An Insider look at Wilson Sonsini’s Neuron platform for start-ups
Caroline Hill talks with David Wang about his work at Wilson Sonsini on Neuron, a proprietary platform that automates and digitizes legal processes for start-ups. Also, how the platform integrates with Morgan Stanley at Work’s Shareworks platform to read and write capitalization data directly into Shareworks through an API
MEET OUR GUEST
David Wang is the head of innovation for Wilson Sonsini, responsible for strategic development for legal technology, the management of innovation-related initiatives, and fostering a culture of innovation.
Editor-in-Chief Legal IT Insider
Caroline Hill is a former lawyer in the city. She has been a senior reporter at Legal Week, news editor at Legal Business, and took over as editor of the Orange Rag in 2014/5.
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 LegalTech Matters, a Litera podcast dedicated to creating conversations about trends, technology, and innovation for modern law firms and companies big and small.
Hi everyone, I’m Caroline Hill. I’m editor-in-chief of Legal IT Insider and welcome to my second podcast with Litera. We’re talking about the work that Morgan Stanley is doing, Morgan Stanley at Work and Wilson Sonsini. But they unveiled, on the 23rd of September, an API that integrates Morgan Stanley at Work’s Shareworks platform and Wilson Sonsini’s new software platform, Neuron, which will read and write capitalization data directly into Shareworks in real time. And we’ll come on to talk about what all that means and joining me to discuss the API and the work that Wilson Sonsini is doing with Morgan Stanley, is David Wang, Wilson Sonsini’s chief innovation officer. Hi David.
Hi. Thank you for having me.
Thank you so much for joining me. So before we… I was thinking about what order we do this in, but I think what would probably make sense, before we start talking about Shareworks and we start talking about Neuron and the API, I think it’ll be really helpful for me, as well as people listening in, to talk about the capitalization tables. I’ve been doing some reading about it. It wasn’t something, I’m going to be honest with you, that I was overly familiar with, but before we launch into the platforms and the work you’re doing, just describe for us what the problem is that you’re solving.
Yeah. Happy to do that. So I think that it’s probably it’s something that every corporate lawyer is intimately familiar with and nobody else probably knows much about. It’s a somewhat esoteric area of the law, but I think actually nowadays is increasingly becoming an incredibly important area. And that’s because the capitalization table is essentially the information of who owns what in a company. So if you imagine when you’re incorporating a brand new startup, like we often do, that entire process is basically saying, okay, Caroline, you are the CEO. You have 56% ownership and then your co-founder has X percent ownership. And if you think about every single thing that the ecosystem cares so much about, and I mean, you get these tech crunch announcements. It’s like, oh, so-and-so did a hundred million dollar raise, so-and-so is doing an IPO, so-and-so is getting acquired.
Each one of those fundamental transactions is, in fact, a change on the cap table at the core. And so when you do a financing, you are issuing new shares, which means that on your cap table, your new investor, I don’t know, say Sequoia, is coming in and now Sequoia owns 25%. Everybody else’s shares get diluted. When you’re doing an IPO, you’re doing an offering out to the market. Public investors will come in, they will change your cap table. And so through all of that, the legal documents are the source of information that ultimately get reflected in the source of truth about the company. And as the guardians of the company’s record and the legal documents related to it, and in terms of making sure that it’s complying with securities laws and any other regulations, lawyers are constantly working day in, day out and paralegals in terms of confirming, updating, supporting documentation in terms of making changes to the cap table.
Which is usually, from my readings, it’s usually a mess. So it’s quite often all over the place. And that takes a lot of time which, bearing in mind, I suppose, at this stage, you want to be as efficient as possible. When you’re talking about startups, where obviously money and efficiency is key, I guess you want to have it there from the outset, with as little effort as possible.
Exactly. I think people don’t realize often that the critical work that goes on behind the scenes, because it’s one of those things when, when it’s right, everybody just expect, of course, it’s right. When you show me a piece of information about who owns what in the company, investors are making decisions based on background, like how much should I pay for this company’s shares? Depends on how many shares you have outstanding on per share basis. And so you can imagine the consequences are huge. You could get it wrong, but people just expect it to be right. But in order to make it right, all of that work has to go in to make sure every single piece of information that came before it, was in fact backed up by documentation. Then the people sign that agreement. And the representations of warranties. Probably the most important part in wraps is when you get the capitalization wrap up, like this is who owns my company, and this is how many shares, therefore the contract we’re entering into, in terms of you buying shares, is valid and you’re paying the right amount.
So tell me, I’m really going to talk a lot about the work that you and Morgan Stanley are doing together, but I really also wanted to give you an opportunity and I want to learn more about Neuron. So you, Wilson Sonsini, you officially launched Neuron in June and it’s to create a digital home for startups. But I thought it’d be really interesting just to… Can you tell us a little bit more about the platform?
Yeah. So Neuron is our proprietary platform to automate our delivery of our legal services to clients end-to-end in the emerging companies context. So, as you’re probably familiar with, we have a number of efforts in the legal technology and innovation ecosystem. And so this is what we consider to be one of our centerpiece, where we are actually launching a digital transformation of that emerging companies practice. So unlike some of our other things that folks heard about, for example our award-winning 650 subsidiary, they are in the world of automating documents and productizing and selling to companies. It doesn’t actually disrupt our core business. It’s business as usual in our main office building, but this is something where we will be changing the nature of which we deliver our core services.
What we’re moving towards is augmented method of service delivery, where our clients are going to be receiving our services through this digital platform. And that platform is going to be automating all the manual labor that would traditionally go into producing the paperwork associated to enable a technology company to go from a team B startup all the way to an IPO company. But our lawyers are integrated right into that process. They’ll be able to chat with their clients on specific matters, help them manage tasks, help them self-service, answer any questions that they might have. All the while we are, as I like to say, automating everything that needs to be and can be automated, but not automating anything that shouldn’t be automated in terms of that value added advice. That’s how we’re planning to provide maximum value to our clients in the future.
Okay. I mean, it’s so fascinating. I gave a talk to a bunch of students the other day. We were talking about some of the really tricky but obvious areas of progress in document automation. They were all studying document automation. But I mean, it’s still hard. Are you able to say… I’m fascinated as to what Neuron’s built on. I don’t know to what extent you can say that or what you’re using. I’d love to know more about that, if you’re able to share, just before we get on to Shareworks and the API.
Yeah. I mean, so it’s a proprietary platform that we built ourselves and developed in-house, but it integrates with a number of state-of-the-art or standard market solutions. So for example, document automation is a part of it but only one part. In a transaction, the documents are just the start. It also automates the process of it, and the signature with respect to collection, and then the data input. And then also the data entry with respect to third party sources of truth. And so, for example, in the signature automation part, we’re integrating with DocuSign, because why would you build your own thing? There’s a commercially available solution. We do that with many other parts of the platform as well.
And so today the announcement is we’re talking, we’re doing it with Morgan Stanley as far as the equity management partner. And so you can see the approach that we’re taking is the department’s proprietary is we’re pulling everything together. But where our clients are already living somewhere else and used to using a accepted market standard solution, like Shareworks, we don’t want to reinvent the wheel. We want to make sure that we can go where the clients are already, instead of trying to pull them into something that’s not fitting within their stack.
Yeah. That makes a lot of sense. So you’ve been working with Kevin, haven’t you? So Kevin Swan, who’s co-head of global private markets at Morgan Stanley at Work. I think he’s been leading this for Morgan Stanley. So, I mean, it’s interesting because, again, I was fascinated to… One thing I love about this is the collaboration between, I think, as you say, not reinventing the wheel, using this API to bring the two platforms together. But again, I wasn’t really so familiar. Clearly I need to do more homework, David, but with Shareworks. And I know Kevin, at one point, I thought Kevin won’t join us. But would you mind just telling, and forgive me for laying out so many of the foundations, but just telling people about Shareworks, as I would have asked Kevin, but if you wouldn’t mind sharing a little bit of information for people listening in.
Yeah, sure. Happy to do that. So, for the folks that are not familiar with this space, I think this used to be just like Excel. People just kept this information tracked on Excel for a very long time. And actually we were the only firm and many years ago we actually created a proprietary software solution to manage it for our clients, just being the biggest law firm in Silicon Valley and having so many of these use cases. So we saw the need for that decades ago. So we actually developed our own platform to track it so that it tracks the things that it’s supposed to, better than Excel. But over the course of the last, I would call, five to 10 years, there’s been a increasing evolution towards using SAS software solutions to handle this information.
There’s now a veritable explosion of providers out there. Shareworks is one of the largest and most robust ones. And so now people are gradually moving towards tracking this information in SAS platforms. And a lot of these SAS platforms will have additional functionality that goes beyond just tracking what’s on your cap table, because, ultimately, that is only so exciting. And if you’re thinking about why is Morgan Stanley tracking cap tables? I think they’ll tell you that it’s because it enables them to provide a range of additional value added services on top, that’s closely integrated with the cap table, like secondary offerings or foreign and evaluation services or helping a company go IPO. And there’s a lot of other things that happen that are synergistic.
And so that’s why they bought a company called Solium for about a billion dollars I think, a few years ago. And it’s now called Shareworks and then they subsequently also purchased E-Trade for 14 billion, I believe, and also merged it with that company. So now I think it’s one of the largest, if not the largest, platforms out there. And that’s why we’re working with them and, given our relationship with Morgan Stanley and their position in the market, it’s made a lot of sense.
Yeah, absolutely. Describe the genesis of the API? I mean, obviously you’ve got a long-term relationship. You’re so well-established in this area, as is Morgan Stanley, but just describe the genesis of the API. How did you come to work together on this?
Yeah, I think that we have established a partnership on a technical level with Morgan Stanley, and we announced that a couple of years ago as part of our transition from that BCI platform that I mentioned before, where we are transitioning our clients onto Shareworks. And so that obviously became part of the conversation in terms of what our next generation technology is going to look like. Because, I don’t know if you’ve figured that out yet, we’re kind of a restless firm, as far as that is concerned. I’m proud that it’s our particular DNA in being a really innovation and technology centered law firm and representing the companies we represent. Our lawyers have a very technology forward mindset.
And people looked at this and said, okay, our next generation platform, Neuron, is going to do all of this stuff that’s around the cap table, that’s going to touch the cap table. And we’re migrating our legacy platform onto Shareworks. And so obviously you see that two and two goes together. And of course one of the big challenges of working through the ecosystem that we are pioneering is how do you get all of this information that’s walled in little silos to talk to each other? And I think this is something that very near and dear to my heart. The law firms, in my opinion, tend to think of themselves as a unique snowflake unicorn animals. And I really think we’re not. We are, in the eyes of our clients, one of many service providers they need to engage with. And increasingly many, if not most, of those service providers are digital.
And so, as the chief innovation officer of a law firm like Wilson Sonsini, I’m always thinking about how do I make that digital client experience on par with the kind of experience that they get in financial and FinTech, in compliance, in other related areas to our world? And you just absolutely cannot do that if you don’t talk to these other players and, in order to talk to them, quote, unquote, digitally, that means having APIs that can integrate with them. And that’s the genesis of that thought.
Yeah. How much of this is coming? So it’s interesting that you’ve got that perspective and I couldn’t agree more with you. When I talk to people I’m now focusing a lot on what does collaboration really mean and talking a lot about, in perhaps a different space, but Microsoft and Teams and how can you create that one platform experience, which the client… How much of this do you think is being driven by the client? I’m fascinated by Morgan Stanley’s such a sophisticated client but, as a general observation, I see clients sometimes saying, we want you to innovate. We want you to be technical, but I’m never sure, with some clients, whether that’s specific enough. How much of this do you think is… Do you think clients are putting law firms enough on the spot and really driving innovation from a technical point of view?
Yeah, I think some of it comes from clients, but some of it is just frankly comes from the market. And I think it’s hard because it’s fragmented. And so we generally have a relatively holistic look at the market in terms of where our clients are living in all of the different practice areas that we’re engaged in. And then I’m essentially looking at a tree of, for each practice area, what are the adjacent technology areas that they interact with. And then trying to make the connection together and proactively researching and observing what our clients are doing in other parts of their business, so that we can come up with solutions that, when we take to general counsel or CEOs, that they think, oh, this makes sense. I already do X or Y.
Just another example, we use Asana for task management. We’re the largest law firm to do that. And then you just go to the market. It’s the number one, maybe number two, depending how I count. And so a lot of our tech companies are like, oh yeah, we use this on internally. And then you can just hook that right up in terms of the collaboration, by sharing a space. But, for the firms that are like, oh, we bought this law firm specific collaboration tool that no one’s ever heard of, that’s going to be really hard. Because people are like, “You’re not using Trillo?” And they’re like, “No, there’s this legal whatever, whatever, that even most lawyers haven’t heard of.” And your clients can go, “No, we’re using Trillo and so you can use it.”
And then of course you’re living in completely different worlds. So I think as part of this philosophy, in terms of us partnering with Morgan Stanley, we also announced recently our partnership with Workiva. We’re going, these are publicly listed companies that were happy to partner with us, but I was the only law firm knocking on their door because everybody else was living in their own world, which is kind of interesting from my perspective. But I’m more than happy to be the first and have that opportunity.
Be the only one knocking on the door. Have you been able to sense, in terms of obviously everyone does this for competitive advantage, have you felt, in terms of how much further Neuron or this work that you’re doing sets you further on the road, from a competitive standpoint? Have you been able to sense, I don’t want to call it ROI necessarily, but have you been able to gauge competitive advantage?
Yeah, I think that is definitely clear. So I think if you… I mean, you’re obviously a consummate insider, in fact that’s the name of your podcast. I think you see how this [inaudible 00:18:38]. I think you can imagine that the work that we’re doing at Wilson Sonsini, we didn’t start and it was not possible to start with building your own proprietary technology platform. And that wasn’t the first thing that we did internally. We did a lot of less sexy, not press release worthy stuff for years. But because those things built on top of each other and then proved out significant ROI in each incremental step, and then we were able to convince the firm and, I think, management together to say, actually, this totally makes sense. We should be doing…
And then we’re just swinging for bigger things now because we’ve, frankly, hit a lot of the low hanging fruit. And so, to your question about differentiation, yeah, I think that’s probably among the most important things that I think law firms don’t think about enough because… And maybe I’ll go a little bit my own personal opinion on this. Are you truly differentiated in your services as a law firm? Because I swear, partners move around all the time, you’re charging similar rates, and you’re providing similar services. How are you actually providing something that your competitors cannot provide? I mean, I think those are serious questions that, from my hat of heading strategy for technology for our firm, constantly on my mind. Because a repeatable competitive advantage, as Warren Buffet said, that is the path towards real business success.
Yeah. I still wonder. So obviously we know that you have to… Well, I still see people approaching technology as the solution to all things, without necessarily really interrogating what that means. And one of the things that I wonder, I think this is perhaps to bring it back to your work with Morgan Stanley. I don’t know if we could bring it back to that in terms of how you came about this. But I feel like people don’t start with the problem quite often, and I’m not sure still. There are some firms that I think do this really well, but I’m not sure whether they’re talking to the clients enough about… I mean, this is a very obvious problem, but I’m not sure… You have to have those conversations constantly, don’t you? And you have to perhaps build it into a process in terms of the way that you work with clients and creating a space where you can habitually have these conversations, where you can habitually say, what are the problems that you’re facing?
Not start with the technology, but actually start with the client problem and create, I don’t know, you might want to call it agile. A lot of people would call it a way of working with them where you can quickly respond to the problem and then work back from there and then go, right. And then we have this technology. I don’t know how much you see… I think perhaps it starts with the conversation, doesn’t it? It doesn’t start with the technology.
Yeah. And I think that’s something that I think technology companies… I think you make a great point and it’s, again, I think this is the maybe a unique and somewhat uncommon outlook and perspective on this, that we have. I used to be an entrepreneur before becoming a lawyer and our firm’s full of people like that, that just very ecosystem centric. So we’re talking to startups and tech companies all the time. And the thing that people don’t realize is that it’s not really the technology, in my opinion. The technology can be magical in a lot of ways and facilitates the behavior that I’m about to talk about, but really the thing that… What makes technology companies so good at creating value and disrupting markets is the act of continuous improvement on the product and the experience.
What software enables you to do is to talk to your client, produce a solution, and then talk to your client again about the solution you produced, and then change that, in the span of a month. And then say, “Hey, how about now? How about now? How about now?” And to continuously improve and make it better and better. And if you are good at doing that, you can triangulate on a problem and solving a solution for your target audience, much, much better than if you imagine a traditional industry like lobbying. One of them where you have practices that are ingrained for decades and sometimes hundreds of years. And then you have a distributed organization with hundreds and thousands of lawyers that you try getting everybody to change.
Everybody change your process because we think this is better. And then five weeks later, we’re going to change it again. You’re probably going to get hung out in the courtyard for that. So that’s the key insight that technology companies have that we can adapt to our industry as well, by deploying technology that we’re going to constantly, continuously, never stops improving on the experience. And call me a optimist but I think this is so true. If I build the thing that clients truly love and which we think we have with Neuron, we have incredible NPS in the 90th percentile. The business will come. It doesn’t matter. Every tech company has done that. So it doesn’t matter if it’s profitable at the beginning, doesn’t matter any of the other things. I just deliver something that’s amazing experience. That’s all you need to do.
Yeah. Yeah. It solves a problem and it works. The user experience is good. We were just talking about user experience. It’s got to be good in this day and age because, let’s face it, we’re all spoiled with Apple, and people have no tolerance, have they? If it doesn’t work, if it’s not seamless, we have no-
Like the experience we just had at the beginning [crosstalk 00:25:22].
We don’t have tolerance. And I call it the… I’m sure it’s not me that’s called it the Apple factor. And this translates into all of our lives. If it doesn’t work perfectly, we have no tolerance. And that’s the same, I’m sure, for all of your clients. When you build it, I mean, it’s a massive challenge, I’m sure. But it’s got to work. It’s pretty obvious. So so what’s next? I mean, are you able to share? So perhaps I’m putting you too much on the spot here, but is it going to be an extension of this? Can you give us any insights as to what’s on the horizon?
Yeah. I mean, I can’t talk about it specifically, but happy to talk in general terms, is that, I think, one, we are fully committed to this exercise of digitally transforming our practice and we mean it. And so I think this is… There’s this great article in Atlantic that I read a little while ago that I thought it was interesting because it talked about the current pandemic. And then the question that they raised was, are we solving the problem at the right scale, by trying to address COVID-19 specifically? Versus the example that they gave in the article was cholera. So solving the cholera epidemic in England at the time, it didn’t take a vaccine or a specific treatment for cholera.
What they actually had to do is build a sewage system for the city. And this article was talking about is we don’t tolerate dirty water and we build a sewage system, but why do we tolerate dirty air? Is the solution to the problem actually building a whole different HVAC and cycling air system to clean the air, and that will get rid of all respiratory illnesses in a significant way together? And I thought it was very insightful and interesting. I don’t know if it’s doable, but it’s similar to the, I think, how I see the legal industry and the work that we need to do here. So if you look at the… If you follow Wilson Sonsini in our technology work, we’ve been doing a whole bunch of things and you see announcements. But I think, behind it all, we have a strategy and they’re all related.
Because we don’t think that the scale of this problem can be solved by one project or one effort. So, again, I’m crossing my analogies, but internally people make fun of me for my liberal use of them. So just bear with me.
I like it.
But it’s like the Marvel movies. You don’t have just Captain America or Iron Man. There’s teaming up to the Avengers movie. And then that Avengers movie is actually part of a series of the bigger, and then you’re leading up to the end game. So I think that’s the way that we see it. So our efforts are related. So you’re going to see more of these crossover releases, which this is the first one that’s publicized. But because, in order to actually digitally transform the practice, there are so many different technological aspects to it, that if you’re just trying to solve one of these problems, often what you end up with is a either inconclusive or unsatisfactorily solve.
And then people lose momentum and they’re like, oh, actually you can’t… And their conclusion is you can’t solve the problem. But I think that the problem is solvable, but in order to solve it, you have to try to solve a much bigger problem. And so that doesn’t mean that each individual effort, your Captain America movie and Iron Man movie grosses at the top of the box office individually. It doesn’t mean that they don’t have ROI in of themselves. But if you have the vision to design strategy that could go to solving this bigger problem, I believe you can bring ROI and create differentiation with each individual effort. But then there’s going to be these opportunities like we have with Morgan Stanley where you can imagine, if we did not have our own Neuron platform, there’s no API to integrate with Morgan Stanley. And so you’re enabling that next level of capability, which is frankly closer to what real technology companies do and how they think, then what traditional law firms are doing and how they think about it. So that’s what we’re hoping for.
Okay. I hope that when we go out with this podcast, we can go out with an image of Captain America. I’m going to try and make that happen. But I think for now, I think, and I really look forward to catching up with you on the next installment. Hopefully we can do it again because it’s fascinating chatting to you. But for now I think we’ll leave it there. And David, thank you very much for chatting with me.
No, of course. It’s a pleasure.
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