Andre Gharakhanian and Gaurav Mathur of Silicon Legal Strategy

Welcome to the Puck, Venture Capital and Beyond, a show that explores the evolving landscape of the venture capital world. We'll have candid conversations with today's VCs and entrepreneurs who are shaping those changes. I'm Jim Behr, managing partner at Behr, Negron, and Troff and president of CMUG Advisors. This podcast brings change makers to the table to discover the inner workings behind the decision making strategies and ultimately to how they got to where they are today. The COVID situation is impacting all of us who have to be proactive about reaching out to people and understanding what they're dealing with and trying to come up with solutions for what they're dealing with.

And we think that we're very well positioned to do that. Today, I had the pleasure of talking with Andrei Garkanian and Gaurav Mathur, partners of Silicon Legal Strategy, a leading law firm focused on representing entrepreneurs and investors in the ever evolving technology and startup space. We're gonna discuss the state of investment and maintaining a strong team in the era of COVID, as well as what they anticipate entrepreneurs may face in the coming months. This is our first COVID podcast. Oh, wow.

So this format is gonna be a little different today. I'd love to hear a little bit about your backgrounds and then also how you guys came together to start the firm. Sure. So I started practicing law about twenty years ago back at Mayer Brown in Chicago. You have a typical McPharm, thousand lawyers in the building, doing Fortune 100 m and a, capital markets, corporate governance.

I was a cog in a machine. Moved over to doing a little bit more private equity and venture capital and came to the Bay Area in 2004. I was really just kind of I it it wasn't necessarily career oriented. I met a woman at a wedding. I lied to her and told her that, I was moving up to San Francisco.

It was a wedding in LA, and she is my wife and the the mother of my son. And, so came out, scrambled. I remember setting up a week's worth of of interviews at every Silicon Valley firm and, joined Oryx Emerging Companies Group in Silicon Valley. And immediately, it was a a different world, you know, working for clients like Facebook, Videoegg, Meebo, RockYou, Pandora, you know, NewWeb, Highflyers in their early days. You definitely, you know, catch the bug being around this.

And it's, like, do you wanna join a startup? Do you wanna start something yourself? Do you wanna be in house counsel at a start up? It's really hard not to to really sort of feel the emotions that these founders are feeling and then wanna live vicariously through them. And so I I had met someone who was a former colleague of my ORIC colleagues because, basically, the bulk of that office at that time came from Venture Law Group, which if you know your Valley history was sort of this crazy upstart firm that ended up doing the third highest number of IPOs in the country.

It's kinda crazy. They're all kinda cowboys and it was a different style of lawyering, somewhat more practical and really refreshing. And I met a guy who was one of their former colleagues younger than I was and started his own firm. And I was intrigued by that notion of being able to start something in this space for these kinds of clients. Like, you know, you can't be at Morrison Forster, walk across the street to Wells Fargo, and be like, hey.

Once you've done Morrison Forster, Come with me, you know, my solo practice. It it's not gonna work. So kinda started crafting and cultivating this initial kind of a solo practice that lasted for a little bit. Got the wife on board, put money aside, started to kinda network myself. And so the solo practice kicked off, and then it became a matter of, you know, how how do we grow this thing?

And I met Gaurav through another attorney at Gunderson. Right. Gaurav was, I think, at Sega at the time. And I distinctly remember sitting in my apartment in San Francisco, I mean, just working my ass off to to convince this dude to come and join Silicon Legal and just, you know, being like he's like, oh, is this gonna work? Like, seriously, seriously, is is this thing gonna be here in six months?

And we hit it off. We clicked. And now we're we're approaching Gaurav and I working together for ten years. I think it's gonna be September. Ten years.

So it's kinda crazy. Yeah. Yeah. No. That's always great to hear that story.

So my legal career started about fifteen years back, and I actually started my career at Thunder Lick and West, which is a big Silicon Valley tech law firm. And interestingly enough, my career legal career actually started out as a litigator. I was a patent litigator representing big Fortune 500 technology companies getting sued by patent trolls. And not soon enough realized that litigation was not the path for me, was not the world's life for me. And, again, kind of like Andre, being in Silicon Valley, you you can't help but get caught up in these entrepreneurial Silicon Valley startup scene.

Fenwick was nice enough to let me switch over from litigation to doing corporate work. At some point, I started representing technology startup companies. So started my career in the startup space. And then like most corporate transactional lawyers who work at big law firms, I thought that my end goal was to end up at an in house position at a company, hopefully someday be a general counsel for a company. And with that in mind, I joined Sega, the video game company as in house corporate counsel.

Going from the startup world, where things move very fast, decisions get made in a matter of minutes, to going to work for a big, huge Japanese corporation with lots of bureaucracy and slow moving culture was jarring for me. And I quickly realized that I was missing the startup world and maybe the in house gig at a big company was not for me. And I happened to meet Andre through, again, as someone we both knew at Gunderson. Just absolutely loved his approach, the way he was thinking about things. It just felt very exciting.

It was something that I've never even imagined was a opportunity for a corporate lawyer like me. And, yeah, we just hit it off and eventually, I left Sega and joined Silicon Legal and the rest is history. Well, you know, guys, let me jump in for a second because one of the things we tried to do with the POC is see where the world is going from the realm of technology and almost being like a leading indicator of where the world is going. And we weren't focused on on law firms because from a business perspective, typically, you don't think of lawyers as entrepreneurial. You think them as lawyers.

But when I really hear your story and I think of you guys, I really do think of you guys as a venture capital firm. What you did was you're reinventing, and and the audience doesn't know all this. But the world is changing. And you've got the kind of boutique law firms that have existed for a long time that build with traditional hours, and there's a certain path to partnership, and you build certain numbers of hours. And it's the IBM approach to law, so to speak.

But tell me a little bit about what your philosophy was and what your product was in terms of selling your goods, but also attracting your employees. Because just like Amazon has to attract employees and just like Facebook has to attract employees, you're competing against the Coolies and the Fenwicks and the Gibson Dunn's of the world. So you have two challenges. Right? You have to sell your product, and you have an approach to do that, and you have to attract talent.

So from the the perspective of where law may be going, I'd love to know what your thoughts were. And, also, do you see it as a trend in terms of do you think other people will launch firms more like yours as time goes on? It's sort of a multilayered kind of a question Right. Too because it it happened in stages. The initial jump that we were trying to do at the beginning was, you know, really a focus around a a client service philosophy.

And there's a tired joke. Everyone hates it in the firm. I say it all the time. I probably repeated it once a month like I have to. I think if I don't repeat it, people will freak out.

Is that, you know, we're not helping clients finance a soccer stadium in Brazil. You know, the complexity of the work that we do, it's not super intense. You know, it's small business law. It's small deals. The vast majority of what we do would never be on the front page of The Wall Street Journal.

On the other side, what's incredibly complex is managing these clients. They don't have in house counsel. They're doing this for the first or second time. Got a lot of, like, 25 year old first time founders. And everything we do is bet the company.

So it's a fundraising that's gonna give them eighteen months worth of runway. It's a new hire who's gonna accelerate product development. It's a distribution deal that opens up a whole new market opportunity. There's all this urgency and anxiety, I think, that we find that just as important, if not more important than the technical guidance, technical legal guidance, is good old fashioned customer service, being ultra responsive, managing expectations, delivering bad news, educating clients, that those soft skills are a lot of times just even more important than the content of a document. It's how you delivered that document, explain the implications of that document, gotten the client comfortable with the risk around that document.

And I think that what we found is that even that thinking is an advantage, and then trying to scale that thinking into the fabric of an organization, that was the next challenge. It's like, Gaurav and I could do this. But how do we make sure that the associates and paralegals think about the world in the same way? That they approach clients in the same way that they deliver the guidance and do the damage control and explain the document markup in that same way. And that came to where we started to craft a lot just around orientation and training.

It's really easy to correct someone's provisions in an agreement. It's awkward sometimes to correct the way someone sends an email. You know? Oh, I don't like the way that email is structured. Well, they're like, I'm a grown adult.

Why are you telling me how to write an email? But from our perspective, there actually is a right way to do it. There's a right way to explain the concept to a client. There's a right way to drive them through closing. And we work to really codify that, orient on it, train on it, evaluate on it, constantly check-in on it.

I think that was a way for us to sort of have this product that was consistent. The recruiting then was the next step, and I I think we've achieved a ton over the last, like, five years, five, six, seven years on that. You go back seven years ago, it was hard. Like, you're asking someone to make a big jump. And so you have to think about what it is that we're gonna be able to offer people.

We're a smaller firm. We can't pay as much as a large firm, and you're already making a jump to something that's seemingly not as stable. So how do you sort of craft that story about the opportunity, about the learning, about the ability to impact an organization? And so over time, that pitch has evolved. It's become crisper.

We've learned how to respond to objections. Right. Now it's this opportunity to come to a firm, work much more reasonable hours, still do a ton of deal flow at the highest level. Like, no boutiques that we come across are doing this at the same level that we are. They're not doing as many deals.

They're not across from Fedwick and Cooley on every transaction. And so it's like this opportunity to still be performing at the highest level and then also in a place that's much more humane. You know, you're helping us build something. We're still trying to build and improve this place. It's unique.

A lot of people just don't believe it. Alright? Like, they're kind of incredulous. And so it's been this self reinforcing effect as we've been able to infiltrate every major competitor and attract talent. We talk about it.

We blast it. You see the press releases every time we hire someone, trying to create as much social proof as possible that this is okay place to be. So when you're servicing the technology clients and these entrepreneurs that are driven and, as you said, have done it their first or second time and they need this help, I assume they want things quickly, and yet you're also trying to create this work life balance. How do you keep your clients happy, but at the same time, provide a balance for your team? Isn't that the million dollar question?

Yeah. Look. I mean, I think at a structural level, right, the way we think about it is it really is driven by how many hours we're expecting our attorneys and our paralegals to bill. And if you follow the traditional law firm model where your expectation is that your associates are gonna bill up two thousand hours a year, there are only so many hours in a day. The associate just will have to prioritize how they respond to certain clients.

And clients who are later stage companies, a higher profile, will always get prioritized higher. And clients who are earlier stage companies not as high profile, their work will take longer to get done. That is just the reality. Right? It's not because the lawyers and their illegals and big law firms are bad lawyers or bad people.

That's just the structural reality of their business model. Our model is intentionally very different in that we limit how many hours our attorneys and our paralegals don't. Significantly lower than what the big law firm model is. And that ultimately is what allows our team members to respond much more quickly to our clients' needs. It's that combined with also limiting how many clients we're taking on.

So we're very selective and careful about the new clients we bring on board, kind of sticking to our sandbox in terms of the types of companies we want to work with and the profile of the companies. Those two things are what really does allow us to differentiate ourselves from the bigger law firms. From our perspective, the trend is clear. We think we are strong believers in the reality that the big law firm model, it's not changing anytime soon. And as long as it stays the way that it is, it just can't offer what we offer to early stage companies.

So I don't wanna spend a lot of time on COVID nineteen, but we are in a different world right now. And you talked about being entrepreneurial and having to adapt to things. As a firm, do you wanna tell us a little bit about how this has affected your business, and is it as good as that? Or you and do you see yourselves going back to an office and wanting to go back to an office? But how has COVID affected what you guys are doing?

It's definitely affected things. You know, luckily, I think there's a nice protective bubble in the technology industry and in the venture capital space that, you know, we've been fortunate for work to still continue at a very healthy pace. But really trying to manage that both from a team coordination level and at a team cultural level is the new challenge. There's a huge difference between having the opportunity to work from home and being forced to work from home. You start to see some areas that you have to adjust around.

There is that distribution of the Kool Aid all throughout the office when we're all there and seeing one another and feeding off one another that you have to recreate. You have to be intentional about it. So taking the time to have more check ins, have more team meetings, reach out to people because in this environment, the time just flies. You know, one of our senior associates who I was working with extremely closely in the April, May time frame, we closed the financing. And then we were just emailing back and forth on Monday and realized we haven't spoken, shooting the shit phone call since May.

It's been three months. What the hell's going on? Right. Right. Right.

And so you have to be so intentional, so deliberate, and also sort of get people to come to the realization that, you know what, it's home and office are all blurred now. Right? And so we wanna be as a firm as sort of proactive in terms of helping people to make it work now. You know, we're like, hey. Ask for resources.

Like, your home office now is more important. How do we help you in your home office thrive? Get buy a bigger house. Can't put your kids away and get them out of your hair for eight hours, but let's make sure that you have all the equipment in there. If you're sitting in a crappy office chair, it's not just a nice thing.

It's our responsibility. Right. How do we sort of make sure that everyone can meld? And that's the new challenge that we're facing, and it's totally brand new. But we're gonna be here for a while.

So much uncertainty. When you combine that with so many working families, until that gets sorted, particularly, I think, until a school situation is properly sorted, we're gonna be working from home for a while. The way we sort of structured it is that we sort of set a target date of September 8, and we call it office readiness date. No one's being made to go back to the office. We have people that would like to go into the office.

Right. And it's our goal to have the offices ready, safety protocols, passive travel, signage, protective equipment but if you'd like to go back, but it would just be inappropriate to make anyone go back. To add to that last point, I think the one thing we've come into the realization of is this is the COVID situation is impacting all of us in the same ways in many ways, but also it's impacting us differently depending on what our personal situation is. So, you know, we were noticing how it's impacting our employees who have kids, school age kids at home, right? What they need to get through this is different than what someone who doesn't have kids, lives alone in San Francisco is dealing with and how this isn't it's impacting them.

Part of the challenge has just been we realizing that there's no one fix or one solution or one thing that's gonna make this better for everybody. We have to customize and personalize our approach and how we're helping folks deal with this. And to Andre's earlier point, it really does come down to it. You can't be passive about it. You have to be proactive about reaching out to people, understanding what they're dealing with, and trying to come up with solutions for what they're dealing with.

And we think that we're very well positioned to do that in that, you know, up until this time, have really promoted as best we can a culture of transparency, feedback, and kind of responsive feedback loops. When Gaurav and I were talking about sort of expanding back in, like, 2014, we were first thinking that, oh, that that we just need systems. This is all infrastructure and processes, and that's all we need. It became clear that those things just break all the time. No matter how well you design the process, it it'll fail.

You know? There's people involved. We all make mistakes. Processes need to evolve. We can't just set it and forget it.

And I think a key thing that's just been a driver really over the last six years has been understanding that the most important thing we can do to scale is nurture, support, get feedback from, and take care of our team. We came to a realization that I think you'll get shot at Cooley and elsewhere. Our team is more important than our clients. Our assets go up and down the elevator they used to. Now they log in in and out of Zoom every day.

And if we can support the team, we can make them feel like they're being challenged, like they're being listened to, like they're being protected, then they'll rise to the occasion. They'll get involved in continuous process improvement. They'll have feedback. It's been pretty crazy in a good way. The amount of feedback that our team gives us, and we just had an all hands last week.

We sit and go through our team's feedback so that they don't think it falls into a black hole. We tell them, okay. We did this because x, y, and z. This is in process. Or no.

We didn't do this because we don't think that it's an actual plan. We do x, y, and z or this. And so having that sort of culture of feedback, we think, as Gaurav was saying, you kinda have to let us in now. And we think our team is of a mindset where they're more comfortable letting us in because work life is home life now. It's the same thing.

You can't separate it like you used to. One of the things that I'm curious about is contract tracing, testing protocols, and lead vaccines for another day. But you run a firm that has offices in Southern California and Northern California, but you are representing and living with some of the brightest technology people in the world. What's going on in Silicon Valley that we aren't getting this thing figured out? Right.

My sense of it is I don't think it's about the smarts. I don't think it's the brainpower that's lacking and that's the problem. I think it's a more fundamental people issue. I think there's something very real to the notion that the social fabric of our country is not what it was or what we hoped it was. And at some level, it comes down to people thinking of it as we're all in the same boat.

Let's pitch in and try to fix this problem. To me, it's more about people and their interaction and with each other as opposed to, can we come up with a technological solution to this problem? I feel like generally the science is getting clearer or fairly clear. We know the path we need to follow. To me, it's more of a societal people issue.

Yeah. I think that makes a lot of sense. I also think that there's this and one of our partners was talking to me about this. She had mentioned that sometimes attacking this head on too involves a sense of realization about the long term reality of what this is that you have to just basically acknowledge that it's gonna be a long term thing. To me, I think that that fear, that tendency just kind of just want this to pass.

Maybe impacts people's ability to just jump right into it. Not related or semi related, it always felt like we got a lot of feedback from our team, but we've had to push them to give us more feedback about how to make their home office more usable, more, worker friendly. I think a lot of that is because when you do that, you're saying, yeah. I'm gonna be here for a while. Might be here for twelve months.

And I think that same sort of mentality is probably driving it, but it it's frustrating. I did a two week RV trip where we went up to Yellowstone. And one of the places that we stopped in was Jackson Hole, Wyoming. I was just amazed by the way, which I was telling the partners, Jackson Hole just kinda has its shit together. There was just a way that you went in the stores, and it was just all seamless.

Some restaurants were open. Everything was spaced out, and everyone was following a protocol. It just seems like from innovation to protocols to testing to contract tracing, it's almost like you can't step out, particularly on, like, a national level or even a statewide level. Just step out, and here's what we're gonna do. It just it sometimes feels like there's not that leadership there.

There is not a higher voice saying, let's just do it this way. Why not have contact tracing? Why not? I know there's privacy concerns with some things, but just basic contact gathering information that would be helpful. Are you guys seeing any of the companies that you represent tackling any of the COVID issues?

As a response to the new work, right, we're not seeing as many medical health tech companies. We definitely see SaaS products and virtual meeting products and certain technology that are complimentary or that are now more in vogue? There are a couple of life science companies that we have that have done some work on this. So as an example, one of our clients is a med device company that has a needle less blood drawing device, a lot of vascular. Part of how they used to function is people would go to hospitals and show the nurses how to use this device to draw blood from patients.

Well, not surprisingly, this has been a tough few months for a company that's trying to sell a product that involves sending people inside hospitals. What they have been working on is ways to use robots to deliver their services and products to hospitals. We have other companies that, in the telemedicine space, One of our clients has seen, you know, probably, like, a 400% increase in their usage. And I'm sure we're gonna see a lot of other companies in that telemedicine space being formed and being funded over the next several months. I don't think there's any question about that.

So we're seeing some still more on the margins, I think it's fair to say, but it's happening. It's happening slowly. In the trends of technology, we know that there's been certain industries that have taken off in different things like virtual reality and so forth. We had the whole thing with the scooter phenomenon for a while. We know you represented companies in that space.

But are you seeing any changes in long term strategy? So for instance, I mean, a lot of people are talking about real estate going up in the countryside because, candidly, once people have figured out they can make it work this way, why stay in San Francisco? Why not go live in Marin County? Or, oh, and by the way, you're paying x percent in rent, and we can increase our return on investment by having half the office space. Are any of your clients talking about downsizing, or do you see systemic changes coming out of COVID?

Even if there's a vaccine early next year and we have herd immunity or whatever, do you think from your firm's perspective and also your client's perspective that things are gonna change? Definitely, it's sort of the recruiting net that our clients are using is now absolutely nationwide, if not beyond. Interesting. That's opened up, I think, some competitive advantages for our clients and that they can hire people out of Nebraska and pay a lot more than an Omaha technology company might. It's funny.

I'm sure in all of our households, there's just been a conversation of, oh, you you know, it's expensive here. Right? You know, we thought about being somewhere else. My wife was on a two week kick of we need to move to Jackson Hole. It's kinda top of mind for everyone.

They're realizing that, at least from recruiting and living, it's expanding. Based on how you came to California, are you sure you're not in Jacksonville right now? Totally fair. I can neither confirm nor deny. Exactly.

I really do feel like I'm in a Bitcoin virtual world now because, normally, I do this in a studio, but you really can become a virtual firm in a sense. And I know people talked about that. There was these law firms that wanna be virtual firms, and there's a few of them out there. Do you think that's gonna stay that way for a while for other companies or at least partly? Yeah.

I think it will stay that way for a while. There'll be a employee supply side. There'll be a lot more pressure around it given how challenging it's been to really push hard to maintain culture. I think you're gonna start to see, like, Harvard Business School case studies on that stuff. That's something that cannot be overlooked.

The three of us know one another very well, but orienting people, training them, really bringing them in the in the cultural fabric of our own organization, that's gonna take some real work. It's sort of like a, oh, we're now we're getting used to this remote work. The cultural stuff, there'll be case studies on it. It takes real work. And I think the first test case really is all the new hires that have come on board for companies over the last three months.

I think there are gonna be a ton of learnings that come out of that subset of employees at companies. And in fact, I actually just talked to a prospective company that's about to form that is specifically targeting the recruiting and onboarding aspect of companies when they bring on more folks remotely. And I think how this plays out will dictate to a large degree on your earlier point about whether this is a seismic shift that this is just the new reality we live on going forward. Right. Or whether this is something where there's an evolution, but not a complete change in dynamic.

My big picture view on this stuff is I think a lot of these trends were already happening. Zoom existed before COVID. And so I think in many ways, what COVID is doing is accelerating the evolutions that were already going to happen anyway. Whether it's how we live, how we work, I think a lot of things we were headed in these directions anyway. But to me, the end result is not a completely different world.

It's just a world that has changed in some ways, but is, I think, the same in many different ways. As you guys were talking, I was just thinking hiring and firing virtually. What happens if you have a problem and they call you up as a lawyer to counsel you? But, I mean, have you had clients call you and have to fire people over Zoom? Oh, yeah.

We've had reps. We have clients do reps. Like, ten, twenty, 30 people have been laid off on Zoom. Because I know there's been virtual funerals and virtual weddings and things. But when you talk about HR issues, for instance, you know, CMVG will lay people up, and I'll always say, you know, you wanna do it in the humane way possible.

You wanna do it in person. I mean, now you're having to do it over Zoom. It's a little crazy. Yeah. In terms of interviewing people, like, you have a firm lunch or you have a firm dinner, have you guys seen any companies doing recruitment by having firm virtual dinners or lunches with people?

Oh, yeah. Oh, yeah. I have. And in fact, one of our company clients actually hired a new CEO during COVID, during shelter in place. The founders were supportive of bringing on board a new CEO for the company.

This is like a series b company, fairly late stage company. And they did the entire not just interviewing, even just working with the recruiter to line up the candidates, do all the interviews with these CEOs, and then hired the CEO, and then onboarded the CEO, introduced him to the entire 200 plus people on their team. All of that happened remote. And in fact, like, to your point, I'm about to get a download from them later this week as to how that process has played out. But app companies are doing it, and it's happening.

And Yeah. Yeah. We will have a lot of learnings coming out of it. It is interesting because life does go on, and people are adapting. So in terms of the kind of clients that you're seeing, whether or not in Silicon Valley or in Southern California, forget COVID, just in general, new trends or new industries coming up.

What are you guys excited by and and involved with right now? I think anything that touches on sort of artificial intelligence machine learning and how that ties to data and it can be empowered. So we've got a client that's in stealth right now, but they just raised a nice healthy c round from Gradient. They have a technology that can record a sales call over Zoom or any other video chat service and looks at the prospects' facial expressions, body language movements to help sort of assess success at different moments in time. Have another one that curates all of the virtual and online learning presentations the company has, like all their training videos, etcetera, then has analytics on that and makes them searchable.

So it's like you can see, okay, well, this particular type of topic or presentation works. And in the presentation, you had a lot of eyeballs here. People then logged off. They can search for content and find did we talk about this particular issue one time, and now it's fully searchable? So I think using AI and machine learning to be able to leverage the interactions that we have, I think we're gonna see more and more of that.

I think we'll see more comfort with it. Before, that was like a Bridgewater Ray Dalio, every meeting's recorded kind of a thing. I think we're gonna be very comfortable with that in short order just because of the insights it can heal. What surprised me is that boring old SaaS companies are still very popular and getting funded because I think there are so many segments of our economy and our life that still have not incorporated technology, where people still live off of Excel spreadsheets. As an example, couple of our companies based here in LA, one has a SaaS platform directed towards audit firms, audit services.

But they're doing extremely well because every company, every late stage, and every public company needs audit services that are still being done provided the way that they were twenty, thirty years back. That segment of the industry is ripe for innovation, and no one had done it until a client did. Another example is another one of our LA based clients has a SaaS platform directed towards general contractors and helping them manage their products, manage their projects, construction projects, helping them manage their subcontractors for residential real estate. Kind of very boring legacy industries, but that have just not been touched with technology the way that a lot of other aspects of our lives have been. So we're still seeing a lot of those SaaS companies doing well and getting funded.

When you're looking at the range and the size of funding deals that are going on right now in terms of liquidity and deals getting funded. What what are you guys seeing out there? Are you seeing more deals getting funded? Are you seeing VCs having an easier time raising money, harder time raising money? What's going on in the whole financing world right now?

It's pretty active. In a lot of ways, it really hasn't lost a beat. There's definitely a speed in terms of getting to term sheets now. You know, before you had to coordinate initial meeting over coffee, and it'd be a second meeting, and then they come in and pitch the whole partnership and with the virtual existence. That's been expedited.

VCs are still coming off the heels of having raised so much money over the last two, three years, but that capital has to be deployed. And so I think we're definitely seeing valuations that are solid but not crazy. But the activity level, I mean, it hasn't stopped. I don't think that VCs have it all decided to put the brakes on. I think a lot of them are doubling down now and focusing.

Maybe looking for some deals some deals that they could get into now at a better valuation than they would have last November. On the flip side, I would say that exits m and a is definitely down, not seeing as much as we were before. Surprisingly, I mean, maybe we're waiting for it. And Gaurav and I talk about this all the time, but there's gotta be this appetite for distressed deals for companies that raise a round or two and can't raise again, maybe in industries that are over more COVID hit, but that have really solid technology. And we're surprised that particularly given where the public markets are and so good cash on balance sheet and all that, that we're not seeing a lot of opportunistic distressed m and a.

Because everyone's talking about it. You look at your LinkedIn feed, you're at least seeing, like, webinars about it, but the activity level doesn't seem to be as strong as you might suspect on that side. And I think part of that is that when this started, I was getting calls from a lot of private equity firms and other firms looking for distressed assets, and they were all gearing up. And they expected this huge waterfall of distressed deals. But I think because of the level of, you know, rent forbearances and loan extensions and PPP money, I think there are a lot of people that are, like, saying, look.

We wanna see how this plays out. We don't wanna do things under stress. We don't have to sell immediately, and so they're taking their time. They don't wanna lay off a lot of people. And so I think some of it's being delayed on the distress side.

I suspect we'll see that. And speaking of which, by the way, for people listening to this that are perhaps, you know, a start up company, are there common mistakes that you see that you would tell people that, you know, how to avoid landmines that you would advise people? Yeah. I'll mention a couple of things. I think the worst thing that a founder can do in environments like this is not plan for a bad outcome.

Of course, founders by nature are very optimistic people. They believe things are going to work out. If they weren't that way, they wouldn't be founders of startups, and that's the right mindset for them to have. But I think there does need to be a bit of a calibration in how they think about things in terms of having a plan b, planning for a sideways outcome. That's always a challenging conversation that we as company council have to have all too often.

You see the difference when the founder has a trusted relationship with their other stakeholders, right? Their VC investors, other folks on their board. Founders who have a transparent and trusted relationship with those folks who usually are the ones who will do the pushing of founders to help them think about and plan for a sideways scenario versus founders who feel like they're in this all by themselves and everyone else is out judging them and are reluctant to have these conversations about difficult situations that they may have to deal with. And, Jim, you know this better than we do. When you don't plan for the bad outcome in environments like this, the outcome gets worse than it should have been or could have been.

I think in many ways, actually, to your point, a lot of the investors have been willing to fund companies via bridge financings. I think a lot more than, for example, what we saw in o seven, o eight, o nine. But I feel like investors have been much more proactive in bridging companies so far. And then you add in things like the PPP loans and other sources of funding that companies have had, Jim, to your point, that has delayed the day of reckoning for many companies. I hope I think one good outcome of that has been at least it started some of these discussions internally and has planted the seed in the founder's mind that they really do need to be thinking about what happens in two, three, six months from now if things don't go as planned.

Because at some point, even their own investors will stop know, funding. So, hopefully, that's a trend that leads to a better outcome than what we've seen in previous downturns. And I think you said something interesting, which I agree with based on my own observations, which is the relationships between the stakeholders and the founders. Because as you said, a founder has to be an optimist, ideally a realist as well, but they're throwing their backpack over the wall, and they're gonna have to make this work. I wonder, do you find that it's more in the board's bailiwick and the financing sources to go to the founder and say, look.

We know you're going at 80 miles an hour, but we need you to consider x and y. And when you get brought into these companies, for instance, you know, you're representing the companies, a lot of times you're taking direction directly with the founders. But do you also find a situation where you have to counsel the boards? And how does that work? Particularly during the PPP loan application time, companies evaluate whether or not they could make the certification, that they actually needed the loans.

It was a constant conversation. But even in a pre COVID world, our boards interact with us quite frequently. But to Gaurav's point, it's almost having that open line of dialogue is especially critical now because some very quick decisions sometime have to be made. Decisions that involve board and investor support. And so what I think sometimes is some of the founders that are a bit too optimistic, they don't have that constant communication going.

And then all of a sudden, it's a hair on fire emergency where they need support. And when you don't have that, it's difficult to get the support that you need because now you're asking for help from your board or investors. Right. They need to get up to speed. You're presenting to them in a way that is alarming, and so they're worried about what's going on.

They're digging their heels in a little bit more. And so having that communication that's even stronger now in a time that which kinda feels like a little bit more walking on a tight rope, it's mission critical. Everyone needs to work together in order to sustain the company. It presses on the relationship when you keep a board in the dark for a long time, and now all of a sudden they need to jump in and help you. It's harder for them to do so.

I I saw it with different companies and the way that their PPP loan applications were handled, those that were sort of in contact more with the bank, the applications were processed faster. It's just having that ongoing relationship empowers those that help you to be able to lean in more, to be able to act faster, to not waste cycles on time getting up to speed. Yeah. There's nothing worse from a investor's perspective than being surprised by bad news. There's one advice I'd give founders is lay the groundwork earlier than later because bad news delivered at the board meeting is a bad outcome for you.

Oh, yeah. Yeah. So if you have bad news, call up the board member separately and tip them off ahead of time and get ahead of it. I was listening to three Stanford professors on a webinar the other day, and they were talking about how we are living through a, quote, global pandemic. At the same time, we've got an economic situation that's as bad as we've got in a hundred years as well, and then we have the whole black lives matter and cultural issues going on.

Are you hearing discussions going on with these companies about, for instance, hiring and having a more diverse workforce, for instance, and sensitivity and white fragility and all these other issues? Are you getting calls or seeing any any changes in that regard? Definitely. It's absolutely top of mind. Looking at things from a practices, processes, and procedure standpoint to say, hey.

You know, do we have some unconscious bias in how we're hiring or how we're interviewing? And then also from, with some ways, which I think is even more important, a long tail perspective around enhancing pipeline, creating a more diverse pipeline, being a little bit more active in the community. It's definitely top of mind, and I think I think we leveraged even as a firm a lot of the the best practices and approaches, very strong sentiments from our clients. We definitely had some clients that we could point to that really were responsive to the world around them. And I think just the communication is so important about all these issues and starting to have conversations and just staying in touch with the team.

You know, CEOs and management really being in contact with their team about this new world, about economic instability, about diversity and inclusion issues. Even more so, people are just craving contact right now. I think it's important to be very vocal in in those narratives, you know, within your company. Yeah. That's been the one key difference I've noticed the last few months, especially with the Black Lives Matter protests that happened across the country is people in organizations are feeling more empowered to actually initiate these discussions.

Whereas I think historically, you kind of look to the person at the top to follow their lead and see what they say, and then you care what they're saying. And people were worried about saying things that historically weren't considered appropriate for a work environment. I think a positive outcome has been people are feeling more empowered and comfortable having some of these discussions with their folks that they work with. And hopefully, that leads to more tangible changes in terms of how companies and law firms function. I think it's something we've tried to internalize with ourselves is law firms are a little different from companies, but maybe not so different in that historically law firms have blamed the pipeline for the lack of diversity, which is true.

Pipelines haven't been great, but I think hopefully one change that comes out of all this is that law firms that we're trying to do this here that's looking legal is that law firms and employers should take responsibility for changing the pipeline. It's not enough to just say that, oh, the pipeline is terrible and that's why we don't have diversity. It's how can we change the pipeline And from a law firm perspective that comes down to, for example, for us is going to law schools and actually telling diverse law students what the startup practice is like, making sure that we have kind of a niche practice, so making sure they're aware of what we do and see if they're interested in what we do. And even before law school, going to high school and telling kids more about what the legal practice is all about and how what the startup world and the technology world is all about is being more proactive about trying to change the pipeline itself. I think it's something that hopefully will come out of this.

Both internally at Silicon Legal and our clients, people are expecting leadership on these issues, but they aren't waiting for leadership. They're being a lot more vocal, which has been really cool and also an emphasis on this structural change. This is not, okay, write a few blog posts, throw a bunch of money at something, feel good. I think that there's finally black lives matter issues and and other diversity issues are not new. And the news cycle of them has often been short.

This kind of repeats itself, and then everyone goes back to normal, whatever the heck that means. I think now that there's there's just a deeper, more sort of introspective look at institutions. You even see it the way that we're starting to look at our own history as a country. You know, understanding that you have to get deeper than just the virtue signaling and the donation that they're real things to tackle, and that's coming from the ground up. That's a new element this time.

One of the things that attracted me about you guys is you are trying to balance this high end, very intellectual practice with humanity. Okay. And I think the world needs that right now. We're not gonna bring people along all with one model. The creativity that you guys are demonstrating as lawyers is inspiring to me, and I hope it's an example that other people will follow that you can be a hardworking smart lawyer, but also care about people and try to have work life balance.

Thank you for that, by the way. I think if you were to ask Gaurav and I what some of the most rewarding things that we ever done, it's been around developing people, mentoring people, and making them into better professionals and hopefully better human beings. That's been a big charge for us. It's just watching people on our team just evolve and improve and just knock your socks off with what they can do both in just terms of judgment and maturity and skill level. It's a big thing that's missing in the legal field in particular is a sense of duty around mentorship Right.

And creating better professionals around you. I think that disproportionately so in in our field versus a lot of other endeavors. Thank you both for your time. Yeah. I know.

This was a lot of fun, Jim. Thanks for having us. Yeah. Thank you. Okay, guys.

Be well. Stay safe. Have a good one. Bye.