
Atrium lays off lawyers, pivots to tools - janeshmane
https://www.axios.com/law-firm-startup-atrium-lays-off-most-of-its-lawyers-e4637120-27a7-44c5-8a52-37e2b0194928.html
======
tempsy
I think anyone considering a job at a company founded by a serial entrepreneur
should heed this as a warning.

These founder raise pre product market fit because they can, and often raise
too much money. Having too much money when you don’t really have a viable
product that people want can easily turn your company into a zombie, where
people are just sort of going through the motions because there’s nothing else
to do but chug along.

I’ve seen it many times. Some end up eventually finding the market after a few
pivots but it’s really not a fun place to be as an employee with little
decision making power. And the founders are usually wealthy enough at that
point independent of the success of this current company that it isn’t “do or
die” for them which creates another layer of zombie-esque behavior.

~~~
bradlys
I had the opportunity to interview with Atrium over a year ago. It was very
clear that they weren't doing well. Their founding team had opposing ideas
about how to do things. Their CTO was fired very early on. Clearly, it hasn't
worked out smoothly. To me, it looks like they just rode on the wave of eager
investors.

I've seen the issue with wealthy enough employees at all the startups I've
been at too. Once you get people who no longer feel a certain hunger, they
lose ambition and direction quickly. I've seen it happen as startups go from
mildly successful to unicorn. Where the founders were able to cash out enough
to buy a house in the bay, they suddenly were way less eager about being
acquired or IPOing. And I've seen it with people who are on the tail end of
their careers, exiting one startup with a very sizeable amount to enter
another. The hunger is gone for them, they're just coasting, and they don't
seem to have any real reason to even be working beyond avoiding boredom in
retirement.

And the worst part is that it feels like these types of people are way too
well represented at the top of the hierarchy. The part of the hierarchy where
these attitudes matter the most!

~~~
lbacaj
I disagree with this, like anything else it’s going to depend on the person.
It’s really hard to generalize when it comes to people’s ambitions.

There are so many examples of serial entrepreneurs doing it over and over.
Likewise of employees of startups going on to do even better in the next
startup they join.

Serial entrepreneurs do get to raise more money, markets reward success, and I
am with you that it’s not always deservingly. I also think many startups can
and do pivot and serial founders aren’t more likely to pivot than the non
serial kind.

I would bet on Justin Khan finding a way to success, much more so than not.

------
anotherfounder
[https://www.atrium.co/inside-atrium/the-future-of-
atrium/](https://www.atrium.co/inside-atrium/the-future-of-atrium/)

For someone who has spent so much telling founders to cut buzzwords and speak
in plain and simple English, this blog post by Justin Kan is something
special. Case in point:

> Similarly, at Atrium, we’ve made the tough decision to restructure the
> company to accommodate growth into new business services through our
> existing professional services network.

Simple facts hidden in positive-sounding buzzwords, as if, they believe that
the reader doesn't know better. It seems like a variation of 'Our incredible
journey..' template

Honest question, why do companies do this? It seems disrespectful to everyone
- employees (both fired and current), customers, and any adult for that
matter.

~~~
serf
>Honest question, why do companies do this? It seems disrespectful to everyone
- employees (both fired and current), customers, and any adult for that
matter.

generally because it keeps the person who wrote it hire-able post closure, and
makes those that lost money or effort on the deal feel as if their loss is
actually being spun into something else, like concepts, innovation, future
profitable IP, whatever.

I agree, I think it's disrespectful, but then again there's a lot about
business that I feel that way towards.

~~~
tempsy
He got the same feedback on his accompanying tweet
[https://twitter.com/justinkan/status/1216896251754450946?s=2...](https://twitter.com/justinkan/status/1216896251754450946?s=20)

Bigger red flag from his tweet is there’s basically zero engagement from
others in the tech community. For someone who is that high profile to tweet
something big about his startup and get almost no responses is _really_
strange.

~~~
cameronlpmoore
That does seem super strange. Any ideas why that might be the case? Most of
his day-to-day tweets seem to get a pretty solid amount of interaction.

This tweet from December 10 seems pretty weird now: Justin Kan @justinkan
"Early-stage fundraising: \- need a great narrative \- can get by with bad
metrics \- but MUST know those metrics"

~~~
tempsy
Digging deeper on Twitter there’s a ton of pissed off lawyers (obviously
including the laid off ones) and customers who both felt blind-sided.

The corporate legalese speak made things worse, of course.

I guess I underestimated the anger this would cause, so makes sense people are
not going to touch it.

------
woah
My company used Atrium to help us think through some very complicated niche
legal issues. We were on a flat rate plan, and it was nice to be able to
brainstorm without watching the clock. We were pretty happy with their
service, but it all came from one attorney, who also was the one who found us
and brought us in. Whenever we dealt with anyone else there, it was
disorganized and low quality. When our main attorney left, of course we
followed them.

I had bought into their philosophy at first but the experience showed me why
law firms have the partner-oriented structure they do. Legal work is built
around trust in the lawyer in most cases and that's hard to automate.

~~~
gumby
It’s always been weird to me when a law firm tells me about all the services
and such they have. It’s not the firm, it’s the lawyer, and if they decamp,
you follow. Likewise just because I am really happy with lawyer X at firm Y
Doesn’t mean I’m interested in Y’s patent practice when I need patent
assistance.

For his reason I’ve always been puzzled why law firms merge. You ever pay
multiples of revenue; it’s just literally a pro data merge with a little
goodwill thrown in from one side.

~~~
arethuza
Cross selling is often a major source of business for law firms and there may
be rewards for successfully introducing an existing client to a new part of
the firm.

~~~
gumby
Those are dumb clients! It’s like assuming your developers are all the same.

------
rayiner
> Even lawyers aren't immune to the unpredictability of working for a
> startup—and the appeal of generating high margins from selling software
> instead of human services.

Companies tend to do the opposite, though, right? Apple could increase its
margins by selling iOS and the Ax processor IP. But it makes more “boatloads
of money” selling hardware, even at lower margins. Instead of selling IP,
Apple uses its superior IP to dominate the market for phones.

Its likely the issue isn’t margins, but scalability. Scaling a law firm is
difficult to impossible due to conflict of interest rules. That’s why the
largest international law firms have 4,000 lawyers while PWC has 230,000
accountants and advisors. That puts a low ceiling on how much you can scale
while doing actual legal work.

~~~
Adrienvdb
Conflicts of interest rules make it harder for law firms to scale but it is
possible by setting up Chinese walls
([https://uk.practicallaw.thomsonreuters.com/3-100-8763?__lrTS...](https://uk.practicallaw.thomsonreuters.com/3-100-8763?__lrTS=20181218001936411&transitionType=Default&contextData=\(sc.Default\)&firstPage=true&bhcp=1))
ensuring lawyers from the same law firm can work in parallel. Ultimately,
conflicts of interest rules apply to each lawyers individually, not to the law
firm.

~~~
rayiner
The US has stricter conflicts rules, and typically impute conflicts to the
firm, except inherently personal conflicts (spousal conflicts). Chinese walls
require client consent, and some jurisdictions, like Texas, do not give effect
to Chinese walls at all.

------
staticautomatic
As far as I can tell, Kan fundamentally misunderstood the nature and value of
automation in the legal services industry.

Kan was quoted in 2018 as saying "The goal with the tech side has always
been...to help attorneys spend more of their time on meaningful work and less
of their time on crank-turning work."

Time spent on "crank-turning work" constitutes a relatively negligible portion
of billable time for any attorney billing at a reasonably high rate. They
delegate as much of it as possible to people who bill at lower rates, like
assistants, paralegals and junior associates. So you're not really automating
much of the attorney's work at all. Even if you build an ergonomic software
platform for routine tasks (like Atrium's glorified Dropbox), the amount of
time/money it would save over the course of a large engagement is de minimis.
And if you aren't dramatically saving time, you can't dramatically reduce
client costs under any fee structure.

So they end up with this software group making tools that don't help the legal
side make more money. And the tools don't contribute meaningfully to the legal
side's pitching for work in part because they don't save the prospective
client much money. Meanwhile, the software side can't sell the tools to other
law firms because the software side is tied to a law firm. Ultimately, they
end up with a bunch of lawyers and software developers who can't help each
other. This outcome is so predictable that it's downright hilarious they ever
thought it would be a money-making strategy, and apparently the investors
didn't understand or think it through, either.

What Kan mostly got wrong was thinking that automation would be _profitable_
for a law firm. There are lots of automation tools that would be extremely
_valuable_ to a law firm, but that usually means you should be selling them
_to_ a law firm, not _from_ a law firm.

~~~
dustingetz
Kan tried to sell $36k/yr fixed price legal packages as "efficiency" to early
stage startups. He generated leads with bait-n-switch tactics - by pretending
to be a startup accelerator with a YC-style application - afaict the
accelerator did not actually exist. I will never forget that he tried to pull
that on me.

------
santojleo
FWIW - This was my product hunt review 3 months ago, after using them for
about 4 months. Reads like a post mortem now.

All in all, I actually feel I overpaid for subpar legal services.

I will credit them with a smooth and enlightening (albeit overpriced)
corporation formation, and maybe they are pearing down the product to just
that - because that was the only thing that worked, IMO.

I felt as if they were taking advantage of early stage startups preparing to
raise capital. You can’t bill their rates and then ghost them, those are
precious dollars and precious time.

“I have been trying to cancel for over a week, and more of the same. NO ONE
RESPONDS FOR WEEKS! These are ATTORNEYS! Waste of money.

I’ve dealt with many lawyers coming from my last startup which was in a highly
regulated space.

Atrium is like an expensive legal zoom, but overpriced. Understand it’s
cheaper to use a lawyer at any other law firm because your retainer is a
deposit on future services.

With Atrium your paying $6k a year in subscription fees for “legal advice”
which is otherwise baked into any other law firm, and they don’t provide much
advice.

They really specialize in financing, using ycombinator docs. These docs are
publicly available templates. All other services are limited to their “al la
crate menu”... again all templates. It takes days to get a email back from
them. It takes a week to get a call setup, if they have the time, and if they
will even discuss the matter.

Litigation? Find someone else

Overseas? Find someone else

Doing something outside of California like an asset purchase? Find someone
else

So you basically need other lawyers anyways if you use atrium, The rest of
their menu is boiler employment agreements, NDAs, and terminations - all of
which are 2x local rates.

They custom quote TOS and privacy policies - and again it’s all template based
- and 2x local rates.

I asked them about the impact of California’s new AB5 and yep, ask someone
else! Save your money - don’t buy the hype.

All your doing is helping VCs cover their recurring legal expenses by paying
Atrium to overcharge you and build valuation based on their “tech” which is
just a drop box and bad customer service, and no legal support.”

------
seibelj
I worked at a company that experimented with them. We had a lot of legal spend
to white shoe firms (multiple) and wanted to give Atrium a try.

They had a flat monthly rate, and then a la carte billing if you needed extra
things, IIRC. The real problem was, when we needed something reviewed or
worked on, they couldn't deliver on time or promise any guaranteed deadline.
My CEO was very frustrated.

~~~
duxup
It's kinda like buying something that saves you money by cutting
support....and then calling support.

------
petesmithy
I get that this shit is hard but who thinks that saying "[o]ur in-house
attorneys _will shift to have the option to become_ preferred providers in our
professional services network" is ok?

This is such a gross way of putting it.

This isn't a publicly listed company ffs, just say what everyone knows it
means: "our startup's Plan A performed unexpectedly so some of our great
colleagues, who believed in us and worked hard for up to 2.5 years, are losing
their jobs, and this sucks, but based on what we all learned, including thanks
to the valuable work the in-house guys did, we're kicking off Plan B today".

------
jelling
I will always remember them for their outreach emails that pretended to be
from Justin and included “Sent from my iPhone” to deepen the illusion. After
talking to them - and already having competent counsel - it was clear they
wanted to turn legal services into a predictable cash flow SaaS business more
than they were actually solving anything.

------
dboreham
It's not looking good for self-driving cars if we can't make a self-driving
lawyer.

------
orliesaurus
so what exactly is Atrium now? A dev shop?

    
    
        tech tools it developed for lawyers and law firm clients, and for new areas it will expand into.
    

This press-release feels was very shallow to me, can anyone explain?

~~~
mdotk
Could NEVER understand what the heck they do and how they got $75M. Just
sounded like they were a law firm specialising in start ups. Big whoop.

~~~
meritt
> how they got $75M

Justin Kan sold Twitch to Amazon for nearly $1B after 7 years, Socialcam for
$60M in 18 months, and Exec for "under $10M" in 2 years.

That's how he raised $75M. The company/product was completely irrelevant.

~~~
OnlineGladiator
That downward trend is a little concerning. And honestly, "under $10M" is
probably a bad exit (although I don't have enough context to say for sure).

------
KaoruAoiShiho
Did they prove or felt like they proved product market fit before they hired
loads of lawyers? I wonder how that worked. (Serious question, not trying to
be critical).

~~~
staticautomatic
They're probably now on the long list of law firms that tried and failed at
alternative fee structures. Legal services consumers have shown time and again
that they like regular old hourly billing.

~~~
sjy
Can you expand on this? It sounds plausible, but then so does the narrative
being pushed by the “new law” firms – that clients want alternative fee
structures because they don’t like the open-ended cost of time billing.

~~~
pkilgore
Not OP but former litigator turned programmer here. This gets very complicated
because saying "legal work" is a giant generalization for a broad field. But
talking about this with my peers (still a slice of the market) we arrived at
this:

There are three types of legal work (exceptions, yada yada, but mostly):

1\. Normal people shit. Parking tickets and most criminal law, etc. Flat fees
fine and usually nice so your clients understand (and understand their ability
to actually pay your rate). Work itself can be pretty predictable, or taken on
contingency for civil stuff.

2\. Line of business legal work. If you fuck this up it sucks, but rarely is
it a material risk to the value of the company. _This work is usually brought
in-house ASAP, to control costs._ Before that point, you see both hourly and
flat fee work, mostly based on client sophistication to negotiate such things.

3\. Bet-the-company (and white collar/wealthy criminal) work. Here clients
only care about one thing: WINNING. You win M/A by closing. You win regulatory
work by clearing the way for profit making activity. You win bet the company
litigation by....winning. The cost of legal services, even at hourly rates,
are negligible compared to the profit making ability success unlocks (or
unlocks the continued existence of the company, a guy not going to prison).
Clients rarely give a shit what or how you charge as long as you win. They
will pay whatever "winners" charge. They will only bitch about costs if they
percieve themselves to not be winning.

You cant talk about this as if legal work is the same. That's probably why you
percieve a disconnect as an outsider.

~~~
sjy
So, contrary to the OP, you would argue that clients _don’t_ like time
billing, but when the stakes are high, the price doesn’t matter. That makes
more sense to me than the idea that clients actually like a pricing model that
encourages inefficiency.

------
duxup
>Its goal was to improve on the traditional law firm model, by developing
software to improve efficiency for both its attorneys and clients.

Any word on what they actually were doing to gain these efficiencies?

~~~
heymijo
If I had to guess based on parsing these articles, Atrium went up against
incentives in the legal industry and lost. [0,1]

Legal firms bill hourly. Efficiency means less billable hours.

(warning: moving into personal experience and conjecture) Yes, boilerplate
forms for repetitive use cases seems like it should be a thing, but in my
experience building businesses, every lawyer I have dealt with has found any
reason possible to have custom documents.

It's also not clear they ever found Product/Market Fit. [2,3] > _This week Kan
confirmed that the company has completed its fundraising process, raising
$10.5 million_ > _as Atrium goes through its product development phase and
tries to achieve product-market fit._

[0] [https://abovethelaw.com/2017/09/competition-is-for-losers-
th...](https://abovethelaw.com/2017/09/competition-is-for-losers-the-rise-of-
atrium-part-i/) [1] [https://abovethelaw.com/2017/10/justin-kan-answers-the-
call-...](https://abovethelaw.com/2017/10/justin-kan-answers-the-call-the-
rise-of-atrium-part-ii/?rf=1) [2] [https://techcrunch.com/2017/06/15/justin-
kan-atrium-lts-fund...](https://techcrunch.com/2017/06/15/justin-kan-atrium-
lts-funding/) [3] [https://techcrunch.com/2018/09/10/atrium-
legal/](https://techcrunch.com/2018/09/10/atrium-legal/)

~~~
duxup
I wonder what the yin and yang in customer's minds are with

"Thank goodness my law firm is saving me money by generating these documents
for cheap!"

And

"You know this is kinda important but I'm not sure I want discount lawyer's on
this who automate paperwork...."

~~~
nrp
Most/all law firms have templates they hold internally and modify slightly for
their clients. Very few billable hours are going into handing you your
standard agreements like NDAs, offer letters, CIIAA, and so on. Your lawyers
are really there to help you when things go non-standard, which is inevitably
going to happen with any non-trivial business.

I evaluated Atrium out of curiosity when I was looking for a law firm for
incorporation purposes. I filtered them out after the first call because they
weren’t set up to handle the slightly unusual setup I had, which other law
firms had no trouble with.

~~~
duxup
Yeah I have some limited visibility to a very large law firm. Paperwork you
can just script never comes up as a problem and it's not like these
organizations would just duplicate effort like that if they could avoid it /
save themselves money.

Also I never got the impression that the really profitable customers are
shopping for those kinds of efficiencies....

~~~
jimmydddd
"... really profitable customers ... ." I agree. If an attorney can choose
their customers, they are not going to choose the penny pinchers.

~~~
duxup
Yeah I've worked enough to see companies chase budget products, customers, etc
.... to see them regret it often.

------
Felz
Last I heard part of the idea behind the lawyering was that it'd give valuable
in-house experience to develop the tools. What changed there? Did they get a
big contract with Orrick to replace the in-house lawyers?

------
eganist
"Startup Straight Talk"

[https://pbs.twimg.com/media/EONrLRRUYAATmAp?format=png](https://pbs.twimg.com/media/EONrLRRUYAATmAp?format=png)

------
ryanmccullagh
So now they are competing with Relativity? (Chicago based)

