One of the larger law firms in the US has announced creation of its own $4 million venture capital firm, but there?s something wrong here.? First of all:? $4 million, are you kidding?? That?s not much of a VC wallet.? Why, that?s more like a medium-sized chunk of a large law firm?s advertising budget. Which would make this just another round about way to advertise the firm.
Second of all:? If you?re hiring a firm this expensive, to provide all the services their press release says they provide for people like you, aren?t you just going to be wasting all your money on legal fees?? This is the kind of firm that can?t handle Aunt Millie?s will or Cousin Lou?s incorporation for anything less than six figures.
Third of all:? Do you really want even a minuscule piece of your business under the thumb of a law firm you went to for legal advice?? Can you count on receiving honest, independent legal advice?? Why can?t you get the benefit of their alleged expertise just by paying their high legal fees, without giving them a piece of the pie?? Giving your lawyer and others a small piece of the pie has been one way to get companies off the ground, but it?s often unnecessary ? the sort of mistake a novice makes under the influence of greedy professionals. Hiring a name law firm is supposed to impress investors, but it?s just as likely to convince them you?re an inexperienced fool.
The complications from having an investor/lawyer are numerous, including potential disputes among investors, concerns about conflicts of interest, whether you will have trouble firing the firm, and so on.? If, for example, you end up in litigation, is your lawyer/investor going to be a witness, an opponent, or your expensive lawyer?? That?s a trick question:? Unless you?ve struck it rich, they?ll be heading for the hills.
There are ethical issues with lawyers who want to do business with their clients, e.g., ABA Model Rule of Professional Conduct 1.8.? Among other things, the lawyer is supposed to suggest, in writing, that you might want to get independent legal advice before agreeing to the deal.? So you?ll either be paying another lawyer to bless this mess or your trusted adviser will be christening your relationship by pulling a fast one on you.
As you read through this synopsis of the firm?s pitch, with items we highlighted, ask yourself what?s in this for the emerging business client, given Foley?s apparent commitment to using this to woo more business from the investment community:
Foley & Lardner LLP announced today the launch of Foley Ventures, a $4 million venture capital fund exclusively to invest in or with Foley clients.The development of Foley Ventures is a direct result of the firm?s extensive experience and insight gained through working with numerous private equity and venture capital funds and emerging companies. Recognizing that clients need more than legal insights to succeed, the firm launched Foley Ventures to have the ability to invest in or alongside clients?. Foley attorneys from all practice groups, from intellectual property to government regulations, and from all U.S. and international offices, are free to submit qualified investment opportunities, regardless of whether or not they invested in the Foley venture fund. This will provide the fund with an extensive and diverse deal flow.
Foley?s Private Equity & Venture Capital Practice is made up of more than 200 attorneys focused on the full range of public and private debt and equity vehicles and their investment activities. By offering an array of legal services, including intellectual property, employee benefits, tax, finance, real estate, and corporate transactions, we are able to assist angel, private equity and venture capital funds with all aspects of their business, from fund formation to exit strategy.
The Foley Venture Fund further enhances the high caliber of service the firm is able to provide clients and is just one of the many service offerings available through Foley?s Private Equity & Venture Capital Practice?.
The ?further enhances the high caliber of service? language is especially disturbing if it?s intended to imply to the naive client that merely paying for legal services will only get them second class services compared with this ?enhanced? service.
Rather than getting tangled up in your lawyer?s aspirations to become rich doing something other than practicing law, maybe you should just hire a reasonably priced, experienced lawyer you can trust who actually practices law for a living.
Original press release:? Foley & Lardner LLP
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