During the late 1990s dot-com boom, Silicon Valley lawyers were so keen to latch on to up-and-coming technology companies that they often waived their usual legal fees in exchange for small ownership stakes in the start-ups. When many of those companies went bust, lawyers most likely wished they had asked for money instead.
Amid Silicon Valley's latest tech boom, law firms once again are taking equity stakes in start-ups--but this time they generally aren't waiving their fees and instead are often deferring them or charging special rates. From big law firms such as Wilson Sonsini Goodrich & Rosati to one-man shop Bottom Line Law Group, firms have become more creative and less exposed to risk when it comes to snagging new clients.
Bottom Line's founder, Antone Johnson, says law firms did straight equity-in- lieu-of-fees arrangements during the 1990s "until the bubble burst, and everything vaporized and a lot of people held worthless equity." After he founded San Francisco-based Bottom Line in 2010, Mr. Johnson put in place a flexible billing model.