Atrium’s mistakes from the Horse’s mouth : An analysis

Justin Kan - Atrium's Mistakes

I wrote a couple of detailed blog posts last year about the demise of Atrium (the Californian legal start-up that burned $75.5 million of VC funding in its short existence):  (1) Is the Atrium ‘pivot’ really shades of Clearspire? and (2) Atrium: A Post-mortem.

I also took an opposite view from Artificial Lawyer about his interview with Atrium Co-Founder Augie Rakow in my blog post: When you can combine venture capital with legal services.

Yesterday the main founder of Atrium, Justin Kan, tweeted:-

10 months ago we shut down Atrium after raising $75m in venture capital. Anyone hearing that knows I made tons of mistakes along the way. Someone asked me today what my biggest lessons learned were.

Justin went on to then list his mistakes. Here I will reproduce and analyse each one with my own views and/or those of others gleaned from various Twitter responses.

Mistake No. 1 – Mission

Start with the mission. It is very hard to write the mission after the fact. You should start with a clear reason to exist and filter early hires for believers.

Analysis of Mistake No. 1

Did Atrium not have a clear mission? Ex Atrium employee @lex_node tweeted last year:-

I loved the original mission of Atrium, which was to disrupt BigLaw inefficiency by making attys more efficient with software.

He says ‘original mission’ because his tweet was at the time of the pivot when the mission changed, where he took the view that-

The new model is nothing to be admired and IMHO will Uberize/disrupt solo and boutique practitioners, driving down rates and degrading service quality.

So is Justin’s point perhaps to stick with a mission and not change it. The original mission was noble enough it was perhaps just very poorly executed.

Although, Justin did not appear to appreciate that software already existed to make lawyers more efficient (see Analysis of Mistake No. 3 below).

On Glassdoor an employee provided the following advice to Atrium management:-

Communicate a simple, consistent vision, and let us execute the details.

@h_pavisic tweeted:-

It is kinda shocking that it is possible to raise $75M without even having clear vision.

Mistake No. 2 – Remote

Start remote. SFBA is over for startups: the cost of housing and rent gives you much worse operating leverage. Many talented people choose jobs they want to be flexible re: location. Remote is better at this time in the market.

I wrote that before COVID, now it’s extra true.

Analysis of Mistake No. 2

With $75.5 million to spend on the start-up the cost of rent for premises would have been a very small proportion of that.

I had to Google “SFBA”. It is, for the uninitiated, “San Francisco Bay Area”. Well not all start-ups are in San Francisco. There are start-ups all over the world and rents will vary depending on location.

Remote is of course de rigueur for all of us at the moment and especially so here in the UK as we have just entered yet another strict lockdown.

However, I don’t think it follows that all start-ups should automatically think remote is the way to go.

Especially in law which is very much a people business where (when we are out of this pandemic) clients and lawyers will crave face to face meetings again. You might not want to meet clients in your house and they may not want to meet in their one. A café is not always the best place for a confidential meeting. Zoom is not always a suitable replacement.

Also, the law still (in many areas and respects) generates paper. That needs to be handled and sorted even if it is just to turn it electronic. Administrative staff need a base to do that in and there are principal deeds/documents that need to be stored somewhere.

Also any start-up surely needs collaboration and the exchange of ideas between its founders/staff? This can of course be done remotely but you won’t beat some face to face meetings to achieve what you need to especially in the early days.

I am not suggesting that you need expensive SFBA or Canary Wharf offices. But I don’t think you necessarily need to be purely remote. A hybrid is probably the answer where you can work remotely but still have somewhere to come together even if it is a WeWork style workspace. Office accommodation does not need to be swanky and expensive especially not at day one.

@raohackr tweeted:-

A point I strongly disagree w/: early on, you want all your founders and team in one room, working hard and living close by, breathing the startup. Remote won’t cut it; you need the organic interactions. Viaweb, Google, FB, Stripe.

@habazzi countered:-

Amazing software and businesses (such as @basecamp) were built entirely remote from day 1. This is not a requirement for success.

Intrinsic motivation and the right team is all you need.

@AdrienStern joined in:-

As a remote co-founder, I find that the weeks where we are working together are 10X more valuable and productive then our regulars remote set up. Maybe it’s us, maybe it’s being in the same room is way more efficient! I’m leaning towards the latter.

@raohackr agreed:-

One room, even one giant table – white board and couches to sleep and nap, large fridge with food. Best environment to build great apps fast. Fast internet and fast team alignment, destroy obstacles like the Borg.

@AndoAnima added:-

I don’t think its the interactions that make the business. There are plenty of teams living close by that fail. Its the quality of the mission and the team’s capacity to learn from its mistakes

Mistake No. 3 – R&D

There is no skipping of the R&D phase of a company. If you try to skip this you miss the part where you are forced to develop something differentiated. Very hard to solve this with money.

Analysis of Mistake No. 3

A fairly fundamental point for any start-up!

Justin nowhere in his list of mistakes specifically mentions the fact that Atrium funnelled huge amounts of money into creating its own bespoke software.

Perhaps Mistake No. 3 nods to that?

All the R&D required would have been a basic Google search to show that there already existed many legal practice management software options.

As I said in my ‘pivot’ post:-

A lawyer could spend circa $500 per annum to access very powerful legal practice management software from established legal tech companies. It would take 2,000 years of legal tech spend at that rate to match the spend by Atrium in a couple of years (if indeed that $75 million investment has all gone on its legal tech development).

Alex G. Smith (@alexgsmith) tweeted sarcastically today:-

History in innovation in legal is Year Zero in 2015/16. Everything before that does not exist … everything is new.

Something that I referred to in my post: Hack the Past : How the Legal Profession knew nothing about Technology

There is this strange view in certain LegalTech spheres that lawyers have never used technology before and anything a LegalTech start-up comes up with is brand new and never been done before. Most of it has and is in use in legal offices today and often been around for many years and is much more developed than the start-up’s reinvention.

@parentopia tweeted to Justin:-

No offense, but I’m sad to see that you missed the biggest lesson you should have taken away: If you want to build a technology company, make sure the problem you are trying to solve CAN be solved by technology.

Mistake No. 4 – Services

Don’t build a services company. It’s more work to manage everyone and the reward isn’t there at the end of the day.

Analysis of  Mistake No. 4

Again I think the point here is don’t build a services company thinking that you need to spend millions of dollars creating software for it to be able to function. You don’t. See Analysis of Mistake No. 3 above.

A service business can cover many things. I found an article listing 18 Examples:-

  • Information Technology
  • Education
  • Consulting
  • Transportation
  • Events
  • Entertainment
  • Media
  • Infrastructure
  • Financial Services
  • Professional Services
  • Logistics
  • Hospitality
  • Culture
  • Medicine
  • Wellness
  • Convenience Services
  • Club Goods
  • Product as a Service

Does Justin really think that start-ups should avoid any of these? Or is he really just saying don’t start a law firm because it didn’t work out for him?

Graham Laing (@Rokmanlaing) tweeted:-

‘Don’t build a services company’ – genius lool.

I vividly remember my history teacher telling us about production economies ending and moving to services which account for more than 50% of most modern, developed economies.

There are many successful law firms in the world all who have been built and grown without $75 million being thrown at their door to assist. They don’t all follow the traditional partnership model either as Mitch Kowalski highlights in his book The Great Legal Reformation: Notes from the Field.

As Katherine Thomas (@katathom), founder of Free Range Lawyers, tweeted:-

It’s almost like there are no shortcuts to success. Not even $65m. Who knew?

Cat Moon (@inspiredcat) replied:-

Bros get the cash

even when they don’t have a plan or know who they’re building for.

Katherine responded:-

Yup. I gave up on that a while ago. Waste of my time to try 2 raise esp if not legaltech. So we’re bootstrapped. And it is hard. But, you know what, we’re doing all the stuff Atrium missed. It’s taking time. But we’re doing it. And we’re still here.

And she added:-

I remember how I felt when I saw that $65m headline: my heart sank… am I the crazy one cos I want to grow biz honestly + realistically?… what am I doing wrong?… It can be difficult to keep pecker-up when surrounded by #legaltechbros + #radbossladies ‘smashing it’.

I can relate to that!

Allen Douglass (@Taxcountant) suggested:-

This was a long tweet to say 1 thing: service businesses like law firms are really 100s if not 1000s of individual startup products under one umbrella. Pick one of or a few. Features solving big problems make the best startups contrary to what the vcs will tell you.

Sol Irvine (@solirvine) tweeted:

The insights in Justin Kan’s post-mortem AMA of Atrium are so basic that it’s hard to see how they got so far. They hadn’t considered the limits of scaling a services company?

Kevin Colangelo (@Colangelolaw) tweeted:-

Many reputable voices in legal praised Atrium w/out doing the forensics on the biz model. Happens too often. “Finally! Ideas & money from outside legal will transform legal services. Let’s celebrate!” Unfortunately law = risk management. Leading w/ cheaper & faster isn’t the way

Mistake No. 5 – Motivation

Only work on things where you have intrinsic motivation. If you don’t, you’ll lose motivation when times are hard or your own goals change.

Analysis of Mistake No. 5

Justin Kan’s motivation for setting up Atrium was the cost of legal services to him as a founder of start-ups. In an article entitled ‘Building the Tesla for Legal‘ Co-Founder of Atrium, BeBe Chueh, said:-

The Elon Musk in our story is serial entrepreneur Justin Kan. After selling Twitch to Amazon for US-$ 970 million, Justin spent his time mentoring and investing in Bay Area startups as a partner at Y Combinator, a startup accelerator.

He noticed that founders identified with the pain he experienced as an involuntary power user of legal services.

Having spent millions on legal, Justin found himself asking his lawyers for status updates and reasons why reviewing monthly invoices felt like a game of Russian Roulette.

To solve these problems, he looked for people who could help and found Augie, Chris and I, who each carried a piece of the Atrium puzzle.

His motivation was perhaps as Jack Shepherd (@jackwshepherd) tweeted today:-

The law firm made by Justin, for Justin.

Spending $75 million of other peoples’ money to discover that its not easy to get good legal advice at a cheap rate is probably not money well spent.

If I bought a dud bottle of wine I wouldn’t buy a vineyard to remedy the situation.

Mistake No. 6 – People

The more people you have, the harder it is to bubble up feedback or turn the ship. The emperor has no clothes effect is real.

Analysis of Mistake No. 6

You don’t need to fill the ship with lots of people at day one. You should buy a dinghy, before you move up to a motor launch, then a yacht and maybe some day, if you are lucky, a super yacht.

It looks like Atrium filled the boat with people before they really had the tech in place for those people to use or the work to sustain them. But hey they had $75.5 million to burn so why not?

As they pivoted ultimately to a pure law firm (in the very traditional sense) Matthew Melville (one of the law firm partners) said to Law.com:-

We were trying to right the ship. Atrium had negative margins. In a post-WeWork world, that was not acceptable any more. We had to figure out a way to make money on every legal service that we sold.

As I commented at the time:-

Have negative margins, even in a pre-WeWork world, ever been acceptable in law firms?!

@scottastevenson tweeted (a few days before Justin tweeted his list):-

People have given a lot of different reasons for Atrium’s failure, but the most prominent one I’ve heard is just that it was incredibly difficult to scale a large workforce of highly skilled people (lawyers) quickly. It’s not like scaling out Uber drivers.

There are law firm models that do that though (granted maybe not as quickly as scaling Uber drivers) such as Gunnercooke, Keystone Law and my own law firm, Inksters (via Plug & Play Law). But that was not Atrium’s model. Indeed its hiring strategy increasingly looked like a carbon copy of BigLaw.

Having said that, however, Atrium still hired a lot of lawyers in a fairly short space of time. Back then to all those people on the ship. At Glassdoor you will find comments such as:-

There is a ton of change management because people keep leaving. Sadly, we can’t hire people as fast as we are losing them. Some bad leadership hires and promotions but it seems nothing is being done to address.

So staff turnover was clearly an issue. Had there been better retention perhaps the problems wouldn’t have been so great.

It is clear from Glassdoor though that the employees all enjoyed their free lunches (and leftovers to take home), snacks and drinks. One of the main Pros repeatedly listed of working for Atrium. So not just LegalTech software building that the $75 million was being spent on. Perhaps start-ups should turn a good profit before they start dishing out the Google/Facebook style freebies? Of course working Remote (Mistake No. 2) would eliminate that expenditure too!

Mistake No. 7 – Money

Adding more money to a situation of lack of product market fit rarely works.

Analysis of Mistake No. 7

@DCDayTrader wondered how:-

Call me naive (or maybe underprivileged), but how do you fail with $75M!??

Clearly $75.5 million was not sufficient! But again I come back to the fact that spend on software build was completely unnecessary and was really why the house of cards fell down.

Mistake No. 8 – Delegation

CEOs can’t delegate getting in the trenches in the beginning.

Analysis of Mistake No. 8

I assume from this that Justin kept out of the trenches in the beginning. Which presumably links in with his Mistake Nos. 1, 3, 5, 9, 10, 11, 14 and maybe some more?

You can’t run a start-up if you are not going to get your hands dirty. Sometimes you need to be in the trenches from time to time well into the lifetime of the business and not just in the beginning.

Having been involved in previous start-ups I am surprised that Justin made this mistake. But then for the same reason I am surprised he made many, if not all, of the mistakes listed.

Mistake No. 9 – Charging

We should have moved more quickly to a flat rate hourly model and iterated the business model. We didn’t do enough turns of business model iteration quickly enough.

Analysis of Mistake No. 9

In the beginning Atrium existed because:-

Law firms have little incentive to build or buy software that will save their lawyers time because they often bill clients by the hour. Tasks like tracking down legal documents, extracting key information and drawing up hiring offers or funding term sheets add up to make lawyers expensive, even if they’re constantly repeating mindless busy work.

Atrium was supposedly different because they provided a suite of tools and lawyers that:-

come as part of a subscription to a bundle of Atrium’s legal services.

Although with

special projects like counsel through an acquisition costing extra.

They thought that:-

This business model incentivizes Atrium to work as efficiently as possible instead of billing hourly rates, and build tools to eliminate less-skilled work or assist with common corporate duties.

Like many NewLaw firms they were moving away from hourly billing.

Odd then for Justin Kan to class that as a mistake. But perhaps a realisation as to why law firms had to charge what they charge to make a profit? Especially, if you actually hire lawyers from BigLaw and presumably have to pay them BigLaw salaries? (Glassdoor suggests their lawyers were each paid $237k – $293k per annum). But then that is maybe part and parcel of Mistake No. 3?

Sol Irvine was a potential user of Atrium’s services. He tweeted:-

Their whole model turned on the question: What’s included in the flat monthly fee? As a general counsel, I was ready to buy. Atrium’s starting monthly fee was less than one working day of a reputable lawyer’s time. But, they couldn’t articulate their scope adequately for me.

And added:-

When they pitched me, I assumed they had a plan that solved for the inherent limits of hourly rates, staffing, and so on. Their service was premised on a “dedicated” attorney for a flat monthly rate, with a really vague scope of responsibility.

Out-of-scope questions went to a referral network at hourly rates. I really wanted them to have a cool internal knowledge base so my dedicated person could chase down answers to out-of-scope questions without bringing in referral help.

Alas I came away from the pitch thinking they must be doing something very clever like using client work to fuel a pipeline of deal flow for early stage VC investment, but I guess not?

Mistake No. 10 – PR

Ability to frame strategy and communicate it is rare and requires experience.

Analysis of Mistake No. 10

There were plenty of PR puff pieces about Atrium when they launched and obtained VC funding.

But I could never really understand what Atrium was.

Their website was vague. What LegalTech they had actually created (if any) was a bit of a mystery.

Their employees, as can be seen from Glassdoor, were unsure:-

Be more transparent with strategic goals because people across all departments are highly engaged and want to understand how to make an impact.

Perhaps the lack of strategy (Mistake No. 1) means there was nothing really to frame? You really need to sort that out first.

Mistake No. 11 – Who?

Should have asked “who are we building for?” much more specifically and ruthlessly iterated for them.

Analysis of Mistake No. 11

Cat Moon (@inspiredcat) tweeted:-

He thought he was the customer they were building for so he didn’t need to ask real ones?

I’ll leave it at that!

Mistake No. 12 – Fake Markets

Create market situations wherever possible and avoid “fake markets” where it seems like a market but isn’t. i.e. you employ someone and they kind of have to use your software — this is a fake market.

Analysis of Mistake No. 12

I’m not sure that I quite understand this.

If you employ someone in a law firm you would surely expect them to use the software you are using to manage your practice and enable them to best serve your/their clients?

However, I suppose if you have built that software yourself and it is not fit for purpose that might be another issue?

Mistake 13 – Space & Time

Build in a space where the iteration time of your product can be very fast.

Analysis of Mistake No. 13

It does take time and effort to build a law firm (see comments at Analysis of Mistake No. 4 above).

Many businesses take time to build and become successful.

But many start-ups seem to want/expect a very quick return.

That is unrealistic compared to how most businesses grow and flourish.

You maybe need to give yourself space and time.

@alexbrunoesq tweeted:-

Atrium was supposed to disrupt law. It suffered the same fate as many #startups. Familiar theme, trying to do too much too early. They were trying to develop software, provide legal services, etc. You need to focus on one thing make it a success then build.

Mistake 14 – Culture

The culture is set early and very hard to change.

Analysis of Mistake No. 14

For many employees at Atrium their comments about culture on Glassdoor were very positive, e.g.:-

  • Culture is a top priority
  • TRULY caring about culture
  • Performance-driven culture that treats employees INCREDIBLY well and with empathy and warmth.

So not sure culture at Atrium was really a problem?

Although there was one comment on Glassdoor that was a little bit more scathing:-

Cons

-Biglaw sweatshop vibe meets enterprise Tech company bureaucracy and politics.
-Process serves as an a constant hindrance to anyone being able to do their actual job.
-Unnecessary meetings every day/week that again take away from people ability to actually do their job.
-This is not a 9-5. Friday around 6 the office is still packed. Work-life balance is not a thing here.
-I’ve noticed very few people take PTO compared any employer I’ve had in the past.
-Micromanaging. Oh the micromanaging. You aren’t treated like an adult trusted to get the job done. You are treated like a child.
-Politics are abound, as well as elitism.

Advice to Management

You are a startup, not a biglaw firm and not an established company. You could be a great place to work (and as a company you have the talent to succeed) but your management needs to get their ego in check.

Which makes you wonder how different from a traditional law firm Atrium really was?

The Elephant in the Room

Whilst Justin Kan provides a big list of his mistakes, and kudos to him for doing so, I don’t think he really tackles the elephant in the room head on as he should. And that is that Atrium simply didn’t need to spend millions of dollars developing its own bespoke software. That was the biggest mistake they made as Clearspire had done before them. That is the main mistake that start-ups coming after them in the legal space need to learn from this.

Summaries

Mitch Kowalski (@MEKowalski) neatly summarised Justin Kan’s list:-

So he finally admits that:

1. he went into an industry he knew nothing about,

2. did no research,

3. had no plan, and

4 no motivation (other than to make money).

I’m so surprised he failed…… badly.

And as Carlos Gámez (@chgamez) summarised it:-

My read: he got into an industry he wasn’t passionate about, with customers he did not empathize with, overfitted for a market he thought was bigger and delegated his business in a way that it developed a culture he didn’t agree with. Then threw more $

Moral of the Story

@johngjelly thinks that the:-

Moral of story is don’t give 2nd time founders money to do anything they want (especially lots of money). VCs treat them as gods for some reason.

Last Word

And I’ll give Aron Solomon (@aronsolomon) the final word (as I seem to traditionally do in my Atrium posts) and maybe the only takeaway you really need from this:-

In this ongoing Legaltech debate there is also the seemingly overlooked possibility that it was a stupid idea that only idiots bet on.

Wylie Atrium

Reactions on Social Media

In addition to the reactions in the comments section to this blog there have also been reactions to this post on LinkedIn and on Twitter.

On LinkedIn the following comments have been made:-

Benjamin White (Crafty Counsel – Helping legal professionals learn, achieve, and share):

Great read, Brian. I was looking forward to it.

On 5 (“Don’t build a services company”) I suspect what he is trying to say is “don’t build a services company if what you want to do is scale very quickly using venture capital and exit in 5-10 years – oh, and with a Tech 10x gross revenue valuation not a law firm valuation”.

Or, “if you have $75m… don’t build a law firm” – back to front I know.

You are right that plenty of law firms have been very successful without $75m of funding (!), but it’s obviously harder to scale than software. (That said, plenty of services companies now venture backed and valued like Tech – Palantir?)

Why didn’t he want to build a law firm? Speaks to the other points covered in your article… particularly 5, motivation.

Me:

Thanks Benjamin.

He was of course building a software company at the same time as building a law firm. I imagine (but not seen it revealed anywhere) that the lion’s share of the $75.5 million went on building the tech.

Plenty of successful Legal Tech companies (and, of course, others that have failed).

He seems to ignore the Tech element of Atrium when discussing his mistakes. Maybe he doesn’t want to highlight a tech failure?

When Clearspire closed they said they were going to spin out their software:-

“Now, the time has come to scale. We’re taking Clearspire to the next level with a mission to empower not a law firm, but all law firms.

We are actively working to ready our class-leading Legal Services Delivery Platform for you! Stay tuned… in the coming weeks and months for updates on our global deployment of The Next Revolution.”

That never happened. I assume they hadn’t really developed anything new that there was a market for.

I imagine the same is true of Atrium or the Tech side of the business would have survived on its own?

Agreed that plenty of services companies are now venture backed – see: thetimeblawg.com/2020/03/09/when-you-can-combine-venture-capital-with-legal-services/

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Paul Ryan (CEO and Founder Focis):

Really interesting breakdown. I found this from Katherine Thomas most encouraging. I can relate. I’m sure many others can reading headlines of new funding rounds:

“I remember how I felt when I saw that $65m headline: my heart sank… am I the crazy one cos I want to grow biz honestly + realistically?… what am I doing wrong?… It can be difficult to keep pecker-up when surrounded by hashtag#legaltechbros + hashtag#radbossladies ‘smashing it’.”

Me:

Indeed Paul

I’ve been growing a business for nearly 22 years now and there has never been a “funding round” involved!

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Steven Mather (Business class lawyer for SMEs):

Honestly, I think the biggest issue was the WHY.
Just to say we want to do services cheaper/better than others, isn’t a strong enough why. Similar to vision.

I’ve tried to do subscription based services, as mentioned here, but it is difficult to fairly scope out – ‘unlimited’ is probably what clients want but difficult to achieve. Anything else is likely to be linked somehow to time. Tough one to get right.

Me:

Agreed Steven

WHY can be applied to most of what they did especially building Legal Tech that already existed!

The Queen of subscription based services in legal is, of course, Tessa Shepperson. Perhaps she will give us her perspective on this?

Steven Mather:

Subscription for information seems doable. Subscription for services less so.

Me:

What about the employment law services that seem to do it by subscription?

Steven Mather:

Possible but is operated by call centres and sales people not lawyers.

Me:

Which begs the question: should law firms have call centres and sales people? Should Atrium have been doing that rather than seeking lateral hires from BigLaw?

Steven Mather:

I think so if they want to become a big player. I wanted sales people and new enquiry handlers but others didn’t .. they say the lawyer is the best seller as they have the knowledge and experience. I say yeah but they cost more.

So yes it’s possible, no doubt, but again it goes back to WHY – if one is doing it to make more money that might not cut the mustard.

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Katherine Thomas (CEO at Free Range Lawyers):

It’s all in the mission. Have one in the first place – obvs – but it’s not enough for that to be ‘to disrupt someone else’ or ‘to be better than someone else’ (ie to be all about the competition). Successful missions involve a positive move towards rather than a negative move away and they are all about…..no, not the founder….no, not the money…..no, not the competition…….drum roll……they’re all about the client.

Me:

Agreed Katherine

I think Atrium did have a mission of sorts which was maybe directed (even if it appeared indirectly!) at the client (Justin having been a client who thought that the supply of legal services could/should be done differently/better).

As an Ex-employee of Atrium put it “to disrupt BigLaw inefficiency by making attys more efficient with software”. Presumably to then benefit the client with those efficiencies and cost savings arising from them?

But the problem I think was really in the R&D and execution.

Justin maybe should have had a chat with a few lawyers in the know before he set sail.

I noticed on Twitter Alex Hamilton tweeting that he often offers to share thoughts with new ventures (he did so with Atrium) but invariably is ignored.

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Donald Munro (Founder – Business Coach – Business Development & LinkedIn Specialist):

Interesting read, main mistake was trying to reinvent the wheel without a good enough reason to do so.

Me:

Indeed Donald

Seems to happen a lot in the legal world.

Particularly prevalent in Legal Hackathons as I wrote about at: thetimeblawg.com/2018/03/01/hack-the-law-to-reinvent-the-wheel/

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Olly Buxton (Junior Space Cadet at The Jolly Contrarian):

interesting how the guy really doesn’t understand even now!

– Original mission: anyone who has done any design/system thinking would tell him that the key is to iterate. “Everyone has a plan till they get punched in the mouth”.

– Location: there’s a difference between being “remote” and being “in the white hot centre of the market”. What COVID has taught us is that we don’t need to be in Canary Wharf/SFBA etc. But (a point Peter Thiel makes in Zero to One) you do need to be together. But you could be in Hackney, Boisie Idaho, Schitt’s Creek…

– Services: This makes the classic mistake of believing that the problem to be solved is the *delivery* of services, not the services themselves. Any big enough law firm has the resources and the loss-lead stamina to outgun a startup with technology. I had not heard of Atrium but it seems their whole model – “make attorneys more efficient with software” – was destined to be driven into the ground. If you can do something with software, so can anyone else, and its marginal utility rapidly goes to zero.

Me:

Thanks Olly

Good points.

With regard to the last one – especially so when your competition can get the same, or probably better, software off the shelf at a much cheaper cost than you will by building your own from scratch!

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Chris Lee (Property Disputes Solicitor at Osborne Clarke):

I do sympathise. Who hasn’t bought a bad service or product without thinking “I could do that better, for cheaper.”

Unfortunately selling legal services is not like making and selling furniture (buy wood, cut wood to X number of templates, assemble, find buyers) or selling transport services (hire driver with vehicle and find passengers in an area).

Unless you are highly specialised eg only do will-writing, notary services or specific areas of trial litigation, you cannot develop a model in law where you sell a cheap all-in service to GCs for a fixed price. That kind of scoping doesn’t work: an all-in scope is expensive, and a cheap service that scopes out most eventualities is useless. There are just too many variables and this is why most BigLaw firms offer a blended services with some fixed fee work combined with increasingly better scoping on an hourly rate – with any fee uplifts communicated and explained clearly and in advance. That kind of flexibility is needed in order to provide this kind of all-round legal advice to businesses.

Me:

Thanks Chris

I guess that is something that Justin simply didn’t understand given his lack of knowledge of the industry.

You would have thought though that the lawyers he brought in to help him run the legal side of the business would have enlightened him.

As BeBe Chueh said:-

“To solve these problems, he looked for people who could help and found Augie, Chris and I, who each carried a piece of the Atrium puzzle.”

They clearly were not able, at the end of the day, to help Justin solve the puzzle.

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Gary Lessels (MD at DocGovern):

Thanks for a good Friday afternoon read. I think Mitch Kowalski hit the nail on the head with his summary.

Me:

Yes Gary

I think Mitch Kowalski always knows when to bring out a hammer rather than a drill 😉

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Lara Lightbody (Founder | Tech Lawyer | DEI Advocate | Podcaster):

Am looking forward to reading this. But my first thought and yet he raised 75.5m… for a legal startup with zero background. looking forward to that day.

Me:

Lara

Your first thought is covered by @JohngJelly on Twitter who said that was the moral of the story:-

“Don’t give 2nd time founders money to do anything they want (especially lots of money). VCs treat them as gods for some reason.”

Us mere mortals clearly won’t stand a chance despite how much background knowledge we may have!

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Caitlin (Cat) Moon (Director of Innovation Design, Vanderbilt Law School):

Good stuff! Many thanks for including my tiny contributions to this conversation. 😺

Me:

Caitlin

Maybe tiny in number of words involved but certainly big on import 🙂

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David Flint (Commercial Law Consultant at Inksters; Visiting Professor at Creighton University School of Law):

The fact is that, despite the glamourisation of law in programmes such as LA Law, a lot of the work of lawyers is not that exciting! A lot is dull, and repetitive but essential. In order to perform well lawyers need efficient and effective support networks; whether to assist with copying, forms, minutes, post or other tasks, it is the work of the support teams which means that lawyers are able to do their work and appear efficient and organised even if we are not always so. Thank you to those who provide the backup! – the secretaries, IT support, dispatch, copying, finance, catering (can’t operate without coffee!) and other essential workers all making my job easier. #teaminksters #plugandplaylaw

Me:

Well said David

And Legal Tech, like Atrium was developing, is never likely to replace those support teams.

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Colin Levy (Attorney | Legal Tech Evangelist | Legal Tech Writer and Speaker | Thought Leader):

Great analysis Brian Inkster.

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Brian McMullin (Solicitor and Mediator):

Great read Brian.

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On Twitter the following comments have been made:-

Lawtomated (@lawtomated):

Excellent updated analysis re demise of Atrium, a Bay Area tech first new law biz that collapsed after a couple of years & despite $75m in VC money.

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Alex G. Smith (@alexgsmith):

One for all #legaltech #lawtech to read of you want to deconstruct “bro-speak” …

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Scott Stevenson (@scottstevenson):

Great read!

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James Peters (@legaljeeves):

If there’s one thing the Atrium thread has done, it’s provided a lovely start of the year reminder that a huge part of “legal tech” loves nothing more than failure.

Me:

Hopefully to learn from failure?

James Peters:

For a handful of people, yes. For others… I really don’t think so. Most definitely looking forward to getting fully through your analysis though!

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Aron Solomon (@aronsolomon):

Don’t sleep on this piece.

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Sarah Glassmeyer @sglassmeyer

I’m reading the Time Blawg’s review of Justin Kan’s Atrium learnings and they quote tweets and struck by this one. How does that work for people with families? Or myriad other reasons that they might not want to live at work?

“One room, even one giant table – white board and couches to sleep and nap, large fridge with food. Best environment to build great apps fast. Fast internet and fast team alignment, destroy obstacles like the Borg.”

Kate Irwin-Smiler (@kisjdmls):

Or like. Introverts.

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18 Replies to “Atrium’s mistakes from the Horse’s mouth : An analysis”

  1. Perhaps a little addendum. At the time Atrium raised their seed, I was in the process of trying and (mercifully, for a number of reasons) badly failing to raise a $20M legaltech investment fund.

    So I contacted around 2/3 of Atrium’s first investors. Not many were legally accredited investors, but rather tech workers understandably excited to invest in truly anything Justin wanted to be.

    So when we think of the Atrium fallout, let’s remember the people who wrote comparatively small cheques but definitely feel the loss of that cash.

    1. Thanks Aron

      That’s an interesting point and one that many will not appreciate when they think automatically of VC being faceless big cat corporates.

  2. Atrium is Latin for <> though this is not so well known. It shows how many people in lawland are hypocrites for building the Atrium bandwagon and riding it right to the cliff then.

    Sure Atrium is our biggest failure but there are so many more including Ross. We do not have the critical eye because all we want is to be taken seriously by investors and actual journalists meaning not artificial or orange ones.

    Why should we not expect more Atrium’s when investors are fooled by the market and by founders?

    1. Thanks Friedrich

      Hopefully episodes like this will make investors less likely to be fooled in the furture.

      However, before Atrium they did have Clearspire as a case study and that clearly made no difference!

      Unfortunately the legal tech journalists in the main tend to just blindly publish the PR puff pieces fed to them with no critical comment brought into the mix. It is left to bloggers like me, on the fringes, to do that bit.

  3. This is the most comprehensive summary of l’affaire Atrium yet it only scratches the surface of the waste of resources and opportunity cost for which Justin Kan was responsible. Is the reddit ask-me-anything the new Confessional, absolving him of ruining a lot of lives and careers in the process of a vanity project that he could have easily funded himself?

  4. If lawyers know better (we always do), why don’t they gather up 70 million dollars and go to it themselves?

    Oh. Because not one lawtech business in history has provided the same kind of return on an acquisition as other types on investments have.

    1. Jaro

      Not so easy for a lawyer to “gather up 70 million dollars” to do it themselves.

      I’ve been growing a legal business for nearly 22 years now and the funding to do so has been reinvested from profits or borrowed money that must be repaid.

  5. It is interesting that Justin is now going back on so many of the parts of his business that he saw as being critical when he built atrium.

    For example, he offered me a role but remote was a deal breaker even though I have a lot of talent and experience. Now he says that they should have always been remote which would have been nice then as I need the money.

    It seems to have always been about Justin and not the clients or fee earners.

    1. Thanks Sofia

      Elizabeth Holmes and Theranos springs to mind. And that was $700 million from VCs + a $100 million loan!

      But I accept that is probably an exception to the rule!

  6. There is such a rejoicing for failure in the world of “legal tech”. That’s the lesson we should take from Atrium.

    The other lesson is those who have stayed around at this point are more than likely failures themselves — children who insist to ride the rusted bicycle with no wheels.

    1. Mauritz

      I would like to think that there is more to learn from such failures than to rejoice.

      Many who have stayed around are on their fourth or more set of new wheels on that old bicycle which they repaint regularly to avoid rust. They are often better doing that than buying a shiny new motorbike that the LegalTech Vendor forgot to fit a petrol tank on.

      #bringbackboring

  7. As someone who “just” has a small, profitable law office, I sometimes read posts like this and am always confused. There is no real problem to be solved here and if there is please explain to me how is takes 7 million dollars let alone 70 to solve for x.

    I see a lot of spoiled brat kids here, in the ross situation and everywhere I look where law and technology grab a beer together.

    As we say, all hat no cattle.

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