 By Katrina Dewey Andrea Chavez does not want your job. Which is really all you need to know about Virtual Law Partners and why it may present one of the first credible challenges to what seemed the inevitable world dominance of Big Box global law firms. Chavez is a professional-level violinist, one of five siblings from a poor immigrant family from Albuquerque who graduated from Harvard. After earning her JD and MS in computer science at Stanford, she joined Silicon Valley's Venture Law Group before co-founding Mediabolic, the leading provider of embedded software for next-generation consumer electronic products. After she and her husband sold Mediabolic to Macrovision for $43 million, Chavez started a small, virtual firm, Lion Tech Law, out of her OMG, five-story home overlooking San Francisco. She gave the big firms a chance: Morrison & Foerster steered her to its minority program and Heller Ehrman told her to tone down her ethnic appearance. "That is probably the moment that I decided that conventional law firms were not for me," she said. Even after she successfully built Mediabolic, the nation's biggest firms took another pass. "I realized that I would have to forge my own path," she said. That's a similar experience to RoseAnn Rotandaro, one of Chavez's Virtual Law co-founders. Rotandaro has served in the Peace Corps, taught Eskimos, flown her own plane, built her own cabin in Alaska, taught in China and graduated from Stanford Law School as a single mother of a six-year old. Rotandaro worked at Wilson Sonsini Goodrich & Rosati for six years, was general counsel at BenefitStreet and then started her own firm, Armor Legal Counsel, in 2003. Both Rotandaro and Chavez were succeeding on their terms, but faced difficulties expanding their practices and handling larger matters. What if, they asked, there was a way to join with other outstanding practitioners in different regions and specialties - through quality, technology and branding - to form a global firm without walls or boundaries? Memo to Biglaw: Virtual Law Partners is one of the first shots across the bow of your business model, which may be facing a perfect storm of unhappy, overbilled clients, opportunistic lawyers establishing a variety of models to fill their needs and GenXers who just really aren't that interested in your Holy Grail of partnership. And one more thing before you write this off as another group of youngsters wanting to practice at home in their bunny slippers while petting their dog. Oh right, the economics. How much does your brick & mortar cost you? Virtual Law intends to return up to 85 percent of its attorneys' billings to them, compared with 30 to 40 percent at your traditional AmLaw 200 firm. By eliminating the concrete middleman, Chavez, Rotandaro and their backer, Craig Johnson, plan to radically change the delivery of legal services. The firm opened its virtual doors July 11 with 18 partners, most of them physically located in Northern California. Their practice is limited to transactional matters. All attorneys are partners, who set their own hours and are held accountable for meeting those targets. [See related story, What Makes a Firm Virtual? ] Johnson has put slightly more than $1 million into development of the technology, administration and branding needed to get the firm off the ground. This is his second go-around at shaking up the legal profession. Johnson believes he has a unique perspective on the way legal services are bought and sold – especially in his target market of technology companies. A computer hobbyist even as a young child, he served in the Peace Corps in Ethiopia before joining Burroughs as a computer programmer. He attended Stanford Law School and joined Wilson Sonsini as its 14th lawyer. One of Wilson Sonsini's most successful rainmakers, Johnson envisioned a firm that could make even greater profits by taking a piece in its clients. That vision became Venture Law Group, which incorporated Yahoo!, Cerent, Foundry Networks, Hotmail and WebTV. Although Venture Law did well, it struggled to eliminate voluntary attrition in the face of the teeter-totter of outstanding partners who win opportunities beyond the mien of your average rainmaker by riding the roller coaster of a start-up. When the tech bubble burst, Johnson merged the remains of his firm into Heller Ehrman in 2003. He founded Concept2Company Ventures, a seed venture capital fund based in Palo Alto, and spent much of his time bicycling the world. By April 2007, he had grown restless. A Venture Law alum shared with him the notion of a business that provided software tools similar to those Venture Law had developed, which had atrophied under Heller Ehrman's watch. Johnson had built Portola Systems into a similar $20 million automation support business, but found law firms to be difficult customers. Though that discussion went nowhere, it got his wheels turning about a new type of law firm – one that was truly virtual and fully automated. At roughly the same time, Rotandaro, Chavez and another lawyer who had started virtual firms called him for his advice on how to grow their virtual firms. In May 2007, he met with all three to learn what makes a virtual practice tick. "What I didn't see at that time – the vision that maybe by providing an automated platform you could roll up people who had already left – was quite how scalable this is turning out to be," Johnson said. "The part that has only dawned on me in recent months was the amount of revenue people can keep." Everyone agrees that the vision of a big virtual firm will succeed or fail on the quality of its lawyers. Johnson is an admitted CV snob and Virtual Law Partners is stocked with Harvard this, Yale that, and Stanford all around. "It's our way of saying this is not a ragtag group of people from fourth-grade law firms. This is an elite group of practitioners who think this is a better model." The firm launched with 18 partners, a legal specialist and a staff that includes a CFO in Texas, a director of training who was formerly an Air Force instructor and a chief cultural officer, among others. The allure for staff, administrative or legal, is to be able to autonomously work together in ways that fit their life and practice that also allow them to scale and build more robust law practices. The brand is key, as is the IT infrastructure. The firm has invested in a brightly colored logo of rings, not unlike those that symbolize the Olympics, but which feature an ‘@' to denote their virtual practice as well as the nature of many of its clients; a bicycle showing their mobility as well as personal lives; and a globe, denoting the scope of its ambition. A serious difficulty is how to grow camaraderie when professionals don't walk down the hallway to bemoan the loss last night by a hometown favorite. So far, Virtual Law's answer has been parties, parties, parties, and a bubble-like vision of a string of vacation homes where retreats can be held and families can take some time off. Virtual Law's attorneys often represent start-ups and other technology-driven companies in discrete tasks as well as ongoing representation. For larger projects, the firm's attorneys work via online proprietary collaboration tools, as they do at other large, traditional firms. The firm plans to develop the world's best web-based knowledge management system and tools to connect its lawyers, though admittedly that will take time. Attorneys get 65 percent of their collections, which can increase to 85 percent based on management, rainmaking and other tasks that are rewarded. Virtual Law is being touted as the first large "virtual" law practice that can expand worldwide to thousands of lawyers, operating from home under one shared global umbrella. Smaller virtual practices have been popping up across the nation in the past few years – from Hawaii to Texas, North Carolina to Pennsylvania. The definitions of what is "virtual" also seem to be multiplying, from XDL, a loose alliance of lawyers who also practice in other firms but operate a collaborative network, to Greg Kim's Vantage Counsel, which employs seven lawyers, has a small office for administration and client meetings, but connects mostly over the web. Among those who are skeptical of the immediate impact alternative practices will have on Biglaw is Ralph Savarese of McMorrow Savarese consultants, who built Howrey into a worldwide power during eight years as its chairman and now counsels the leaders of the nation's biggest firms. "The delivery of legal services is an experience to a buyer," he says. So while a virtual firm can work, it must overcome daunting challenges. Most significantly, Savarese pinpoints the need of any new market entrant to convince clients to take a significant risk with respect to the legal services they buy. "It's not a trivial bar of candy they're buying." Still, the Virtual Law principals are banking on cost pressures and quality attorneys to prove compelling to clients. "I can't see any reason why this won't be built to last," says Johnson. "With low overhead, there won't be the same pressures as other firms, and we'll be able to attract experts from all over the world in different areas of law. But we won't need to open a Shanghai office in a high-rise tower. We'll just need a user name, a password, and compliance with local legal regulations." If he's right, the world could soon be their oyster. About the author: Katrina Dewey is the CEO and Publisher of Lawdragon, Inc. Email: katrina@lawdragon.com. Page: 1 of 1 pages for this article
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