Bargaining Power among Silicon Valley Law Firms
A recent New York Times article attempts to analyze the relationships between Silicon Valley law firms and start-up companies in the area. The article looks at the dominant firm in the area, Wilson Sonsini Goodrich & Rosati, to see how the law firms interact both with each other and with potential start-ups. Wilson Sonsini was one of very few law firms interested in start-up companies in the 80’s and 90’s. From the perspective of bargaining power in a network, this made all of the firms very central nodes in a network composed mainly of start-up companies. While the 1-exchange rule was definitely not in place on any of the firms at the time, there was still a limited exchange rule based on the finite resources that any one firm could bring to bare. This enabled the firms, Wilson Sonsini foremost among them, to cherry-pick the most promising start-ups.
However, the number of firms in Silicon Valley today is far greater, which means that the old firms like Wilson Sonsini have far less bargaining power. This has led them to make many creative changes in an attempt to instantly cultivate positive relationships with potential clients. As most would expect, some of this goes into better deals for clients, such as the offer of a partner of Wilson Sonsini to defer legal costs up to $5000 for a client that he was interested in. Other changes are partnerships with programs that help get start-ups off the ground, like Angelpad. And some changes are just unexpected, like the redecorating of Wilson Sonsini’s ground floor to resemble a start-up company, rather than the lobby of a 50-year-old law firm. They claim it gives a marketing advantage.
It is interesting to see some of the more unconventional steps companies will take in order to stand out in markets that are becoming saturated as opposed to markets with relatively little competition.