  for example, I was a history major 

in college and I think you're sort of. 

Sophia Matveeva 

Excellent choice. 

Daniel Glazer 

Thank you. And I was encouraged, and I think a lot of people are encouraged really to think  outside the box a little bit and explore different areas of study. And that's where a lot of  people go to law school after that. Let's say that they might have been pre-med in college and  decided actually that they want to go to law school. 

in the arts, right, and decided that they wanted to go to law school. And very often, those that,  those who go to law school will end up focusing their careers in law on areas that they were  particularly interested in may have explored in university, right. So, you know, after seven  years of that study, what, what comes out more often than not is,

both an understanding, as they say in American law schools, an understanding of how to  think like a lawyer, not necessarily that you've memorized a body of law. 

But you've been taught, especially in those three years of law school, by what's called the  Socratic method, where there's an ongoing back and forth, a Q&A, kind of a call and  response with your professors, where you learn how to think on the spot and think critically.  And the right answer, oftentimes, if you're, at least in the US, if you're an American lawyer,  when somebody asks you a question, you may not know off the top of your head the specific  legal answer, certainly 

with, right? But you know exactly how to find that answer, right? And to find an answer and  to provide the answer in a way that will be most useful for the company. In other words, not  just here is the black-letter law answer, but here is the answer and this is how it applies to  your business and this is how you can use the answer to be successful. 

Daniel Glazer

And that extra step that making a recommendation to your client on how to use the legal  knowledge that you're providing, I think that's the extra bit. That's what kind of separates  maybe the good from the great, hopefully. And that's what in my experience certainly  American companies, American clients are looking for. And that's why I talk about this a bit. 

the phrase for hiring a lawyer, it's take advice of counsel. 

Right? And I think that underscores what's going on there, is that when you're out hiring a  lawyer, when you're seeking to get a legal answer, what you're asking for is advice of  counsel, which is please advise on what your recommended course of action is. And you  cannot effectively provide a recommended course of action unless you've got the broader 

Daniel Glazer

the technical, the legal answer. And again, I do think a lot of that comes from the training and  I'm just gonna give a shout out to my professors who always said, teaching you how to learn  how to think like a lawyer, yeah. I mean, how to think critically and to provide an answer that  is highly useful in context.

Sophia Matveeva 

You know, it's interesting because I'm actually seeing parallels to what I've taught at business  schools when I've taught tech for non-technical founders or tech for business leaders, because  people assume that I'm going to tell them how to teach a specific tool. And I mean, most of  the time I have no idea. So I'm not the person to learn that. Um, but it's all about, okay,  you're, you're in a world where technology is constantly changing, things are constantly  changing, so you need to, but like that doesn't matter. The tool is. 

doesn't matter because it's going to be a different tool in a year's time. What matters is linking  technology strategy to your business goals, asking the right questions. And also, as you said,  knowing how to find the right answer. And sometimes that means knowing the right  specialist. And so knowing who the right specialist is to build your thing and knowing that,  for example, don't build, don't hire a backend developer if what you really want to focus on is  kind of a. 

beauty on your front end screens. And if you understand how that works, essentially you kind  of have, you know, enough to be a leader in today's age, which is not the same as, you know,  go and learn Python because you know, Python is really useful now. Is it going to be useful in  five years time? I have no idea. And sorry, go on. Yes. 

Daniel Glazer 

No, and a little bit of that is, from a lawyer's standpoint, is creating, making the analogies  between companies that have come before, used analogous technologies, talk about how  companies dealt with previous disruptions in the market. And yeah, the specifics are  different. And the specifics technologies may change. But some of the dynamics are very,  very similar. And here, I'll give you an example of this just from maybe 

business standpoint is, you know, I, you know, so I've been practicing since the late 90s. And  so I've been through sort of, you know, three of the real kind of up and down cycles, right?  First being the late 90s into the early 2000s, you know, the internet boom, and then, you  know, the, you know, the 08, 09 financial crisis, and then sort of the recent downturn after the  highs of 2020 and 2021. And you know, I talk to companies all the time. 

who have maybe only been through one or maybe two of these cycles. And there's a lot to  learn.

right, from what we've seen on prior cycles. Like, for example, that often some of the best  companies get created on the downsides of these cycles. Some of the best times to be a seed  investor or an A investor tend to be on the downsides of these cycles. And being able to share  some of those lessons, even though the specifics might be different, right, 

It might be the current exuberance over AI versus the current exuberance over the dot-com in  the late 90s, but there are similarities there that can be shared and hopefully be instructive. 

Sophia Matveeva 

Mm-hmm. 

Sophia Matveeva

You know, it's funny what you say about investors because I used to work in a private equity  firm. And I actually remember we had this slide deck when we were fundraising. So we had  to go to limited partners because, you know, private equity people also have to fundraise.  And we literally had this slide that said we are ambulance chases. And there was this really  gruesome picture of an ambulance and a guy running after it. And basically it meant that I  think. 

At the time we were just coming out of the Great Recession and essentially our pitch was,  this is the time to invest. Yes, this feels scary, but when it doesn't feel scary, that's exactly the  time when you shouldn't invest. And generally, I mean, it wasn't particularly a nice place to  work, but they were very successful. So I remember when we spoke recently, you 

about US versus UK lawyers and my mind was boggled. So I would love to share that insight  with the audience. What is the core difference between working with a lawyer in the US  versus the UK? 

Daniel Glazer

Well, I don't know that it's necessarily the difference working with the lawyers so much as it  is that the legal system creates different incentives and disincentives in the US versus the UK.  And I think that results in a bit of an impact as to what sort of advice is sought. And here's  what I mean by that. In the UK, if we, so if you're going

had a business dispute, we went to court, right? Whoever loses... 

would have to pay most or all of the other size legal fees, typically. It's funny. I always say, in  American law schools, that's taught as the English rule, because that's how they do it in  England. And that creates a pretty substantial disincentive to go to court, unless you are  pretty much absolutely certain that you're going to win. Because then you're going, as I often  say, double or nothing. 

Sophia Matveeva 

Mm-hmm. 

Daniel Glazer 

risky unless you are very certain that you're going to prevail. And frankly, how often is any  one party that certain? They may be, and you do say it. But at least you think twice. But that  also means. 

that the sort of maybe letter writing that you might see a lot in the United States, the threats  that you might see between business competitors or otherwise around threatening legal  actions, you don't see as much in the United Kingdom on average. Why? And again, I think it  has to do with some of the disincentives there. If it's unlikely that you're actually going to end  up in court, it makes the letter writing seem a little bit 

less threatening. And so you don't see it as much. And so that creates a certain dynamic,  where it's a little bit less litigious. Whereas in the United States, if we had a business dispute  and we went to court, the default is each side bears their own costs, even if they win. 

Sophia Matveeva 

Mm-hmm. 

Daniel Glazer 

And that creates a certain dynamic. Well, let's imagine that I had more money to spend than  you do on a claim. Well, as long as I can come up with any sort of claim that kind of gets  over the threshold of not being frivolous, then I can put you in a pretty challenging position. 

By threatening you, I can put you in a position where your choices are go to court and beat  me. But now you're at a substantial amount of legal fees. And American litigation often is  more expensive than elsewhere in the world. And you're not going to get you generally. I  mean, there are exceptions. There are exceptions. But you generally won't get that  reimbursed, even if you win. But then your other option that would be to settle on my terms,  which also is bad. 

So how do you navigate that? And I would say, as a public service announcement, millions of  companies are creating trillions of dollars worth of gross domestic product in the United  States every year. So somebody is figuring out how to navigate this dynamic. And that's  where you get into the take advice of counsel, the advisory model. Because to keep  companies out of that position, 

American, the American model when providing legal advice is at the core to answer one core  question. How does the company achieve its goals, let's say achieve their business goals,  while managing risk? Because if you just focus on business goals without being sensitized to  the legal considerations, then it's too easy in the US to get blindsided, or I often say to get run  over by the litigation trade. 

right, to get blindsided a bit by the dynamic that I just raised for you. I mean, you're between  a kind of a rock and a hard place. But if you just focused on legal risk in the United States,  well, then you sort of get wrapped around the axle a little bit, potentially, because it seems  like, well, the US is certainly a higher risk environment. I mean, just look at insurance  companies. I often talk to UK and European companies about this, that when they go out and  look for global business insurance policies, 

Daniel Glazer (19:52.345) 

They find that there's a default exclusion for the United States because of the different  environment there. So that's sort of the key point of advice, which is how does the company  achieve its business goals while managing risk, which requires somebody who's advising to  have both a business hat on and a legal hat on.

And as you decide, it also means that business people in the US tend to be a little bit more  sensitized to legal matters than you might see in other parts of the world, because it kind of  permeates everyday business life in a way that you don't see elsewhere. Like in most other  environments, there's kind of a bit of a hard break, a harder break between the business and  the legal, whereas in the US, business and legal are almost inextricably intertwined 

Sophia Matveeva 

Mm-hmm. 

Daniel Glazer

It seems a little bit unusual oftentimes to companies going to the US from outside, but in the  US it's kind of our native environment. 

Sophia Matveeva 

So this actually makes sense because I remember in my first company, I had US and UK  investors and my US investors would say to me, well, who's the law firm? Who is your  lawyer? Who is representing you? And my UK investors, it didn't even enter your mind  because why do we care who drafts the agreement? Like we discuss the term sheet, we  discuss the terms and then they put it into legal language. 

And like, why do we care who does that? And I remember, you know, I, I used to be a huge  fan of the Good Wife. And I thought basically, this is what it's going to be like. You get this  lawyer that like, they're like your best friend in a suit who can also sue people on your behalf.  They're like your best friend with superpowers. I was really looking forward to having that.  And in that, in that, that would, that definitely didn't happen. They basically, I had to tell  them what to do. And I mean, I, I had no idea what was going on. So it was, it did. 

I don't know if it was the blind leading the blind, but they were lawyers. So I didn't really  know what to expect. And I think you've just described that distinction beautifully. 

Daniel Glazer 

Yeah, I mean, it's just the two different systems incentivize different behavior, right? Like, I  mean, I've heard this sort of the same sort of thing when you said that your investors said,  well, you need someone to draft the documents. So yeah, I mean, they need to be drafted 

well, but without an environment that has the incentives of the US environment, it's seen as,  at least maybe from your investor standpoint, 

that it might be seen as a very limited legal task. Whereas in the US, it's seen as a much  broader task, which is, let's talk about what the term sheet should say in the first place, both  in terms of, for example, what's the market standard? And the lawyers, certainly in the US,  are often in a very good position to be able to talk about what's market standard just because  of the number of deals that we see. For example, Wilson-Sinzini puts out 

publicly available report on what we see as market standard term sheets. And that is very  common in the US that for that group of law firms that are heavily working at the venture  stage and later, but are also working at the venture stage, that the support on the term sheet  comes in a couple of different ways. It comes from the perspective of what is market out  there? How does your deal look relative to the... 

hundreds or thousands of other deals, you know, that we've been seeing. And then second,  and this goes back to what we were talking about, you know, starting with the VCs in the 60s  and going till now, being able to see our own corners a little bit. How do these terms play out  on the next few rounds and most importantly on the exit, right? And you only have that  perspective if you've gone on the journey before so that you 

how the terms that you might have at seed or series A play out not only on the B and the C  but how they eventually play out you know on the IPO or the M&A sale and if you have that  whole perspective then you can better, I'll use the verb again, you can better advise the  company on the term sheet at the seed and the A if that makes sense. 

Sophia Matveeva

You know, that's really interesting because what you talked about, we literally actually  studied this, but at business school, because in a, in a class on venture capital, because  essentially we're taught like this is a term sheet, but you have to think several term sheets  ahead and basically don't make a bunch of agreements that are going to put people off or that  are essentially unsustainable, which is what you're talking about, which is fascinating, but  you know, with this difference between is a lawyer, a strategic advisor or a drafter of  documents. 

This is where this discussion about what a large language model is doing to the legal industry  and what's this disruption going to look like that I think that discussion is really pertinent 

because essentially if it's document drafting. Well, that is going to be really disrupted by  technology. It already is. But if it's strategic advice. Well, we haven't yet figured out how to  do that with technology that is a uniquely human skill. So I wonder if therefore the US legal. 

the US law firm system is kind of more safe than the UK law firm system from this tech  disruption. What do you think of that assumption? 

Daniel Glazer 

So I've been a little bit more familiar, obviously, with the US perspective. And what I would  say is that we certainly, as a firm, are embracing technology. And I think it goes to what we  often hear in the market, which is that the 

I think I've heard this said a couple of times before, is that AI is not itself going to take jobs,  right? It's the people who know how to use AI, right, are gonna have the advantage. And I  think that that's probably the right way to look at it, is that if you are viewing the world as  looking to provide strategic advice, AI is a tool that helps you provide better strategic advice. 

And I think that that's certainly the way that we, and I'm sure other firms are looking at this,  which is how can we be better advisors by using the best possible tools? And to what you  were saying before, that we're talking about the outset about embracing technology and  learning technology as a lawyer. Yeah, I mean, if there are tools out there that will help. 

us be better in our core job. I mean, that doesn't have to negatively disrupt our business. That  can positively disrupt our business. And I think that's the way that we're looking at it. 

So thank you so much,  Daniel. I've really enjoyed this conversation and I think the listeners are going to love it too.  So listeners. 

If you do love it, which I'm sure you do, then what you need to do is leave this fascinating  podcast, a five star rating and a great review and that will make my day. So thank you so  much, Daniel. 

Daniel Glazer 

Thank you, Sophia.

Sophia Matveeva

Wasn’t that interesting? I found what he said about the US vs UK legal system absolutely mind boggling.

And, if you found this episode useful, don’t forget to leave this show a rating and a review. It really does help me, and I genuinely love hearing from you.

On that note, have a wonderful day, and I shall be back in your delightful smart ears next week.

Ciao!