Legal Innovation in Silicon Valley: View from Wilson Sonsini
In this episode, Joe Borstein of LexFusion interviews David Wang, Chief Innovation Officer at Wilson Sonsini. Wang describes how working with Silicon Valley tech companies made keeping up with technology an imperative for the firm. He describes the many ways that technology is not only transforming legal work, but also providing new opportunities and career paths for lawyers. Read transcript
CEO of LexFusion
Joe Borstein is the CEO of LexFusion. Also, columnist for Above the Law and Advisory Board Member for Penn Law’s Future of the Legal Profession initiative.
Chief Innovation Officer at Wilson Sonsini Goodrich & Rosati
David Wang practiced corporate and securities law for more than 10 years, working with private and public companies on general corporate and transactional matters.
Welcome to Legal Tech Matters, a Litera podcast dedicated to creating conversations about trends, technology and innovation for modern law firms and companies big and small.
Hi, my name is Joe Borstein, CEO of Lex Fusion, and Total Freak about legal innovation.
Today, I’m here with David Wang, Chief Innovation Officer at Wilson Sonsini. So a little reminder about what we do here on future law, for tectonic and interrelated forces are bubbling under the surface of the $800 billion legal industry. Keep this in mind today as we talk through David’s role, Wilson Sonsini, and his views of the market. First, we have globalization, allowing lawyers and other allied professionals across the globe to collaborate seamlessly on legal work in a way that was not possible just ten years ago.
Next, we have technology automating routine legal processes of today and relentlessly crawling up the value chain of tomorrow. Third, we have outside investors pouring in from Silicon Valley VCs, to New York private equity funds, to numerous public stock offerings in just the last year, these investors see an opportunity to make a system that they see as broken dramatically better.
And last but certainly not least, we see legal regulation being questioned and changed. Finally, even here in the U.S. It allows professionals outside of bar associations to work right alongside lawyers to solve legal problems at scale and even to participate in some of the profits of traditional legal work. Imagine if and when the US capitalist juggernaut sees that it can participate in an additional 400 billion dollar domestic legal market. And now, while there’s a bright line, we finally see the creation of legal sandboxes and the success of legal technology companies going public.
One can make the make the argument that 2020 was the first year that you could see all four of these forces acting at once. And the market’s still massively underserved. Lots of people who want legal services are priced out of it. Technology can be a great equalizer, and at least we at Lex Fusion believe it has the ability to dramatically grow the pie. Futurist Peter Diamandis likes to say If you want to make $1,000,000,000, you better figure out how to help 1,000,000,000 people. That stuck with me.
Law affects every single person on this planet. There are a lot of people to help, and there’s a lot of money to make. So whatever drives you idealism, greed or even just excitement, we beg all lawyers and allied professionals to pay a little bit of attention to the legal innovation space. You might just find your purpose here.
So again, today I’m here with David Wang, Chief Innovation Officer, Wilson Sonsini. He is at Davis Polk Alumni, a Georgetown Law alumni, and he is both building and buying at the highest level of legal innovation.
So David, first of all, thanks for being here. Tell the audience, give them a little bit about your background and how you ended up in this really exciting position.
Yeah, thank you for having me, Joe. So a little about me. I was a entrepreneur before going to law school. I had my own business, so I started like when I was in college and then just kind of went everywhere, you know, came to the U.S. and from Canada, came came to the US for the second time, actually to go to law school at Georgetown and then went out to the West Coast. When I heard about this thing called Silicon Valley, and I was very interested and excited about technology and started working out there. And then there was this giant tech IPO boom at a time in China.
And so because I was a fluent Mandarin speaker, I went out there and that’s where I joined Davis Polk and worked in capital markets while I was out there. And then eventually decide to come back to the valley.
So when I came back, I joined Wilson Sonsini, started out representing, you know, startups and tech companies and then eventually figured out that what I really wanted to do wasn’t the law of tech, but rather the tech of law.
So kind of gradually kind of became known as an expert in that particular field in my firm. first of all, people I work with and then eventually in the whole firm, and I think timing was right in that there was it just basically coincided with this massive jump in demand for this type of skill.
And so one thing led to another and eventually they just told me, You know what, David, we just need you to do this full time at the firm. And, you know, so we started doing that and then, like six months later, is like, were actually, you know what? We need you to build a department and there’s too much for one person to do. And so there we go, and we went on our journey.
What did you see? In your practice that led you to the belief that I think it was in that very much in the minority at the time that legal innovation and legal had a real place in our future? Or was it the Silicon Valley experience?
Yeah, I mean, it’s it’s really interesting because I think we have a relatively unique vantage point being where we are and interfacing with the kind of companies that we deal with.
And the clients are actually a real strong influence here because, you know, you see them and the way that they work and their expectations about how things should be done digitally is just not even on the same level as like what, you know, even, a Silicon Valley lawyer would be doing.
I mean, they’re they’re used to like digital payments, right? Like instantaneous responses, collaborating in multiple pieces of software. You know, I remember a client invited me into like a Figma board at one point and then, you know, oh, “here’s a Jira Task,” you know.
And then, you know, lawyers are dealing with this stuff and everybody’s like, OK, what do we do? And also, they see the efficiency and they ask “why don’t you use Slack?” Right? So this permeates your experience on a day to day.
And then on the macro level, you know, I would have to say that at least I hope that among our partnership, you have to believe that this technology stuff works because all our fees come from companies that are disrupting an industry.
So, you know, there’s money to be made in disruption. And you know with the level of inefficiency that I think we are all painfully aware that exists in the legal industry. You know, we’re just asking for it to be disrupted.
And so you’ve seen attempts here and there at it. And I think nobody has been successful so far, but it doesn’t mean that the opportunity isn’t there.
Absolutely. There is a fear, I believe, among many lawyers and many law firms and certainly law students, that technology is going to take away their jobs, right?
There is, and it’s something that’s happening in almost every other industry. And, you know, over history, we’ve actually seen new technologies tend to to, you know, increase wages and increase employment levels. But lawyers, especially working on the billable hour, I think, have a particular fear of that.
Has that been a problem in your career to convince lawyers that this can both help them do their jobs and also kind of help grow the pie?
Yeah, I think absolutely. I think like everybody in my roles, there’s definitely that dynamic there.
Anybody that tells other than that is lying. Right, right. And so I think the way that I talk about it internally is very important because there’s a there is a macro level answer as far as the entire industry. And then there is kind of a micro level answer at the unit of our business, like my firm. And then even a kind of subatomic level at the individual attorney or legal professional, whether they’re a paralegal or whatnot, paraprofessional.
Right? And so it goes something like this, at least in my own view of the world. So on the macro level, the absolute amount of legal work that needs to be done is growing. There’s no doubt about that, right? In every single study that people have done on the industry you can see that. But at the you look at the growth of in-house departments and ALSPs compared to the growth of law firms, even though law firms are doing historically well – we have a record year last year. So did many other firms, but the firms are not growing as fast as the overall industry and the ALSPs. The legal tech companies and these other providers and in-house departments are growing much faster.
Right. Which is telling you that at the macro level, the business is moving away from firms generally. Right. And so, you know, at the micro level, right, like if you’re at a firm like ours, which is very specialized and kind of known for representing really tech companies and tech and biotech companies and investors, you know, we’re doing exceptionally well because we are just intimately involved in that tech world. But I think it would be kind of delusional for us to think that these macro trends will never, ever impact us right at that level. So when I look at it on a micro level, the thing that I always tell people internally is that, you know, there’s really kind of a step. The logical way you think about this is like, what do you think that this disruption is possible and will eventually come? I think most people who are tech savvy agree that it is possible and they might disagree about when or to the extent that it will happen.
But everybody generally goes, “Yeah, it’s going to happen.” And so then the question is, OK. Do you want to work at a company that is ahead of that curve and drive that disruption? Or do you want to work at a place that’s going to need to react to that disruption or change?
And you know what? The way that most companies reacted, disruption change is that they lose. They fail to react to it. They lose their business or they decrease their market share, or they had to lay people off because they’ve lost their business due to that, too.
Right. So I always tell people is like, Look, I’m not the guy here that’s going to replace you with a robot. That’s not what I’m here to do. What I’m trying to do is to make sure that our firm, our business thrives in this environment where these changes happen so that we continue to maintain and grow our market share so that you will continue to have a job and an even better job because you’ll be doing kind of a levels of work, – I think I’m sure someone like you is familiar with that argument of – taking away that routine mechanical stuff and leveling the work up.
That is only possible if you are ahead of the curve. Not if you’re just getting beat down by it because you’re losing your business because somebody else is taking it.
Absolutely. And I’m curious how you see lawyers in your firm or just lawyers you interact with in the broader market.
Look at also the opportunity for themselves in terms of. There’s no question we’re seeing a boom in legal innovation. We’re seeing various types of business models open up technology step in that actually works. Most of this is built by lawyers. I mean, you know, if we want to talk about products at Litera, you have, you know, Hayley Altman, who was a partner before she stepped out to build Transact.
A former Wilson to senior associate, by the way.
But like, I guess from my point of view, and then I’ll get I’ll take your reaction. I was friends with a lot of lawyers. I was a senior associate when I left practice. Who didn’t love what they were doing but loved but but really were idealists and loved making the world, in their view, a slightly better place. I feel a lot of those lawyers would be very excited by a world where they could take their skill set that was hard earned, apply technology and scale to it, and also, if they wanted to, profit tremendously from it, are you seeing the internalization of that, that promise if they want to?
Or is that something? Does that feel like it’s an outgroup taking that work?
No, I mean, you definitely see it right. And then, you know, but it’s a it’s a scale issue. So what do I mean by that?
So. And I’m thinking of a particular associate. I think it was like two or three years ago was the first year in which I was as a senior, and we lost a summer associate that we gave an offer to to a legal tech company.
And then at that time, we sent shockwaves internally in recruiting. Wait, hold on, this person is turning down a Moses and seeing offer to work at some startup straight out of law school. You know, that was kind of a wake up moment, I think, for some folks in our H.R. and recruiting department.
But, you know, I think that’s an interesting phenomena. So I’ve created a group Wilson Sonsini called the Innovation Leaders Forum. And so I try to gather all of the lawyers that are within the firm that have this kind of outlook and interest and kind of give them leadership opportunities and get them to work on projects. A lot of them go on to become very successful internally and known for that, and some of them even go off and do their own things, either in business, right? But I would say that that is a relatively small segment, right?
I think the interest, the funnel of how many people are interested in potentially doing that or making it a part of their career is large. But the people that really go and do it and in a meaningful way is smaller. For a vast, vast majority of lawyers do far more likely thing that they’re going to see, and how they would prepare for this – this because people became lawyers because of specific reasons, not they didn’t go to business school or become entrepreneurs or write or go or become engineers for a reason – And so there is lots and lots of room for the future enabled, tech enabled lawyer, right? But that also requires a shift in the attitude and the way that lawyers think about their work. And, you know, at that time, rather the T-shaped person, like that to the top of the T is what need to know about how to be a good lawyer. Right? At Wilson Sonsini when I was still practicing my younger associates would be like, you need to be tech savvy person, or else your clients are going to laugh at you because they’re going to be talking about SAP models and, you know, automation and their servers in the cloud and you’re like, “what? What does that mean?” . Yeah, you’re not even going to be able to read the minutes correctly because you don’t even know what these things are like.
They’re just going to sound like they’re speaking gobbeldygook to each other. So that requirement, that’s the thing for most lawyers where you’re going to need to have some savvy about how technology interacts with the front end of what you do and how to use those things to be a better lawyer, right?
And then there’s going to be a much smaller segment of people that go on to really make that kind of a central element of their careers.
That’s great. So so the next question is going to touch a little bit more close to home.
I know you’ve talked actually on this show about the work you are doing at the firm, building your own products. We see this ecosystem now flooded with money, private equity money companies going public.
How do you decide what to build versus buy and to make it a little bit more compound, what do you want to see this money going towards if you’re not going to build that yourself? What would you like to see people built?
Yeah, my view that there is room for the whole spectrum of build, partner and buy is kind of almost an understatement, right?
So it’s like a prerequisite in my personal belief about, you know, kind of the industry and legal innovation in general is just that like I, – again, these are purely of my own personal opinion, not Wilson Sonsini’s – I think the whole industry has a problem, and the problem is kind of a lack of imagination. I think your lawyers are not doing OK. Give us a break, right?
I mean, right and me a lot already has lawyers. You can’t also want to imagine stuff come on.
A lack of imagination and the lack of risk appetite. Right. And so what do you see? A lot. Very common. And this is also where we started, by the way. So I I’m not giving myself any like, you know, visionary points or whatever.
Like, we started in exactly the same place. Everybody else is just like, Oh, incremental stuff, right? Is like, Oh, I don’t, and let’s take a let’s take a tiny little step first and then take a tiny little step after that kind of step and then a one more tiny step just to be really sure that these first two tiny steps forward, OK? And then like ten years later, you’ve taken like 15 tiny steps, half of which were successes, half of which were like, OK, the ones that were super successful in those tiny steps did not make any meaningful impact on the business because you never aim for a, you know, even close to first base, you know, you’re trying to just hit the ball, right? And so, you know, that’s that’s kind of what you get, right?
And so you know, you have you take a different perspective than that and you say, OK, you know what? We we are 1,000,000,000 dollar a year revenue business. Right? You know, like people are like, Oh, we’re a unicorn. I’m like, Yes. So you raised different financing round. And, you know, like your shares, which have never been actually sold, are valued at $1,000,000,000 that’s no small achievement.
But we are a billion dollar a year revenue business. Right. And you look at what a normal business of this size spends on R&D, and you’re talking about like three to 6% on average in a traditional business on R&D of revenue, not profits but revenue.
Right. And when you look at a technology company, you generally spend around 20 to 30% of revenue on R&D. Right. And so that’s kind of the the larger world, right? And then you kind of zoom back down to kind of law and you say, OK, well, what’s the right, you know, outlook with us in terms of how much you can invest in innovation and the future and know stuff? And I’m like, Well, it’s, you know, it’s not what you’re spending now, that’s for sure, right? And one of the big reasons why you’re not going anywhere is because you, you know, like, you’re like, “Oh, here’s $100,000 Let’s see what you can do.” I’m like, Yeah, this is a $150 million a year business?
We’ll have a summer associate lunch. Yeah, we have a few sandwiches, you know, like what the inflation now or maybe like half is going to with each person?
Right? And so that on to come back to your question, right? So it’s like, what is it so like you need to buy, right? And so we are kind of prolific in terms of what we have bought, and it’s not only that you must buy it, but you must put it into practice and you must follow through like what we did with Litera Transact is a great example, right? I mean, we follow through with, you know, rolling it out across an entire practice. Now, thousands of transactions are on it, it seems like like that scale that works to do right.
I think that was fairly good exercise in high ROI right? But that’s not enough. That doesn’t even go like remotely towards fully solving the problem. If you only do that, then, you know, OK, that’s nice. But it’s like, that’s one of those tiny steps that I talked about.
Right? And then you have to partner, right? So we do that. So we have investments, right? Like, Lexion, you know, which has now been also invested in by Khosla Ventures. When we went in there with Madrona, there’s a sizable investment, like seven figure at least, that’s like get in the door money, right? And, you know, we partner with the likes of Morgan Stanley and Rokiva, you know, publicly listed companies, right, and sales projects that are fairly large.
And then we also have our own build projects internally, which is kind of the premiere saying that kind of connects everything together. But we also have our own completely separate independent ALSP play SixFifty.
So like, you see this whole, I mean, that’s just a MVP width of the the kind of stuff that you need to be doing as a company of your size in your kind of future looking endeavors to, even, in my opinion, have a hope of a shot of having a remote small chance to actually succeed in transforming your business.
I love it. I love it. That’s super helpful. And I think I think everybody out there, especially on the legal tech side of the market is is always interested to hear what people in your seat of what they want them to work on.
So we’re running out of time. I want to hit one more thing for sure. We talked a little bit before the show about the open cap table project. To tell me your views on that and how you’re how you’re involved.
Yeah. So I mean, for the folks out there that are not, you know, maybe a corporate lawyer by background, I don’t know. Yeah, yeah. So, you know, a cap table is the basically how you track who owns what in a company.
So, you know, up until a few years ago, people did that on Excel. But this market is becoming increasingly driven by software companies, some of which are very well known like Carta, like a 6 billion dollar a year valuation company now. Morgan Stanley at work, who we partner with, is a giant company. You know, they acquired you trade for $14 billion like. Right. And so this is something that is at the forefront of the kind of overlap/confusion between fintech and law and legal tech so that we and basically every single law firm that represents tech companies has now joined together. Gunderson, Fenway, Callie Goodwin Latham. A whos-who. Yeah, that’s incredible. Now, who’s who of tech law firms, right? So we’ve actually been together like we literally sit in the same virtual room and, you know, we’re not at each other’s throats, which is, you know, incredible.
I was going to say, that’s an amazing story in of itself like that should be its own podcast. And then we’re working with all of these tech companies, right? And I’m on the largest fintech and banks, which will announce shortly.
Actually, next week, those small cohort see a very impressive roster of legal tech and fintech companies in there, and we’re all going to work together to create a common standard for how data about the equity of a company is going to be recorded.
So it’s basically going to be a one common language or a currency through which we can all interact with each other. Right. So as the money flows and the legal transactions happen, how you talk about who owns what among this entire ecosystem, which is rapidly becoming siloed, rise, right? We’re going to break down all the silos and create this whole new way of doing things which in itself would be an incredibly interesting. So I’m super excited about that as a founding member and as author of the Open Cap Table Principles.
So if you were listening out there and you’re doing stuff with cap tables, you should consider joining us. Anybody can join. We just ask that people declare their fealty to the open cap principles at this point, but there’s going to be a lot more to come when we get into the technical aspects of it.
That is that is such a cool project. I mean, it just sounds like something that breaks down the walls between business and legal technology as well. David, there’s so much more we could cover. This was this was incredible.
I think we got through about a third of the questions I hope to ask you, but only because you gave some great, insightful information. So thank you for coming. Again, this was David Wang, Chief Innovation Officer, Wilson Sonsini.
My name is Joe Borstein. I want to thank Litera as always , as always, for giving me this space, and I will see you in a week.
Thanks, everybody. Thank you. Thank you for listening to legal tech matters. Be sure to subscribe wherever you get your podcasts.