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Shape Up! Practice Management Tips for 2010

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FRONTLINES

TRENDS REPORT

THE RISE OF VIRTUAL LAW FIRMS

It used to be that when lawyers formed their own firms, either as solos or with a few partners, it meant they would rent office space and “hang out their shingles.” These days, however, some start-ups are skipping the shingles and taking the “virtual” approach.

The leader in this trend is Axiom, which was actually founded nine years ago. Unquestionably the largest of the virtual firms so far, it was started in New York by Alec Guettel and Mark Harris, who’ve often been described as “BigLaw refugees.” They, in turn, describe Axiom as “the first real alternative to the traditional law firm.”

What’s so alternative? The lawyers do not have offices, secretaries or desk space. They work on-site at the client’s location or at home. Another big difference is that, unlike a traditional law firm, Axiom is not a partnership but a corporation originally funded by venture capitalists. But perhaps most important, while its lawyers are graduates of top law schools as well as being BigLaw alumni, Axiom’s fees are less than those of large law firms.

Apparently the idea has worked. Axiom now has several hundred lawyers and six offices—in New York, San Francisco, Chicago, Los Angeles, Washington, D.C., and London. But these are not “practice” offices. For the most part the people based in them are attorneys, executives and staff who manage the enterprise.

Another thing that makes Axiom different from traditional firms is that the lawyers are free to work as much or as little as they wish—a characteristic, by the way, common to this new type of firm. As for their client list, it’s extensive and includes such names as Accenture, Dow Jones, Thomson Reuters and Xerox.

The growth of Axiom didn’t go unnoticed, of course. Other virtual firms started up in turn. Some were moderately successful but remained relatively small. Then, in 2008, Virtual Law Partners (VLP) entered the field. Founded by Northern California lawyers Andrea Chavez, Craig Johnson and RoseAnn Rotandaro (also large firm refugees), the firm has grown rapidly and, with over 40 lawyers, may already be the largest “no-office firm” after Axiom. Reflecting this growth, the firm has a chief financial officer, a communications director and a technology architect, all of whom, of course, work remotely.

Learning from experience. Chavez and Rotandaro both focus on transactional work and had each founded virtual firms before. However, they felt those firms were too small to attract and handle the kind of work they wanted. Separately they approached Johnson for advice. Johnson, who passed away this past October, was a former computer engineer who had also been a co-founder of an earlier virtual firm, Venture Law Group (acquired by the now-defunct Heller Ehrman). His experience in the challenges facing teams of virtual lawyers, as well as new advances in technology, enabled VLP to both develop an advanced technology platform and an administrative structure to support teams in handling large transactions for major clients.

Like Axiom, VLP doesn’t hide its no-office status or the fact that all its lawyers and staff work either from home or at the client’s location when necessary. In fact, like Axiom, it boasts about it. It also emphasizes the experience of its lawyers and its lower-cost structure and rates. But there is at least one major difference: Every lawyer in VLP is a partner.

The list keeps growing. Among a number of other virtual start-ups, one of the more recent is Ghannoum Law Firm, the brainchild of another former BigLaw lawyer, Afif Ghannoum, who began by recruiting lawyers on Craigslist. The firm’s practice focus is offering economical legal services to start-up biotech companies. It does have a small office in Cleveland (Ghannoum’s home city), but some of its lawyers are based in New York.

Furthermore, like both Axiom and VLP, it emphasizes that its lawyers work either at home or at the clients’ offices, and it stresses its low-cost structure and the fact that its lawyers have all come from top law schools and firms. And, like VLP, it has ambitious growth plans. Ghannoum’s strategy is to have as many as 50 lawyers in the firm within the next few years.

The similarities among these firms are obvious—no practice offices, along with a lower cost structure and overhead and, therefore, lower fees. But there is another significant characteristic they share—an emphasis on quality of life. VLP probably expresses this point best on its Web site: “In addition to enjoying a satisfying law practice, we want to have fun! Expect invitations to lots of parties and retreats….”

This emphasis on fun and quality of life makes these firms different from a lot of other start-ups as well as many established firms. Even their Web sites are fun. And that’s a difference that I think is exciting.

About the Author

Bob Denney , President of Robert Denney Associates, Inc., has been providing strategic management and marketing counsel to law firms throughout North America for over 30 years.

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