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With Scott Orn

A Startup Podcast by Kruze Consulting

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Scott Orn

Scott Orn, CFA

Andre Gharakhanian of Silicon Legal Strategy, a leading startup law firm, talks about growing a leading law firm focused on serving startups

Posted on: 08/06/2019

Andre Gharakhanian

Andre Gharakhanian

Founder and Partner - Silicon Legal Strategy

Andre Gharakhanian of Silicon Legal Strategy - Podcast Summary

Andre Gharakhanian of Silicon Legal Strategy, the first outside lawyer for Uber, Pinterest, and Instagram, talks startup legal strategy and about growing a law firm totally focused on serving fast-growth startups.

Andre Gharakhanian of Silicon Legal Strategy - Podcast Transcript

Scott: Welcome to the Founders and Friends podcast with Scott Orn at Kruze Consulting, and before an excellent podcast, quick shout out to our sponsor, Brex. Brex is a credit card for startups, the first one ever. It’s fantastic. They don’t require a personal guarantee by the founder. That is a huge, huge deal. Also has great integration with QuickBooks, which makes life easy for your accountant, and finally, they have really good rewards. They do startup-centric rewards, so like bonuses on ride sharing and travel and eating out and things like that, all things that’ll appeal to the whole team at a startup. So, check out Brex, and if you go through their signup and typing Kruze, you get a discount. Hopefully you enjoy Brex, and thanks so much, guys, for sponsoring the podcast. Thanks. Welcome to the Founders and Friends Podcast with Scott Orn at Kruze Consulting, and my very special guest today is Andre Gharakhanian from Silicon Legal Strategy. Welcome, Andre.
Andre: Hi. It’s great to be here.
Scott: So, you were actually the focus of a really cool article that our marketing team put together, which is tons of data on the best kind of, we’ll call it, boutique law firm for startups, and that’s how we got to meet. Charles Hudson put us in touch, but we went to lunch, had a great time, and I was like, “Hey, Andre, do you want to be on the podcast?”
Andre: Sure. Yeah.
Scott: You were very nice and joined us. So, maybe you can start off by just giving folks your background and how you started Silicon Legal.
Andre: Yeah, it’s pretty crazy. I started practicing law about 20 years ago in Chicago at Mayer Brown, large McFirm, a thousand lawyers in the building.
Scott: McFirm. Is that like a McDonald’s?
Andre: Yeah, yeah, yeah. It’s a high volume, initially doing a lot of the Fortune 100 M&A capital markets kind of work. I moved over in doing some private equity and venture capital work, followed a woman out to the Bay Area-
Scott: Was that your future wife?
Andre: … Who is now my wife, and now-
Scott: I’m glad that’s how that ended. Right?
Andre: Yeah. Right? And joined Orrick’s emerging companies group, this is back in, I think, 2004, joined Orrick’s emerging companies group working for clients like Facebook, VideoEgg, Bebo, RockYou, Pandora, new web high flyers in their early days, and practice focused almost exclusively on early stage startups and venture capital investors. Once you start getting more and more involved in that practice, it just has this certain magnetism, a certain pull. You’re asking yourself, “Should I try start something? Should I join a startup? What should I do?”
Scott: Let me ask you, is it the founders or just the way they see the world, or the reframing of your world, or what do you think that is? I feel the same way. I get the same exact vibes.
Andre: Yeah. It all comes together, I think, but particularly, the sense of purpose that the founders have, coming from a Fortune 100 environment where you’re essentially assisting number four in treasury on a daily basis so they can go home at 5:00, versus someone who’s really out there trying to do something just incredibly exciting. There’s a passion, and it’s infectious. The overall environment of being here in Silicon Valley, also infectious, and how we frame the world and how we frame possibility, and it just gets you thinking. It gets your mind spinning, and in the course of that, I met someone who was a former colleague of mine, Orrick colleagues, basically at that time that the bulk of the Orrick Menlo Park office were people who were former venture law group attorney guys.
Scott: I remember that. Yeah, yeah, yeah.
Andre: This was a former venture law group colleague of theirs who was younger than I was, but had started his own practice, and I was intrigued by this notion of being able to market and sell legal services to these kinds of clients as a solo practitioner. It’s [crosstalk]
Scott: So, it wasn’t even building a firm wasn’t any part of it.
Andre: Not [crosstalk]
Scott: It was just like, can you do it by yourself, kind of thing, pay the bills.
Andre: Yeah, not in the early… Yeah. In the early days, it was this idea of starting something on my own. I had a lot of philosophies and beliefs around representing startups and venture capital investors. I thought there was an art to it, and so let me just take that art on the road myself. So, it was initially just myself and a part-time paralegal, had been sort of baking the idea for a bit. I knew I was going to leave about 14 months or so before I did, got the wife onboard with the idea, put money aside, started planning out the business, and also really took a lot of steps to hone my network-
Scott: Yeah, that’s smart.
Andre: … Hosting a lot of events, speaking on panels. There was a time in 2006, early 2007, right before I launched, when there were a ton of startup events in the city that the founders actually went to. Mark Zuckerberg went to it. Michael Birch from Bebo was… I mean, people were actually there. Now it’s all service providers like us. It’s a way different environment, but there was… I was really able to establish myself, I think, as the young present lawyer, particularly in the San Francisco startup scene, and so built that reputation and made the jump. Initially, it was a virtual office in Palo Alto. I lived in the city, lived in the marina, but had a Palo Alto address because I was scared to death about having a non-peninsula-based address.
Scott: Well, San Francisco wasn’t quite as big a tech hub back then, probably. Right?
Andre: Yeah.
Scott: It all happened kind of in the 2010s or-
Andre: That’s right.
Scott: Yeah. That’s hilarious.
Andre: So, had the optics right, took a few clients with me, had a few clients waiting in the wings from when I was doing a lot of networking, and-
Scott: Did you have the moment of anxiety, like you walked out of the building at Orrick for the first time, or last time, and then you’re like, “Woo. Okay. I’m on my own. Let’s do this”?
Andre: I think I had more anxiety before doing it, actually, because there’s just… You’ve got to explain yourself. Inevitably, they’ll do-
Scott: Oh, to the Orrick people, or to-
Andre: To Orrick, to everybody, to those who are the know before you do it. You got to explain yourself, and you’re under a little bit of a microscope. People are looking at you funny, like, “Why would you this?”
Scott: Yeah, but then coming back to that sense of purpose you talked about, it feels like most people would understand. Right?
Andre: I think I definitely had a lot of supporters. I would say in the legal industry, there’s still less imagination even in Silicon Valley.
Scott: Yeah, might be a little more risk averse or something like that. Yeah.
Andre: Yeah, but definitely had believers. People could feel my passion, and then as soon as I made the jump, and I would bet that a lot of the founders are saying the same thing in your other podcasts, as soon as you make the jump, that type of anxiety goes away, and then it’s more of a sense of urgency. It’s sort of like, I have to execute that. Day one is like, okay, it’s on you. You’re the hunter-gatherer.
Scott: Yeah. There’s no excuses.
Andre: No, you get down there. Yeah.
Scott: Did you have the… I’m just reflecting, because your story is very similar to Vanessa’s, my wife and our founder, and I remember the company she worked at got bought, and she left, and she started Kruze, and I watched her fill her book of business, and she was like… No project, no company was too small for her. She would do everything and then kind of level up over time. Was that how you were, or how did you be smart about the projects you took on versus maybe overextending yourself?
Andre: You know, when I was in the planning stages, before I actually made the jump, I spent a lot of time thinking about clients, thinking about the kinds of clients that I wanted, because I had noticed in a big law firm context that there wasn’t a filter that I thought was appropriate, that there were clients, particularly from a personality standpoint or from a collaborative mindset standpoint, were not, in my opinion, up to par. So, I had sort of drawn up my own ideas around what a good client was, and I would say definitely in the early days, though, you’re a little bit more nervous. So, there were clients that I took on. There were moments where I was willing to walk the line in terms of some of those client ideals and values, but I would say I would pride myself on having been pretty, or as resolute as that could be on that. I fired my first client within 12 months of starting Silicon [inaudible]
Scott: It’s funny you say that, because I feel like you thought about it ahead of time. We had a moment where probably like… I think it was three years for Vanessa, and then right when I joined, where we had to fire our largest client, because they weren’t being nice, not a productive work relationship, and we were so nervous, and then we did it, and we had freed so much emotional energy that we actually grew so fast for the next three months, because we had this moment where we were like, “Oh, my god, we’ve been spending so much emotional energy on this person, and we haven’t been servicing our best clients as much as we could have.” So, we put that positive energy into them, and then they referred, and it all went crazy. You know?
Andre: Oh, yeah.
Scott: So, we probably should have been a little more introspective early on, maybe, than how you were, but I guess you kind of have to learn.
Andre: It could bite you.
Scott: Yeah, yeah.
Andre: It can really bite you, and that emotional time-suck, the energy associated with servicing those clients who, regardless of what you do, just don’t view you as a valuable part of their team. In and of itself, that’s fine. It’s just not what I want to be associated with, and it’s not energizing, and it doesn’t lead to more referrals.
Scott: That’s a great point.
Andre: It just leads to you trying to service… I mean, regardless of the amount of revenue they generate, it becomes a blockade. It does become an impediment to growing your business.
Scott: Yeah. No, totally, and I never had thought about the, you can’t make those people… Maybe you can’t make them happy, or they just don’t appreciate you, so it doesn’t lead to the same word of mouth that tremendous service for other people would lead to. So, that’s really interesting. Yeah. So, you walked the line, you got people going, you started building a practice, and then did you… When was the moment where you’re like, “I got to get some more lawyers in here. I need some help”? Was it the first month, or year?
Andre: No, it took a little bit of time. I think I brought on a contractor who I used to work with at Orrick, a contract attorney, a great guy. He’s still a buddy of mine. He lives in Finland now, works at Supercell, but I brought him in maybe eight or nine months in. Inevitably, as a solo in particular, you’re just hungry. You know what I mean?
Scott: Yeah. Yeah, yeah, yeah, yeah. Yeah.
Andre: It’s crazy. So, the above and beyond level of work that you do, it’s pretty intense. So, you please a lot of clients, and it leads to more and more business.
Scott: Yeah. Well, also, they’re getting you. They’re not getting kind of someone that you’ve trained or someone who’s very smart, but they feel so connected to you.
Andre: They feel so connected. Yeah.
Scott: Yeah, yeah.
Andre: So, about eight or nine months in, I started to piece together some contractors, still was not necessarily looking toward growing until probably 18 months in, where it was like, That vision had evolved. I mean, if you talked to me on October 10th, nine days, nine, 10 days in to actually starting the firm, I would have told you that, “Hey, you know what? I’m just going to work out of my house. This is what I want to do.” But seeing the business grow, and then seeing just that incremental amount of success in training the contractors, My buddy Dave, and then when I brought on Kristin Sverchek as a contractor, and she’s an incredible talent, but seeing the way that you could leverage talent was like, maybe this is something bigger.
Scott: It’s like the people who you bring on, and they take things way above and beyond, or run with things that you never had to think about, or just extend the brand that you’re trying to create, it’s a really magical feeling. It’s really cool.
Andre: It’s incredible. I caught that bug after working with them. I was like, well, we got to do something [crosstalk]
Scott: Yeah. Looking back, what do you think they saw in you, or what was so… Because you’re hiring two amazing talented contractors, and then you went on to build… We’ll get into how big you guys are on the firm you built today, but what was it like just looking in the mirror for a second, being like… Why did they want to join? What do you think? Don’t be modest either. It’s okay to say, “Hey, I was a good attorney, and I had a lot of energy.”
Andre: I’m very handsome.
Scott: Yeah, you are. You are.
Andre: But I honestly think if there’s one thing that I stand apart from others that are in my space, it’s authenticity, and I think that when you meet me, you know that I mean it. This is what I’m doing. This is what I truly care about, and it flows to not only client service, but when I want to bring someone on to the firm, and the way that I view developing people, and there’s just a realness to that, whereas I’m not sure others have that truly genuine sense of authenticity that comes across, and I think that’s why. There’s definitely people that are smarter than me. There’s people that are more polished than I am. There’s people that are better business people. There’s people who are better and biz dev, but I would say with confidence that I believe I’m the most authentic startup lawyer in Silicon Valley.
Scott: Yeah. It’s funny you say that word because I really believe in authenticity, too, and I think we do… Vanessa, nice personality, but it’s so much more fun to just be yourself, and we’re good at that. You might make mistakes because you’re not more cautious, but people do really pick up on that. As you were saying that, I was thinking about the best venture capitalists and the best founders in Silicon Valley, and they’re all like that, warts and all. Right?
Andre: Yeah.
Scott: The positives obviously outweigh the negatives, but they’re just who they are. They’ve gotten to that place of comfort with themselves, and you kind of meld who you are as a person and your technical skills, and then you become this amazing force. It’s really cool.
Andre: There’s a level of maturation that has to take place with that. You know?
Scott: Yeah. Oh, yeah.
Andre: I’ve learned to improve my communication with people, but a lot of times, too, I’m not afraid to burn bridges. I’m not afraid to just spout off if I have to. I’ve got a call this afternoon where a client’s former employee who has some stock is making all kinds of unreasonable demands about information, and they’re holding an annual stockholder meeting and all this nonsense. My response was, “Yeah, I remember this guy. Total fucking whack job.” I mean, I wasn’t going to sugar coat it. I think people appreciate that, that I’m… There’s a certain, I think, emotional attachment that I have to my clients and my firm. It comes through.
Scott: Well, they appreciate that you’re on their side, too. You’re doing that, and you’re an advocate for them. That’s really cool. Okay. So, I have a bunch of things they ask you, but fast forward, who you guys are today. I mean, you guys have built a really great firm. It’s really impressive.
Andre: It’s been crazy. Now it’s a team of 43-
Scott: Wow.
Andre: … With presence in Denver and Los Angeles as well. It’s a different game now. It’s so much more people-focused now. It’s how do we really empower a team to deliver in accordance with those client service ideals that started this firm, and it’s an incredible challenge. It’s so much fun. It’s the best of the best and the worst of the worst. It’s the emotional highs and lows.
Scott: I’m laughing because I can totally relate. We have the same thing. I think you guys are farther along than we are, maybe as an institution, and some of that stuff we’ll cover, but I really like how you’ve thought about systematizing your processes and making it easy for people to get indoctrinated in the culture.
Andre: You have to, and I think that that can be something that gets overlooked. You’ve seen it as companies scale and your clients scale.
Scott: Even us ourselves, we’ve made mistakes on that.
Andre: Oh, yeah. We love learning from the mistakes. It’s very funny. I always say to my other partners or senior associates or department heads on the staff, when we have a misstep or something goes wrong and someone’s down about it, I’m like, “Listen. Every good thing that ever has happened in Silicon Legal has been a function of a mistake, and we learned and make corrections, and you kind of need that kick in the butt every once in a while.”
Scott: Yeah. You also need… Totally. We’re the same way, and it’s also helpful to explain why things are structured the way they are to your team or the clients.
Andre: Oh, yeah.
Scott: I had one of those today where a client didn’t understand why we needed source material from the bank. I was like, “Well, it’d be really easy to steal… If you were going to steal money, the way you would steal money would be not to give us source material. I’m not saying you’re stealing money. I’m just telling you why we want it.” Right?
Andre: Oh, yeah.
Scott: It was actually really help… I had a couple examples of theft that we’ve seen, that we’ve caught. So, that actually really reframed… But if we hadn’t have seen weird stuff and not understood what was happening and then learn from that mistake, we wouldn’t know how to explain it to people.
Andre: That whole thing about context-
Scott: Yeah, context.
Andre: … Providing that to your client, our team members, and I think just particularly young attorneys, young employees coming up, they crave context. They don’t want to be given a piecemeal work assignment. They want to understand, okay, what’s the big picture here? Why do we care about this? Why are we pushing so hard to do this? We’ve made it a priority to make sure that we’re delivering as much context as humanly possible to people all the time, and because you’ll find they’re more engaged. They want to know, and when they do have that context, they have more of a sense of purpose. They feel that are stakeholders in everything from a project to building the firm.
Scott: Yeah. Well, it accelerates their career. That’s how they get to be in your chair someday, whether it’s at Silicon Legal or another company or whatever. They need that context so they can grow. So, I actually think it’s really smart of the team members to ask for that and to demand it. It’s really cool. You told me some crazy stat, that you’d done like 2,000 financings or something. You had some amazing… Do you mind just sharing-
Andre: Yeah, just in the last five years. Yeah. So, in the last five years-
Scott: Yeah, yeah. Give people a context for how big you guys are.
Andre: Sure. So, just an incredibly active firm, particularly for a boutique slash mid-size firm. Over the last five years, we’ve advised clients, both company side and investor side, in well over 2,000 financings. Our clients are backed by tier one VCs. We were first outside lawyers for Uber, Pinterest, Instagram, early lawyer for Lyft, Expensify, so a ton of activity on the M&A side, in the last five years alone, over 125 M&A transactions-
Scott: Wow. Good for you.
Andre: … Tons of commercial agreements across the Fortune 1000. We’ve really realized the importance of deal flow, particularly startup companies. They want to know, okay, what’s going on in the market? What’s standard? To be able to point to them and say, “Yeah, no one’s doing this in Series A rounds right now. Why are they asking for this,” or you’re negotiating an agreement with Walmart. We’ve done four in the last 18 months.
Scott: How do you do it? Yeah.
Andre: Don’t ask for this term. They’re going to stonewall you. Do not do this. Clients want that context. They want those market data points.
Scott: I think the context is so critical, but also, you kind of lubricate the deal process, because you’re cutting out steps. The venture capitalists on the other side, who maybe you’re representing the startup and the venture capital and venture capital lawyer, they know that you know the market, and so they cut to the chase, or they accept your pushback when you push back on a not great term for your client. It just makes it… That experience and that kind of top-down view of the market is so valuable. It’s really cool.
Andre: Even down to logistics, knowing that, oh, I need to pull some strings or get ahold of somebody at Accel. Well, you’re going to talk to [inaudible] or talk to Donnie Clay, or-
Scott: You probably have their cellphone, and you can probably text them. Yeah.
Andre: Yeah, or back office, even knowing who the back office is. If you’re doing a deal with Propel, and it’s a back office, you’re going to talk to [Yergin 00:00:21:50]. You know?
Scott: Yeah.
Andre: So, knowing all those players then provides a comfort that clients know that, hey, they’re minding the store, and they not only know the market, but they also are not strangers here.
Scott: Yeah. What’s your kind of target? Is it Seed, Series A, Series B, or where are you on the spectrum of your target clients?
Andre: Yeah, definitely. It’s everything from two entrepreneurs in a garage up to Series D, Series E.
Scott: Oh, wow. So, you guys get pretty deep.
Andre: Yeah. We definitely do not touch anything public company. We like to stay with private companies. I would say to think about our sort of representation lifecycle is we are the general counsel until you get a general counsel, and once a client gets a general counsel, then our role shrinks more to financing, corporate governance, M&A. We’re generally not touching the commercial stuff anymore unless they want an outside opinion.
Scott: I don’t know… This is how it is for us. I’m assuming it is for you guys. When that general counsel comes in, I’m sure they’re very grateful the company was working with you because everything’s documented, everything’s done correctly.
Andre: Oh, yeah.
Scott: When people come in and they finance as a legal person, they don’t really know. The company could be a total mess, or it could be in great shape and after working with you guys. Do you get that kind of feedback, or do you get people, the GC, the last company that was working with you is now pushing you or telling other people in The Valley they should be working with you guys because it’s such a good, clean environment?
Andre: Definitely. We get a lot of love for that. We also try to really insert ourselves into the conversation about hiring in-house legal.
Scott: That’s smart.
Andre: For us, it actually makes the most sense. Once a client starts to hit a certain spend, that also is indicative of a lot of activity, and you can get to a point where, hey, you know what? It doesn’t make sense for us to be doing everything for you. We absolutely want to maintain the relationship as counsel of record and doing the financings, being at the board meetings, but we should be intelligent about this because it may be like, hey, you’re doing so many contracts every day that require an incredible turnaround. It’s not helpful for you.
Scott: It just wears you guys out, too. Yeah.
Andre: It wears us down. The relationship can be tarnished.
Scott: Yeah. We have the same exact experience, and the interesting thing for us is we have a hard time getting the CEOs to realize they need to hire that full-time person. It’s always three months too late, no matter what, because they’re so happy, and they’re like, “Oh, this is working. This is working, and you guys are at a great cost point.” I’m like, “No, no, no, no, no. It’s actually getting stressful for us because of so many moving parts.”
Andre: Totally. Totally.
Scott: That’s the relationship. So, talking about the team, one of the things that caught my attention when we were at lunch was you have this incredible playbook for continuity when people come into your firm and they’re going to start taking on clients. They come in cold. They’re a new hire. Can you kind of talk about that process?
Andre: Yeah. It stems from a desire to have just an incredibly well-baked onboarding process. I read somewhere, maybe it was in the First Round Capital Reviews, something talking about when someone first joins your company is when they’re the most excited and engaged they could possibly ever be. So, take advantage of that. So, not only the very strong onboarding on the sort of organizational side, what life is like at Silicon Legal, but on the company side, really trying to promote that, and it helps from a client perspective, too, because I know our clients have very limited tolerance for reinventing the wheel, repetitive teaching-
Scott: Education.
Andre: … And education. Yeah. So, what we do is when a new attorney or paralegal is joining the firm, in the weeks before they’re joining, we get together and look at the existing client teams and say, “Okay, where do we need someone. Where would they fit in best?” We generally staff them on between 10 and 12 client teams before they even started. We add them to our client team email handles. So, they join seeing an inbox that has a lot of emails so they can start to pick up context.
Scott: Context, yeah.
Andre: We put together this sheet that is clients, what they do, venture financing history, who are the main contacts at the company, what’s on tap that we’ve recently done and will be doing in the next month or so. Then we prepare these binders that are going digital now, thank God, but that are background articles on the company-
Scott: Oh, wow.
Andre: … As well as background, LinkedIn profiles and articles for the contacts.
Scott: People, yeah. That’s huge. That’s so smart, because then you know what their work experiences is and where they’re coming from.
Andre: So, when you’re first starting, you can get a sense and dive in. Then the last thing we do is we have then an in-person meeting with the client team-
Scott: Oh, nice.
Andre: … Where we run through a checklist of items, but also talk about quirks. “Oh, they hired this new head of ops. He’s kind of weird. Here’s what you’ve got to look out for,” or, “Oh, you know what? This is the one where they fired already two of the co-founders,” or, “This one board member is a little bit difficult to deal with,” so kind of like the inside scoop of the clients.
Scott: Yep. That’s so smart, and then that way, the knowledge gets transferred throughout the firm, people can pick up faster, they’re more productive faster, they’re probably happier faster because they’re contributing. That anxiety… We have a dedicated onboarding process, too, and I always pick up on people want to do such a good job that they have that anxiety, so if you can help them contribute quickly, it gets rid of that, and they’re just happier.
Andre: It enables them to take on projects quicker, and yeah, because I think that there is that anxiety about it. Am I contributing? It’s sort of, I wouldn’t say counterintuitive, but it’s like, wow, you need to make sure not only are you onboarding them correctly, but you’re giving them an opportunity to make a pretty quick impact-
Scott: To prove themselves, yeah.
Andre: … Because people immediately feel like, I’m useless. What am I doing here? Even if it’s like in the back of our minds we’re like, “Hey, dude, you only been here for a week. It’s totally cool,” but they get nervous.
Scott: I feel that one, too. Also, you know the other… I just thought of this, but there’s a little bit of you want them to be able to prove themselves to their teammates quickly so they can get more work and be more… Because we’ve had times where sometimes people didn’t want to hand off stuff because they were a little bit risky-averse to the new person. We were like, “No, no, no. The new person’s here to help you. Let’s get them going.” So, getting them to contribute quickly really helps drive that.
Andre: That’s a good point. We actually developed something around that with respect to senior associates when we bring on a new senior associate. The analogy is the sort of West Point graduate who is going to lead a 20-year staff sergeant. Right?
Scott: Yeah. Yeah, yeah, yeah.
Andre: The West Point graduate was a higher rank.
Scott: [crosstalk] Yeah.
Andre: They haven’t been there. So, we had developed this process called senior shadow. So, when a senior associate joins, then another senior associate acts as their shadow to… So, if you’re a new senior associate, you don’t want to ask some dumb question that every other mid-level or junior associate already knows about, and so someone you can talk to to make sure, because in those initial days, you have to build that trust with a team, and somebody who’s been with us for four years and is a badass mid-level associate, it’s like, dude, what? So, you want to be… How do we create processes and that information sharing for those more senior folks, but who are newer employees, to be able to establish that gravitas?
Scott: Yeah. That’s right. We have a buddy system, which is like that, and they get paired with someone at their level, and it just makes it so much faster. It’s so much better. The continuity stuff is amazing. A couple hypotheticals. What is it like when a startup gets an inbound M&A offer or interest? How do you coach them through that? What are the things that come to your mind when all of a sudden the big boys or maybe a later stage, very well funded company wants to buy a Series A, Series B company? How do you think about that?
Andre: A couple of different angles, a couple of different things to think about. One is think about where this fits in terms of your overall life cycle of the company. Where are you right now? Are you at a point where, yeah, we need a soft landing here, or are you at a point where, hey, you’ve just raised a round, and there’s a lot of excitement there? So, have in your mind, because I think a lot of times these transactions can have an inertia where sometimes just completing the deal just becomes important as a standalone concept, divorced from is this a good deal or not? Is this right for the companies? Is this right for the stockholders? Is it right for the employees? So, I think taking a deep breath, and of course, it’s flattering, it’s exciting, but stepping back from that and figure out where does this really fit for us, because you’re going to start to get into something that has a mind of its own, an inertia of its own.
Scott: Yeah, distracting. It makes it harder to run the business, emotional up and downs. It’s crazy.
Andre: Yeah. I mean, it’s taking you away from everything. It’s all encompassing. You know?
Scott: Yeah.
Andre: So, that’s one. I think two is, and maybe sort of after you’ve made a decision that we’re probably going somewhere down this path, I think two is definitely to have a grasp on your board, your stakeholders, how this thing will be sort of socialized with folks to know what you’re sort of dealing with.
Scott: Can you say more… I think I know where you’re going with that, but maybe… or maybe some type of different viewpoints from different board members. What are some things you’ve seen?
Andre: I mean, you’re potentially in a situation where you have people that have bought into the company at different valuation, where you have investors who are at different stages in their career, who are like, “I’m the young gun VC. I need to get an exit on my resume,” or someone who’s like, “I don’t care. I’ve done 15 of these, and I don’t care.” So, knowing how those stakeholders are going to behave, knowing how your team’s going to behave, how critical key employees, how the overall team is going to react, and employees, particularly if it’s one where the acquirer really wants to have everyone join them, how would they react to that? So, understanding those stakeholders, because you’re going to have a lot of discussions. You’re going to be managing those people. You’re going to be managing their expectations. They’re going to be factors of the deal, which likely feel unfair to certain members of the team that you’re going to have to get over the hump. Basically, as you’ve seen, basically any deal, regardless of what the charter docs or Delaware code’s telling you about approvals, the acquirer is going to want 90-plus percent sign-off from stockholders. So, you’ve got… Yeah.
Scott: [crosstalk] management, properly incentivized and fully onboard. They don’t want to buy a leaky boat, kind of thing.
Andre: So, you’ve got a lot there to manage. So, that’s the second part. I think the third part is when you’re going down thinking about negotiating. I think a big mistake that a lot of founders attempt to do is sort of try to get into some apples-to-apples comparison about how these deals work. My partner Gaurav Mathur and I helped as editors for Ezra Roizen’s book, The Magic Box Paradigm. He talks about private company M&A, which really is a… It’s its own animal.
Scott: It’s so hard.
Andre: This is not typical investment banking, comparable companies. Every big buyer is looking for something different, and it’s really understanding how to navigate those waters and how to really figure out what they want, what they’re trying to buy. Is this a build-versus-buy scenario, or are they trying to buy the team?
Scott: Or they failed internally, and this is their last option. What’s going on there?
Andre: Understanding how to navigate corp dev, knowing that particularly, the vast majority of our M&A transactions are not $500 million, billion-dollar deals. So, when you’re talking about sub-hundred-million-dollar M&A, it’s important for you, but to the corp dev at Palo Alto Networks… So, how do you-
Scott: It’s not like [crosstalk]
Andre: Yeah. So, I think those are three things that folks really need to keep in mind in the process. So, it can be really fun. It’s fun to guide them.
Scott: It’s cool to be… Because we do a ton of M&A, too. I don’t think we… We’re averaging two a month now, and we just had two close in the last two weeks, but I love… I think this is probably how you are. I love being kind of the guide through the process on the financial side, and we rely on good lawyers. You’ve got to have a good lawyer-
Andre: Oh, man.
Scott: … Going through this process. The legal side is actually harder than the finance side, but having people like you who can walk them through, and especially when things get heated, and kind of talk everybody down this is incredibly valuable.
Andre: I think a big part of that is that, again, there will just be many moments where someone feels wronged. There could be sort of a frenetic pace, the changes in the deal terms. Your company, particularly if it’s a larger deal, your company is operating, and so it’s like, shit, man, if they see this month’s financials, we got to close this thing now.
Scott: If they see we missed a corner, oh, my god. Well, we’ve kind of run over here, so I had five more questions to ask you, but thank you for coming. Maybe give the quick pitch on Silicon Legal, and I think people should know, we’ve discovered how big of a player you were by looking at the data, and so the awesome thing about you guys is you walk the talk. We can see all the clients you’re working with and how active you are, but maybe give everyone just a quick refresher on you, and then I’ll let you go because I know you’ve got to go, and we’re past the time.
Andre: Sure. You know, I think that Silicon Legal bring something just incredibly exciting to the market, and we realize the importance of client service in the technology space, and we think that we provide the very best client service experience in bringing together a unique combination that no one else does, this combination of ultra-responsive, high-touch, hands-on service of a smaller firm that’s small enough to care about you, with the seasoned experience of a large firm that comes from having world-class deal flow and a world-class team, and then topping it off with a bottom line-oriented no nonsense approach that comes from the fact that we’re not just coaching entrepreneurs, we are entrepreneurs, and we’re going through the same things our clients are going through. We’re trying to build and motivate a team, create repeatable processes, deal with technology infrastructure issues, fire people. I terminated someone half an hour before I came to this interview.
Scott: Yeah. Been there, yeah.
Andre: Living that reality, again, not just coaching or providing advice, but actually living it forces us to deliver legal advice in a different way, and I think it really resonates with clients, and that unique combination is something that no one else in Silicon Valley is truly bringing to the table.
Scott: Yeah. Well, I love that. Congrats on everything you built, and you’re the real deal.
Andre: Oh, thank you.
Scott: I look forward to working with you for many, many years.
Andre: Oh, same here. Same here.
Scott: Thank you, Andre. Bye-bye.
Andre: Thank you.
Scott: Thank you. Hope you enjoyed that episode of Founders and Friends Podcast. Quick shout out to Brex, the first startup credit card. Brex is our sponsor, and we really appreciate their support. Brex has no personal guarantee for founders. That’s a really big deal. It integrates really nicely with QuickBooks, great rewards that are startup-centric. It’s a really nice little tool, and we are seeing it all across the Kruze portfolio of clients, so check it out. Again, if you go through the signup flow and type in Kruze, you get a discount. So, hopefully you’ll check out Brex. Thanks again for the support on the podcast, guys. Take care.

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