Making Connections, Managing Risk in Startup Deals: A Visit to Boston Law Firm Mintz Levin
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long-term great result. There have been successful companies already. EnerNOC, for example—their guidance is to expect nearly a couple of hundred million in revenue this year, and cash-flow positive. They are going to become a profitable business, and they just raised another $100 million. That is a client that has been a success for us and has become one of the standard-bearers in the industry space. There is a staggering pipeline of other companies that are waiting to be sold or taken public, so the next three years are going to be really big years.
X: How has the economic downturn affected Mintz?
LG: Most of us have lived through the booms and busts of venture capital and emerging growth. We were the third-fastest-growing law firm in 1997-99, riding that dot com boom, and we contracted and crashed along with the industry. It’s not as dramatic this time around—we were not as leveraged in late 2008 as we were in 2001—but we all recognize the cycle that we’re going through now. Nobody is saying “Let’s give up on venture capital.” The question is, how do we hunker down, just like the VCs themselves, and how do we weather this. We are thinking about how we need to evolve, from an economic point of view. The changes in what’s driving emerging growth companies and the venture model are also going to affect how we make money and how we have to staff things. So we have a lot of internal evaluation going on.
X: Let’s talk for a bit about what kinds of actual work you do for startups and venture funds. But first off—you represent both companies seeking funding and funds seeking to invest, so how do you manage potential conflicts of interest?
TB: We will represent the funds X, Y, or Z, in a deal, and we will also represent companies A, B, or C, but we will never overlap a fund and a company together. Aside from that, folks just have to get comfortable with the fact that those relationships are there.
LG: It’s pretty well understood that there are only so many lawyers who understand venture financing—and you definitely want to work with somebody who is a venture lawyer when you are doing a venture financing, not with some litigator who is just trying his hand. And most of the industry understands that just because we work with, say, MVM Life Sciences or Oxford BioScience on some of their portfolio investments doesn’t mean that Mintz Levin couldn’t represent a company that has one of those funds as an investor. You would not be able to hire [an attorney in Boston] if you ruled out all the firms that have those relationships.
TB: The reality is that knowing how you think, and how this other person thinks, we can help you bridge potential conflicts that may arise over time. The investors trust us and will listen to us, which increases the likelihood that our client companies will become successful.
X: I think that among a lot of new entrepreneurs, there’s a certain skepticism toward lawyers, just as there is toward venture capital firms. The perception is that the law firms are going to earn fees whether or not the companies they work with are successful.
TB: Oftentimes, entrepreneurs’ bias against the venture community, or against the service providers as a necessary evil to take their technology to market, is a bias by … Next Page »