The advent of the Internet not only changed Bradley J. Gersich's client base, it also changed the way he practices law every day. The co-chair of DLA Piper's Northern California Corporate and Securities practice has spent more than two decades representing emerging and sophisticated private companies in Silicon Valley. He also works with venture capital firms and angel investors to evaluate, structure and complete investments in early-stage companies.
In the lead-up to DLA Piper's Global Technology Summit, scheduled for September 27-28, 2016, Gersich shared some thoughts about the evolving nature of legal counsel and the state of the market in Silicon Valley.
Can you describe the relationship between entrepreneurs and legal counsel, and how it has evolved over the years?
When I started 20 years ago, document generation and negotiating required more time and effort, and we often counseled clients on the basics of legal and market requirements. With advanced technology (e.g., document management systems, collaborative storage, automation software), drafting time is reduced. With more information available today, especially through the Internet, our clients have a better understanding of the legal issues they will face in a given transaction, and whether certain positions are typical or unusual for similarly situated companies. They are more sophisticated about technical legal terminology and requirements, as well as market trends, leading to abbreviated conversations with clients and expedited negotiations with third parties.
This allows the lawyers to offer strategic, not just tactical, support for our clients. More and more, we're walking clients through an analysis about various ways to solve a problem rather than strictly responding narrowly to questions about the legal risks of a particular path. Put another way, there's less time actually drafting and more time thinking creatively. You end up being more of a business partner/sounding board. Often, we are helping clients understand and manage the impact of varying personalities and interests of stakeholders on corporate aspirations.
Because we're helping clients with their most difficult problems – helping guide them, providing business judgment and helping to make them more confident in their actions – they end up valuing us more. They've had an intellectual and emotional experience on their end, because they know what we're providing is not a commodity.
Clients also increasingly seek value add beyond pure legal services. Our clients often ask for introductions to resources (especially potential sources of capital) that can help their businesses grow. While our clients have sought to leverage our networks for many years, we have, over time, made increasing investments in technology and human resources in our Venture Pipeline program – a free resource to our clients – to provide clients with a sounding board for their business plans and fundraising aspirations, as well as a systematic and thoughtful approach to matching their fundraising goals with the venture capitalists we know well.
What's been one of the most unique or interesting deals you've worked on in your career?
A few years back, a startup on the rise was an acquisition target of a pretty major player in the social media world. The offer came in on a Friday afternoon, but the acquisition target couldn't reach its regular lawyers. The deal on the table was worth a fairly substantial amount of money, and the clock was ticking. The deadline was Monday morning.
The folks at the acquisition target were worried, and the acquiring company was getting frustrated. I was returning from a leisurely visit to an open air market on a Sunday morning when I got the call from the target that they desperately needed help. I put down my produce and headed straight to the office – after telling my wife that I likely wouldn't be home for a while. Together with a talented and dedicated, but lean, team, I used every one of the next 24 hours to help get the deal signed just before the deadline, when the acquiror and the target walked into the employee meeting to announce the deal. Exhausting, to be sure, but the client was thrilled with our services and included my wife and kids in the celebratory closing dinner.
What are the most challenging aspects of a company's life cycle? How have the challenges companies face changed over the years?
For early-stage companies, the most difficult thing is usually just getting off the ground, though the level of difficulty fluctuates depending on where we are in the economic cycle. It's about finding the right resources, human and financial, they need.
When startups have a product and a few customers (after seed or Series A funding), they are at another difficult stage. They want to raise money at a higher valuation, but haven't really proven whether they are more than a one- or two-hit wonder. The fundraising process at this stage can be particularly challenging and if things drag on, retaining the best contributors can prove a formidable task.
While it may be hard to predict or project, what is your take on the state of the venture capital and start-up market right now?
I think we're in a good place – not a great place, but certainly not a place of irrational fear. There's capital to be invested, and while standards are a little tighter than in the last couple of years, deals are still getting done, most of them without dramatic valuation drops. I tend to believe it'll stay that way for a while and that good companies are still going to get the funding they need to move forward. Corporate venture capital continues to grow in influence, and while non-traditional venture investors may not drive high unicorn valuations as often as they did, I expect they will continue to seek opportunities to invest in quality privately held companies.