Starting out in startups
GC delves inside Startup@BerkeleyLaw, a University of California, Berkeley initiative that trains law students, entrepreneurs and investors on the ins and outs of the startup ecosystem.
Legal training in Silicon Valley
Editor and features writer
Look out law schools, there's a disrupter in town
Naturally, that town is Silicon Valley, the home of innovation. And the innovator in question is UC Berkeley – a leading US law school, renowned for its prowess in technology and IP.
It might seem obvious that Berkeley Law’s proximity to the Bay Area tech hub would lead to an inventive approach to legal education. This idea certainly drew Hannah Porter, a former entrepreneur, to enrol at Berkeley Law in 2015.
‘I came into law school knowing that I wanted to work in corporate law, with startups specifically, and I thought Berkeley Law would be a great place to do that, because Silicon Valley is where startups are happening,’ she tells GC.
But despite a wide range of practical initiatives for first years to sink their teeth into, none of them were aligned with corporate law. According to Neil Dugal, senior corporate counsel at investment firm Omidyar Network, and former corporate counsel at Silicon Valley venture fund 500 Startups, this is a typical law school scenario – academic rather than experiential, adversarial rather than transactional.
‘When I came out of law school,’ he recalls, ‘the only kind of law I knew was going to trial. I didn’t really know what venture capital was – I didn’t even know what corporate law was.’
Meanwhile, across the wider UC Berkeley campus, students were busy dreaming up business ideas with little guidance on how to turn them into startup reality.
This mismatch between supply and demand provided fertile conditions for the emergence of Startup@BerkeleyLaw, a trailblazing initiative co-founded by Adam Sterling (along with Law professor Robert Bartlett, and supported in part by law firm Wilson Sonsini), that brings together law students, entrepreneurs and investors, educating them about the formation and growth of early-stage companies and the mechanics of venture capital funding.
The programme has developed cutting edge courses in venture capital funding and entrepreneurship law, offering a range of initiatives designed to provide hands on experience within a startup ecosystem for budding lawyers, founders and investors, often by matching one group’s skills with the needs of the others.
To Bay Area insiders, the Valley might seem a place where people organically meet each other and make ideas (and fortunes) happen. Law firms in the sector typically manage a playbook of multiple clients. As co-head of the legal team at 500 Startups, Dugal had exposure to a portfolio of around 1,800 startup companies. However, he says that in his experience, the startup community can seem impenetrable to those not already part of the club. Busy and leanly-staffed venture capital funds in particular can appear secretive places to both emerging entrepreneurs and budding startup lawyers – somewhat of a misnomer for a world essentially scaffolded by lawyers.
‘In Silicon Valley, it’s lawyers who have created the rules and are the keepers of those rules,’ says Sterling. ‘Lawyers have so much exposure that they’re the unofficial keepers of the market – if I see 1,000 term sheets, I can decide for my client whether the term sheet that they’ve just received is market value or not.’
Hannah Porter, JD Candidate, Berkeley Law
‘At Berkeley Law, there are pro bono projects that students can join to get actual hands-on experience. The problem I found in my first year was that none of them were anything to do with business or transactional law. I wanted to start something where students could actually get experience of business law. That led me to reach out to Adam Sterling at the same time as he was launching Startup@BerkeleyLaw. He helped me found the “Startup Law” initiative, which allows first-year law students to do real transactional work.
There are talks that bring in people who are working in the startup field, there are pro bono projects, and there are workshops, which are so hands on. Last year, there was a training about how startups get funding and what the life cycle of a startup looks like, and it is recorded and online. The workshops are great, but by also having them recorded, they are there as a resource forever.
The training is more applicable to working with startups because that’s what it’s all about, but it doesn’t hurt for any kind of corporate transactional practice, even if you’re working with big companies. It’s about understanding how companies are set up and how the financing works – providing value for any future work on either side of a transaction.
I’ve been involved with another group on the Berkeley campus that’s trying to unite all of the efforts across the engineering school, the business school and the law school to make the entire campus more entrepreneur-friendly. I think Startup@BerkeleyLaw could play a big role in that, as there are a lot of students on campus trying to start businesses, and we have students in the law school who are bringing legal skills that could be helping those startups.’
But until now, this information has failed to filter through to law school students or, for that matter, to junior associates working inside law firms, who often have limited or partial exposure to the clients their firm is advising. Vital information is often even less accessible to the entrepreneurs themselves, especially those still in the education system.
Naresh Sunkara was a virology post-doctoral student at Berkeley in 2013, when he founded Nosocom Solutions, a company that develops technologies to combat healthcare-associated infections. Initially, he found he had to go outside of Berkeley to access guidance to launch his company. ‘My professor was raising his eyebrows and saying “Why are you leaving the lab in the middle of the day?”’ he recalls.
Sunkara established the Berkeley Postdoc Entrepreneur Program, but until he met Sterling, he still struggled to find the necessary support from the law school to grow the programme. Particularly challenging was legal advice, not least because the law school was like ‘an iron dome’ in terms of gaining access.
Silicon Valley outsiders might be forgiven for assuming that those who write the cheques are more clued up, but investors are just as likely to be looking for information in the wrong places. Established venture capitalists might know the lay of the land, but new funds, corporate funds and family offices can all benefit from additional support.
A New Talent Wave
A major challenge facing all potential investors is the battle for talent, not least because funds often seek ideas from traditional, established venture networks. Neglecting channels that more diverse entrepreneurs might follow has resulted in a dearth of founders from non-traditional backgrounds.
Such a misalignment between the pipeline and the gateway into the startup world often causes unnecessarily high transaction costs. Entrepreneurs, investors and attorneys who lack a sophisticated grasp of the terms of venture capital financing drive up fees.
‘You spend a lot of time negotiating deals purely because you’re trying to avoid misunderstandings and correct previous misunderstandings,’ says Dugal, citing such an inefficiency as a major factor behind his interest in Startup@BerkeleyLaw and a driving force for empowering Berkeley Law students, who are ‘sitting at the centre of arguably the most dominant technology ecosystem in the world’.
naresh sunkara, founder of the Berkeley Postdoc Entrepreneur Program, and CEO of Nosocom Solutions
‘Five years ago, I was a virology postdoc at UC Berkeley. I developed a drug delivery technology at my lab and I wanted to start my own company, but I didn’t know anything about starting a company. There’s a business school here, there’s a law school, but they didn’t have programmes tailored for scientists like us, so I was going to UCSF, where they had the programmes and resources to help scientists launch companies.
My question was: I’m at UC Berkeley, why am I going anywhere else and why is there no programme for scientists? That started off a conversation on campus, and eventually they said, “Ok, go out and try launching a programme”. We started the programme and after five years, there are about ten companies that took off and got funded.
Law school at that time was like an iron dome. Nobody could enter it and nobody would come to our events, until Adam Sterling came along. He was very open to collaboration, and opened doors for us. He would sit down with us, and understand what we were in need of to start a company.
Sterling set up a workshop series and “office hours”, where he had top notch Silicon Valley lawyers offering advice to aspiring entrepreneurs. After a time, my startup needed a different law firm, and I approached Sterling saying, “I want to move my law firm, how do I do this?” He introduced us to three law firms so we could interview them, and we finally moved. He brought the best people to the table for us, he knows what we need and that has had huge benefits.
Lawyers are going to be a part of your startup forever, and innovators like us don’t know much about the legal space. If we can have support of a platform where we can meet and build those relationships, that is a sound foundation for a company to grow.’
The initiative also develops project and people management skills for law students, in recognition of the fact that startup-focused law practices act for multiple clients and often field lean teams, meaning frequent, direct client exposure for associates. The Berkeley programme therefore provides the sort of preparation that even a typical BigLaw associate training might not.
‘I feel our law students, if they go and practice in Silicon Valley, are practising at the level of second- or third-year associates in terms of what we expose them to,’ says Sterling.
Practice makes Perfect
Startup@BerkeleyLaw students get to rehearse their new skills through its ‘office hours’ programme, where law students can directly advise entrepreneurs and investors during drop-in meetings. This will soon be available via videoconferencing, allowing the initiative to connect with substantially more entrepreneurs and investors.
A major benefit of all this contact between would-be lawyers, entrepreneurs and investors, is the opportunity to form networks. Traditionally this has been the preserve of business schools, with risk-averse law students often reluctant to reach out to new connections. But in the same way that law firms act as a hub between startup companies and investors in the real world, Startup@BerkeleyLaw is setting out its stall as a hub between entrepreneurs coming out of UC Berkeley and investors.
‘Investors come into our programme to learn about the mechanics of venture capital and exposure to some of the best startups in the world. Entrepreneurs are being educated on the mechanics of starting and scaling a business, and getting access to some of the investors that they wouldn’t otherwise,’ says Sterling.
The most recent scheme sponsored by Startup@BerkeleyLaw is further expanding the programme’s reach beyond UC Berkeley, into the world of underrepresented entrepreneurs, through partnership with Code2040, a San Francisco-based non-profit that works with Black and Latinx technologists. ‘Access to Entrepreneurship’ launched in July 2017, funding travel for Code2040 entrepreneurs to attend the organisation’s San Francisco annual summit, in which Startup@BerkeleyLaw hosted workshops and office hours, as well as a half-day of intensive training at Berkeley Law.
For companies moving beyond the formative stages, ready to recruit their first general counsel, or for venture capital funds expanding their in-house legal team, a pipeline of upskilled graduates is a useful resource – particularly in a market where lawyers are going in-house earlier and earlier in their careers.
Creating a Culture
On top of fostering links between students and the in-house community through involvement with groups like the ‘VCGC’ (Venture Capital General Counsel) annual conference, Sterling is confident that Startup@BerkeleyLaw directly addresses the main challenges for law firm lawyers when transitioning to an in-house role: ‘Our programme is teaching our law students the economics of new businesses and how to set up and manage projects, which are two of the most critical skills for general counsel and in-house attorneys.’
Dugal made this transition himself when he moved from Fenwick & West to 500 Startups, where he saw at first hand the demands placed on lawyers at emerging companies. ‘A lawyer working at a startup will have to wear many, many hats and will have to put out a lot of fires. You’re not talking about a lawyer who is assistant assistant assistant corporate counsel focusing on outbound licensing IP agreements. You’re talking about somebody who deals with everything – as fundamental as advising the board of directors, or as minute as changing a word in an offer letter.’
Porter believes that the programme is giving her skills that are directly relevant to an in-house career path, should she choose to take one: ‘There are so many different workshops that I’ve gone to that are on totally different topics, and it’s made me realise that being a GC in a startup, you have to be on top of all those things. You wouldn’t get bored!’
But for those not attracted to a career in the startup world, Sterling is confident that his students are being trained for any corporate ecosystem, such as capital markets or M&A. ‘They understand the building blocks feeding successful late-stage companies, so it’s totally relevant,’ he says.
Startup@BerkeleyLaw is steeped in Silicon Valley culture however, developed in true startup style and non-hierarchical, as demonstrated by its student-run programmes like ‘Startup Law’. ‘We piloted a number of workshops and courses, many of which – but not all – worked. Based on the feedback we received, we’ve iterated and grown,’ says Sterling.
There’s still further scope for experiential learning through Startup@BerkeleyLaw, says Dugal, who would like to see fellowships that enable students to work at new companies or funds and have the opportunity to interact with GCs, venture capitalists and non-lawyers on a professional level. ‘If they go onto a law firm they are better equipped for client representation, they are more effective lawyers, and they have pathways beyond law firms for later in their lives – they’ll have life ventures,’ he says.
An innovation like Startup@BerkeleyLaw might not entirely disrupt the legal education model, and its relevance will depend on the market each individual institution serves. But as automation and AI begin to relieve law firms and in-house departments of low-level work, law schools might be well-advised to adopt more forms of practical learning and network-building, so that even the most junior lawyers are furnished with big picture nous and client skills. The age of lengthy legal apprenticeships filled with repetitive tasks could be about to be consigned to history – along with other outdated operating systems.