This week, we sit down with Conrad Everhard, founding partner of Flatiron LLP, a pioneering law firm that has revolutionized M&A services with their innovative flat fee model. Conrad shares the fascinating origin story of Flatiron, its unique approach to legal services, and the challenges and successes they’ve encountered along the way.
Everhard recounts the inception of Flatiron LLP, co-founded with Mark Haddad and Lenny Nuara, former big law partners, who sought to modernize legal services post-financial crisis. Despite their elite backgrounds, reentering the private law firm space proved challenging due to their detachment from Big Law for a few years. Driven by their frustrations with Big Law’s resistance to change and the convergence of factors such as acceptance of virtual models and access to senior labor, they took the bold step of founding Flatiron. This new model law firm leverages technology and client-focused solutions to disrupt traditional legal services.
When it comes to Flatiron’s groundbreaking flat fee M&A services, Conrad explains that the motivation behind this disruptive approach was to bring more transparency, predictability, and cost-efficiency to the fee structure. Over several years, Flatiron has honed a model that relies on low overhead, innovative labor deployment, and technological advancements. They operate on a general contractor model, utilizing a network of expert contractors on a project basis, which allows them to offer high-quality services at a lower and more predictable cost compared to Big Law.
Conrad highlights Flatiron’s development of “Deal Driver,” a workstream efficiency platform that streamlines the M&A process. Initially created as an internal tool, Deal Driver organizes and manages data through each phase of a deal, incorporating AI and human intelligence to enhance efficiency. This platform has not only improved their internal processes but has also gained popularity among clients, leading to its spin-off as a proprietary platform. The success of Deal Driver underscores Flatiron’s commitment to innovation and client satisfaction.
Flatiron’s unique labor pool taps into senior associates and counsel with elite firm backgrounds who, for various reasons, seek alternative work environments. Flatiron offers better pay and a more flexible, engaging work culture, attracting highly skilled professionals. Conrad emphasizes the importance of their “coolness factor” in recruitment and client acquisition, noting their collaborations with Stanford Codex and the positive reception from private equity clients who appreciate their efficiency and data management capabilities.
In the crystal ball segment, Conrad speculates on the future of the legal industry. He predicts that traditional Big Law firms may eventually adopt more innovative models, possibly through spin-offs or off-brand ventures, to stay competitive. Additionally, he foresees alternative legal service providers and sandbox experiments in places like Utah and Arizona challenging the traditional legal market. Despite the potential for disruption, Conrad remains confident in Flatiron’s model, emphasizing the green field of opportunities ahead and their readiness to adapt and innovate continuously.
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Music: Jerry David DeCicca
Flatiron LLP: flatiron.legal
Conrad Everhard on LinkedIn: Conrad Everhard
Email: ceverhard@flatiron.legal
TRANSCRIPT
Marlene Gebauer 0:07
Welcome to the geek in review. The podcast focused on innovative and creative ideas in the legal industry. I’m Marlene Gebauer and I’m Greg Lambert. Today we have Conrad Everhart, founding partner of flatiron LLP, a pioneering law firm offering innovative flat fee MNA services with a rich background from elite global firms, Conrad is leading the flat iron charge to modernize legal services through technology and client focused solutions. Conrad, welcome to the geek in review.
Conrad Everhard 0:37
Happy to be here.
Greg Lambert 0:39
Well, we’re glad to have you so Conrad, probably a number of our listeners are unfamiliar with flatiron. So do you mind giving us an overview of flatiron itself and your role within the firm?
Conrad Everhard 0:53
Well, I can give you overview of the origin story, because that’s how we love origin stories. Were former Big law partners, principally M and A partners, although Lenny was more of a technology commercialization guy, we were connected with each other at some point, at Jones Day or at Greenberg Trevor, different places. After the financial crisis, we had all left to make our fortunes in the private sector. We didn’t make our fortunes, but we reconnected with each other when we re entered the private law firm space this now, seven, eight years ago, the reception to us from big law wasn’t all that welcoming, given that we had been detached from our book of business for a few years. And the other thing is, all of us were connected in one way or other, with the legal tech community, with the business model evolution community, all of us had banged our heads in big law trying to create some change. And you know, we realized that our advanced age, that wasn’t going to happen within big law in our professional lifetimes, and we were all motivated to do to be more disruptive, to try to test the model, you know. And the other thing Greg and is that after looking at legal tech and challenging the model now for 25 years plus, by the mid 2000 10s, there was sort of an a convergence of the stars that made this kind of thing possible. First of all, acceptance of the virtual model. You know, firms like VlP, which I was at for a couple of years, for Iman and, you know, Fisher Broyles and the alternative legal service providers. They were already out there, you know, forging an identity as a principally virtual practice so that had been accepted. The second thing that was available to us is that we had access to this almost unlimited pool of artisanal, well trained senior labor. You know, the big law has this crazy model where they invest all this time trading all these young attorneys, but only, you know, 10% of them ever get picked from the choir to make partner. It’s like the old movie Logan’s Run. If you’re my age, you know, if you reach 10 years out, they they either park you in some service position, if there’s a lot of work, or they throw you out. And so you have all this well trained labor. They may not be business generators, that’s why, you know, they weren’t elevated to partner. But, you know, they try to find in house positions, but a lot of them wind up as bodies at axiom or at United Lex or whatever. So you have this, all this big pool that people have trained for me already, I don’t have to train that I can tap into. And the other thing Marlene, obviously, is, you know, by the by the mid teens, you had access now to computing power, computing power by the cup, you know, you didn’t. You don’t have to build these, these, you know, like, like venture Law Group and VlP, had to spend, you know, this, four or $5,000,000.20 years ago to build the infrastructure. Now I have those tools accessible to me, not only tools and power to run my law firm, but also tools and powers to do cool things with automating the workflows and the processes so we could be more innovative. So all those things converged at the same time, and we decided to we like we always tell our clients, we decided to get outside the firewall the big law firms and take this incredible risk and put our own money into it and create this kind of new model offer. So that’s our background. You know, that’s what led us to create flat iron. And from there, we’re seven years later, we’re here.
Marlene Gebauer 4:39
Yeah, it sounds like, you know, necessity is the mother of invention, and that kind of gave you guys the push you needed to do the type of experimentation that you were doing. But you know, I know that many of you had a background in MNA services, but you came up with something very disruptive, which is. Offering flat fee M and A services, which you know, when I met you at legal innovators California, I’m like, what? So tell us a little bit about what motivated you to make that sort of decision, to to offer flat fee M and A services.
Conrad Everhard 5:18
So we’re flatiron. We’re supposed to be this disruptive law firm, and we had this idea of of re pushing the model, but where do how do you do that, and where do you go with it? So the obvious place is to try to bring more transparency and predictability to the fee structure and bring down the rates. So we started experimenting with the flat fee structure, sort of feeling ourselves in the dark room, trying to figure out how to do that. And now, over the course of several years, we become pretty good at it, and we’ve developed a tripod of things that we rely on for to allow us to price ourselves on a fixed fee basis. One of them, obviously, is low overhead. I mean, or the virtual law firm, like Ryan Menon, Fisher Broyles, you see, I’m sitting in my girlfriend’s living room right now. We do have office that we work and we do have, you know, we we have a full set of law firm applications, but everything is online, so we don’t have the heavy overhead footprint of big law, which, in and of itself, allows us to price ourselves more attractively, and that’s basically what VlP and Ryman do. You know the big secret about VlP, where I was for a couple of years, and Ryman and the other folks, they’re basically the same model as big law. They just have slower overhead so they can have lower rates, but they’re charging by the hour, and they do everything else the same. One of the reasons I left the OP, I wanted to create something different. So when we have low overhead, two we talked about before, access to all this labor. So now, you know, I’m looking at in so it was a eureka moment. Now that I’m now that I’m at on a flat fee basis, I’m no longer making money marking up Junior labor. That’s not my model anymore. I don’t make money by being inefficient. I have to rethink everything and rethink, how do I produce the service at the same level, or even a better level of quality than big law, but at a much lower price and more predictable price. So one is the overhead, but secondly is the way I’d deploy labor. Labor is now a cost center. To me, it’s a utility. It’s not a profit center anymore. So we’ve adopted principally a general contractor model, just like general contractor in a construction home. We don’t have experts on our balance sheet. We have a long road standing relationships with tax firms, benefit firms, transactional firms, Cephas, firms that we use on a project basis when we need them, and it passes through our invoices, Junior labor, we just talked about, I got access to all this talent. Over the past five, six years, we’ve developed a deep bench of contractors. Some of them have become partners with us, but a lot of them are just contractors. A lot of them are the axiom model. A lot of them are, you know, people that left big law for whatever reason, because a family or otherwise, but they have highly evolved skills, and we, we pay them better than axiom on a project basis. So that allows us to, you know, radically change the way our pricing model, because we’re you, we’re deploying labor differently. The other thing, and this, I have to, you know, give a lot of credit to my partner, Lenny, who you can talk to whenever you want. Lenny was coming, you know, he’s a computer science guy at Boston College, amateur software developer and architect. Um, when we formed flatiron, it was all hands on deck. He’s a technology licensing lawyer. But I said, You got to help me out with due diligence. We don’t have bodies here. We’re doing M A. We went after M A because big law is so grossly inefficient that no matter what we price ourselves out, there’s going to be a lot of margin. But I said you got to help me out with processing due diligence. Here he is looking over my shoulder, and he’s as a non m a lawyer, and he says to me, What the heck are you doing here? This is the most inefficient process I’ve ever seen. You take data from the client, the seller, in an MNA transaction, and you spend a lot of time finding the data so you deliver it pursuant to the due diligence request. Then you go back to the same data to answer the rep and warranties, and you go back to the same data again to do the disclosure schedules and to post closing integration, why don’t you organize and flow the data in one place? And that’s what led to the building of what we now call deal driver. We created a deal platform. It’s a workstream efficiency platform that basically chaperones the due diligence through each phase of the deal, right? And we we brought in all kinds of applications, including air table. That’s what we know. That’s been our base platform. And, you know, we’ve evolved that over the years to do lots of other things. We extract intelligence from the data. We use AI, and Lenny likes to say h i, which is human. Intelligence, which is well trained paralegals that are not lawyers, and they’re not charging $800 an hour that we they’re charging $35 an hour. So we combine them with AI and some technology leverage to extract intelligence like assignment clauses and change of control provisions and whatever Marlene as a sidecar story here, this technology platform that we created as an internal utility was just an internal utility for us. It’s like any other consulting company. You know, creating a utility became so popular with the clients because of the way it organized the data that they kept pushing us to both use it, but also to improve it, and it wasn’t really usable by third parties because it’s a Frankenstein monster of different apps. So finally, last year, we spun everything off into a sidecar, we raised a little bit of money, and we’re actually porting our application to our own proprietary platform. And what we do with it, I don’t know, but we’re doing that. So that’s the long, long answer to that’s how we we started experimenting with M, a, and we started doing these things with labor, with technology, and they’ve allowed us to price ourselves on a fixed, B, more transparent basis.
Greg Lambert 11:16
I wanted to ask before we dive into some of the disruptions on the billing model. I’m very interested in your approach on the labor side of things and finding the talent, because I think a lot of times the industry does not look at all of the talent that is essentially sitting on the sidelines in the industry. So do you have kind of a you know, what does one of your contractors look like? Are they out of California? Are they male? Is white or female? Is there a particular type overseas? What does the labor pool that you pull from? Is there any trends that you see or
Conrad Everhard 12:03
It’s 10-15, years out. Wilson, Sonsini Davis, pull Simpson Thatcher, I’m just thinking, I’m Scadden. A lot of times, don’t have the skills to generate business because they’re, you know, most lawyers don’t have most lawyers are academics. Sorry, I was told my girlfriend I’m an academic. But, you know, most lawyers are academics, and they’re not salesmen, so they don’t get picked from the choir, so they’re highly skilled, but they’ve been out 1015, years. They’re talking to axiom. They’re they’re they don’t want to go in house, because they don’t. A lot of them have young families. A lot of them are female. They have young families. They can devote 1000 hours a year, but not 3000 hours a year. That’s that’s the model. Now, you know, we’ve had some folks with us for a long time. Some folks come and go. Some folks go back into big law, and we can always dip back into the pool. Right now, we have an overflow of talent, because M A has been slow, so a lot of the senior talents been let go. Two years ago, we were looking for talent, because when M A was going crazy, the profile is that Senior Associate Counsel, person who, for some reason or other, sometimes it’s personal, sometimes it’s economic, reached the end of the line in big law, and now they’re facing the prospects of trying to find an in house position which is not trivial, or selling themselves out as a body to the alternative with the United elects, which they don’t want to do. And we pay them better. You know, we pay them more than axiom does. I’m not going to put numbers out, but we pay them more by the hour than they would there. And we’re also pretty cool. So people know, you know, then when we put out, when we go out on LinkedIn, and look, that’s where we principally find our labor. When we go out on LinkedIn, we say we’re flat iron, and you get the B and deal driver our side car. And I don’t know if you followed us, we’ve been collaborating with Stanford in the legal laboratory over there.
Marlene Gebauer 14:02
Conrad, I do want to ask about that? Like, well, we should add a question later. So
Conrad Everhard 14:06
everybody, we’re cool. You know, it’s I that it’s funny because
Marlene Gebauer 14:17
I like that marketing, come work with us. We’re cool.
Conrad Everhard 14:19
Well, it’s funny, because I’m not going to name any names, but the folks that I came up through the system with the Jones Day and a Brian cage before that, you know, if they’re reaching that age where the service partners are reaching the magic age where, if you’re not a big business generator, you got to retire, and they’ve all made plenty of money, so they’re going off the pasture Now, and they’re looking he and saying, Wow, what you’re doing is so cool. I wish I was doing that.
Marlene Gebauer 14:47
They’re not ready. They’re not ready to be put to pasture yet, right?
Conrad Everhard 14:50
But on the other stuff to give I don’t think they could do this unpredictability of a startup law firm, which it’s funny. It is the coolest fact.
Greg Lambert 14:59
Sure. Well, let’s talk about the client who has m a work that and they’re looking for a different approach of doing their M A work. How do you pitch that the style of work that you do at Flatiron to them and make them comfortable with the disruption. Because, you know, the old saying is, you know, no GC got fired for hiring, you know, Kirkland.
Conrad Everhard 15:28
You know, there’s a question here, by when our one of our challenges is the GCS are conservative and not risk takers. So they talk a lot about innovation, but not a lot of them are actually willing to take the dive. For that reason, we’re still principally on the sell side. We’re trying we think that our efficiency model has more value on the buy side. And we do some buy side work. We’re doing some buy side work right now, but we do principally sell side, and a lot of the opportunities come from the bankers. So our pitch, Greg is, in the first instance, we’re not cheap, but we’re cheaper than big law. So we’re competing with big law. We’re doing middle market M and A transactions, principally in the technology sector, but also, you know, in other sectors, we’re typically representing bootstrapped entrepreneurs selling their businesses to private equity or to strategic buyers. We’re talking about five to $200 million we’re not doing public deals. We’re not doing so typically, the private equity is represented by, you know, magic circle, or Kirkland Alice or whatever. We’re not cheaper than local law. That’s what you want. But we’re, you know, we price ourselves 40, 50% below big law. So that’s real, right off the bat, if that’s what you care about. Now, some private equity funds don’t care about the price, because it all gets passed into the deal. Secondly, we’re selling transparency and predictabilities. Now you know exactly what you’re going to pay and is predictable, and if you’re doing a bucket of deals, you know what you’re going to pay. But the third thing, but we’re selling other things too, Greg, we’re selling adult supervision. You know, under our model, you’re dealing with me, or you’re dealing with somebody who’s Senior. I mean, rather than the big firm model, where you have some partner sitting on top of a pyramid of young labor, you know, we’re sitting on a Ferrari, the senior partner is sitting on a Ferrari, which is partially labor, but partially it’s technology, partially, it’s AI, and he’s using all those tools to enable him to drive the deal. He’s usually the interface with the client. So you’re dealing with a partner level person at Flatiron, which is what we pitch. And frankly, coming back to deal driver, our little sidecar, the platform that we created for ourselves. You know what we found is that private equity in particular, appreciated the way we organize the seller’s data. We took this unstructured mess of data from these bootstrapped entrepreneurs who had no professional assistance, and we organize it and we silo it, and we code it and we tag it and we parse it, we flow it through the deal. So what that does for private equity and for buyers is that the data surfaces early, so you’re making decisions, so your issues are surfaced. Early. Problems are surfaced. Early. Deals break early if they need to break, or they’re fixed early if they need to be fixed, and they’re getting data which synchronizes with their other deals. So if they’re doing multiple deals, and that’s why they keep pushing us to, can you do this? Can you let me do that? Can you improve here? Can you synchronize the financial statements with my financial things? So if you go to our website, you know what we talk about, we do better deals. And that it was purely accidental, guys. It was not something that we expected. It was, you know, we we created this platform, we asked the client and the other side, you know, get on it, because it makes us cheaper. And then they started liking it. And what happens, you know, ironically enough, is private equity won’t hire us. They’ll stick with Kirkland and Alice, but they’ll refer us to their targets, and they’ll say, there’s gonna be one question that target and fix them up and clean them up. You know, that happens a lot. So there’s a whole series of value propositions that go beyond just the fact that we’re cheaper, but being cheaper is helpful. Is this?
Greg Lambert 19:12
I was going to say that with the Just to follow up on the referrals. Do you find that your clients continue to come back to you. Are they one time clients, especially being on the seller side?
Conrad Everhard 19:27
Well, the problem with sell side is I lose my clients, right? Because they get sold. And then I, in our D ultimate almost always earn outs and stuff, so I wind up. It winds up dragging on for years. But the sellers become, for us, loyal reference sources, and by the way, they’re also investors all of us, all of our investors in the platform are former clients that used it, so they support us that way as well. The folks that like us in refer are multiple referrers, or the bankers and the bankers like us because our interests are a. Line we the enemy of the fixed fee is time and inefficiency. Though the longer a deal drags, the less money I make and the more at risk I am. So you know, it’s I have every incentive with them to prosecute the deal as efficiently as possible and with for with the best outcome than than anybody else, because I don’t make money being inefficient on labor, and the bankers appreciate that. You know, that doesn’t mean that we don’t break deals. You know, we’re still a fiduciary to the client. God knows we have two broken deals this year, but we try to surface the problems early. So the so the bankers like the platform, they also like the organization of the data, so they are our best sources.
Marlene Gebauer 20:45
I had a follow up question, Conrad, you had mentioned earlier that you know you do think the model would be good for the buyer side. And I’m curious, given that we’re talking about hourly billing and that this would reduce that if this were the model that we’re using, like, what’s the pitch for the buyer side?
Conrad Everhard 21:05
Well, the pitch for the buyer side is, I’m going to do it. If you’re a private equity fund and you have a portfolio of acquisitions, I’m going to synchronize your data so that all of your deals are synchronized with the same paradigms, the same parsing, the same coding. So if you want to know how much toilet paper you’re buying across six different portfolio companies using our platform, you’re going to get a better deal. You’re going to get better data. The buy side, the strategics care about pricing. The private equity don’t care so much about it, but they do like the predictability. Also with the private equity funds management teams get paid on EBITDA. They get paid on basically your cash flow, free cash flow. So they do care about expenses and transaction expenses. But the reason why we think our value proposition makes more sense for the buy side is because they’re doing multiple acquisitions and using our process, you know, can really make them more efficient and help them manage their data better.
Marlene Gebauer 22:07
All right, do you have any concerns, sort of, given some of the new technology, particularly kind of Gen AI, sort of the Gen AI explosion, I mean, do you have any concerns on that side, that big law can harness some of that and put together models that might be similar.
Conrad Everhard 22:27
I The problem with big law is they have now an institutional commitment to a model of inefficiency by selling hours and marking up Junior labor. I mean, I just wrote about this in the Thompson Reuters article. Um, there’s a lot of there’s a lot of buzz about innovation at the big firms, but their prices keep going up. If not they’re not whenever innovation, I
Marlene Gebauer 22:54
saw that like it’s going to go up again this year with what,
Conrad Everhard 22:57
whatever innovation they’re absorbing internally, and they’re not sharing it with the client. So am I concerned about big law coming up with them? I imagine that at some point there’s going to be some, you know, progressive big law firms that understand the advantage of pricing themselves better, but retaining the margin by using efficiency like any other business, they’re going to understand that if they can price themselves lower, they’re going to be more competitive, and if they can retain the margin, then they win the game. Well, I think maybe out of the magic circle, because they’re in the British Empire stuff where there’s less regulatory barriers, that may want to create an off brand, spin off an edgy, kind of, you know, more progressive brand that they can have in the sidecar. But honestly, Marlene, I’m not losing any sleep over big law evolving, and that’s an ocean liner
Marlene Gebauer 23:54
that makes me sad. I don’t want you to go to his sleep, but, oh, that makes me sad. But
Conrad Everhard 23:59
I think that there are other, you know, I think there’s going to be some big law, but in order for it to work, you know, big law, it can’t be that you’re automating the non billable war, and the non billable stuff, and not the billable stuff. In order for it to work is you have to pass on some of that efficiency back to the client and a business sense. And that, I don’t see that happening. And for that to happen, frankly, guys, it’s would require a lot of dramatic surgery to their model. I was there for 2030, whatever. I was there for 20 plus years. I know their compensation structure is based on it, their their their training, and the young lawyers, I think other startup law firms could imitate what we’re doing. And frankly, I think that the non law firm competitors that are right on the cusp of practicing law, the United Lexus and nail saps and the sent the consulting, the accounting firms, the legal zooms of the world. Old, you know, we’ve been looking with keen interest that was happening in the sandboxes in Utah and in Arizona. You can bring in non lawyers, you can raise capital, none of it that’s not as exciting as you might sound, because I’ve talked to them, and they’re, they’re, they’re, they’re moving fairly slowly. Someday, there’s going to be somebody who’s going to apply traditional business principles, which includes the application of technology and the deployment of labor differently, that’s going to compete with big law for this kind of work. I don’t know when that happens, but those are the people I think are more interesting.
Greg Lambert 25:39
Yeah, I was gonna follow up on that with you know, the big law model has the risk of disruption based on just traditional hourly rates, marking up labor, that type of Traditional billable work. But you’re not without risk either in coming in with a disruption to a traditional industry standard of how M and A work is done. So what do you do at Flatiron to mitigate the risk for yourself as you go along, and make sure that you know, if you’ve priced something incorrectly, how do you adjust for that? So is there a particular risk that you kind of monitor as you make these deals?
Conrad Everhard 26:30
Yeah, so that’s a good question, and obviously we’ve built in a lot of safeguards into the fixed fee pricing. Like everybody else who does fixed fee pricing, the biggest risk I told you was time. We usually bake in a 90 day window. If the deal takes more than 90 days, we keep the right to revisit, and we also build in extraordinary circumstances. So the first instance, guys, we have to do due diligence on the deal. We have to look at things like corporate governance, because it’s a single owner, but if there’s a big stockholder base, and there needs to be a stockholder meeting, whether there’s hostile parties, whether there’s employment agreements, you know whether there’s any issues in the due diligence and litigation employee issues. So we take and also the structure. Of course, we tend to deal with a lot of companies that have been structured as S corps or LLCs, and they’re more complicated, frankly, from a not tax perspective, particularly the S corps, you have to do reorganizations to make them suitable for purchase. We factor all in those issues in and we do have some escape hatches, including time to that we build into the model. And sometimes we get burned. I mean, if you play this game, that’s one of the reasons the big firms are really reluctant to play this game. You know, when you play this game, sometimes you get burned, and you wind up doing a lot more work than you’re getting paid for. Sometimes you make more. I mean, sometimes it’s, it goes, everything goes, you know, and remember, I mean, I’m not going to throw numbers out there, but you can guess. I mean, you know, big laws charging on these middle market, M and A’s anywhere from a half a million up, and we’re pricing ourselves about half of that. There’s a heck of a lot of margin in there, and we’ve driven through the our processes, our labor deployment, the way we do things, we can typically drive the non equity partner costs of the deal, so the junior labor and the expert labor and the third party deal cost, we can typically drive it well under $100,000 so it doesn’t take us to a big number for us making decent money for the firm and ourselves. And it’s not surprising, because you couldn’t think of a more inefficient way to run a deal than the way it’s done now, by throwing armies of bodies at it at $800 an hour, that you can get to that place without a lot of creativity. You can get to a place which is half the price, you know, without a lot of creativity. And we’re pretty creative. So yes, there’s a lot of risk. And Lenny talks about that a lot. I mean, it’s one of the things, if you want to do fixed fee law, you have to be able, to be willing to take some risk, and have to know leverage with upside? Yeah, we have breakup fees. We’ve built in all kinds of things into our model.
Marlene Gebauer 29:26
So when you first started flatiron and this, this flat fee offering, how did the market at React, including clients and competitors? And have you seen a trend over time regarding the reaction?
Conrad Everhard 29:47
Well, you know, there’s two kinds of clients out there. There’s a clients that go and attend legal innovators California, where we’re just together, that are looking for. Aggressive stuff and are looking for new models and application of technology. And those people tend to gravitate to us, but they’re still the minority there. There’s all there’s another group out there that talks a big game, but they still continue to use Kirkland and else. And then there are the traditionals who are not moving off, you know, they’re through Jeffrey Moore’s Crossing the Chasm. You know, you got, you got the you got a lot of people that are part of the legacy community that are not really interested in taking any risk with a smaller firm. I think we have built some street cred over the past 70 years. I mean, we’ve done, I don’t know, 2030, M and A deals, probably more at this point to all various sizes. We have a track record that we can point to. We have happy clients, and we have success stories, and we have a platform that we can demonstrate so and and we’re doing all this cool stuff, and we’re pretty good at getting it out on LinkedIn and other social media, the AI stuff we’re doing. So right now, it’s easier than it used to be, Marlene, but it’s still not a, still not a walk in the park. I still, you know, we even get clients who say, Well, you know, we want you to shadow Bill, you know, and by the hour so we can, what’s the point? Now, you’re giving me the worst of both worlds. I gotta do the inefficiency of keeping my hours, and I gotta give you a flat fee. So that’s and in terms of competition, I don’t see anybody doing what we’re doing. I know there’s a few people doing things like this and immigration law and other areas, whether they’ve moved to a more automated and our other competition, frankly, as we get mistaken for small law, which we’re not. We’re more expensive than small law. If you want to use small law to fight against big law, good luck. But you know, so we run into that occasionally, we run into regional offices of big firms, like last year, when there was no M A at all, and they were and the dinosaurs were starving. They were coming way down in price to compete. So we have plenty of price competition. But when you look at it from a big law, big law, we do pretty well.
Greg Lambert 32:08
You’d mentioned that there are other practices that benefit from this type of efficiency. Immigration law being one, is there any type of practice that flatiron might look at expanding into other practices.
Conrad Everhard 32:25
Yeah, do that, or, frankly, license our platform to other companies, other law firms, that are in those practices, anything that’s heavy duty, transactional and that requires the movement of a lot of data. So you know, event we do venture capital, private equity, M and A we do technology licensing, and unfortunately, we still do a lot of startup work, just because they insist on coming to us. But anything commercial lending, project finance, the commercial real estate, anything that involves a lot of documents, a lot of closing documents, a lot of data that needs to be moved and organized and parsed and red due diligence, you know, lends itself to our process. And yes, we do have ambition to move into those areas or to license others to use what we’ve built in those areas. You know, we like, we like M A because there’s, there’s no point on the horizon, Marlene, where I’m expecting emanate, if you know, the big law firms on the other side to tell me, oh, you know, we’ve, we’ve, we’ve reduced our price by, you know, whatever. Occasionally what happens is that the buyer puts a cap on them, and then they come to us and say, Well, can you, can you run most of the deal? Because we’re bats, and I was so are we. But yes, I so that’s, that’s, that’s the answer of the I assume, Marlene, you want to touch upon a little our little adventure in AI,
Marlene Gebauer 34:00
I do. But I was going to ask one other question, because, you know, we talked a little bit about your model and the folks that you bring in to assist in terms of your your human review. What opportunities do you think this kind of model affords, like new attorneys coming in?
Conrad Everhard 34:20
You know, that’s a good question, because we, we’re so early in the game that we cheat. We don’t train, we let them train, and then we take them after they’re trained. At some point, we were going to have to build our own labor base, but we’re nowhere near having to do that, because I have, we have a surplus of of labor, which has been trained by other folks. If you looked at this holistically, on a 20 year horizon, 30 year horizon the application of technology, workflow management and workflow automation, plus AI, theoretically, should reduce the number of. Lawyers that you need to process deals the old fashioned way. I’m reluctant to say it’s going to reduce the number of lawyers, because my experience with evolution of technology over my career is that every time technology has been introduced, it’s created more work. So I just have more deals to do. Not sure where that goes, but I do know that you’ll be able to do deals more quickly and more efficiently, whether that means less lawyers, I don’t know. The other thing, though, is that, from a lifestyle perspective, getting off of this, you know, I have a daughters in big law, getting off of this treadmill of the 3000 hours that that’s very hard to maintain a, you know, a social life with in the 2500s I mean, I did all that stuff 3025, years ago. It on the horizon. You could see a time when the advanced and the premium lawyers can have a better life than still process. You know, premium work at the same level of quality. I don’t know how it all plays out, but that’s when I’m thinking, what has gonna happen at some point. Well, you know, and young people, of course, gravitate to us, because what we’re doing is at least an optically is cool,
Greg Lambert 36:20
very quickly. There was something you mentioned about taking advantage of having big law train the attorneys and then being able to take advantage of that later in their career. Are there any bad habits that big law trains that break of
Conrad Everhard 36:37
course. I mean, that’s when you’re asking about trading. That’s a, that’s a very good question Greg, and we have to explain to him them, you know, because that this
Greg Lambert 36:48
takes six hours to answer a five minute question.
Conrad Everhard 36:52
You You have to, and we train them on our technology, you know, you have to leverage what we’re doing and, and we put fairly tight guardrails, because, frankly, they’re just a cost on the balance sheet, on the P and L statement. I mean, it’s the more, the bigger that cost item is, the more less margin I have. So we manage them, just like any other place manages labor. It’s not no longer a profit center. So yes, there is a little bit of deprogramming required when we bring the folks in, although, again, most of the folks that come in to us have an idea about what we’re about, so they know that we’re not doing it the old fashioned way. But yes, that is always a challenge getting people and the other thing is funny, and I get because having a kid in law school and having young lawyers working with us all the time, you would think that they were cutting edge when it comes to technology. They know how to use their laptop, but that’s about it. There’s a lot of training involved.
Marlene Gebauer 37:54
Okay, comrade. So now I would like you to tell us a bit about your work with Stanford and Dr Megan, Ma, yeah,
Conrad Everhard 38:01
I’ll just talk about it, and I can send you some links to because we’re cool, and we were probably the only law firm doing this kind of premium transactional work, you know, with
Greg Lambert 38:16
and humble and humble,
Conrad Everhard 38:20
unlike like our labor force, I have to sell so, you know. And I was promoted from the choir because I was a business generator once upon a time in big law. But we were, we said, we ran into Megan, who, you know, you know, Megan, ma and legal innovators a couple years ago. Stanford has a legal tech laboratory called Codex, where they experiment with all kinds of open source stuff. And they invited us because they knew we would be willing to spend the non billable time. They invited us to participate, to collaborate on a project, to create a training simulator and M A for big firm lawyers. They had a bunch of, they have, and we still have, you know, a bunch of crackerjack AI developers in the Middle East, actually, and Megan’s obviously involved. And it became, you know, if you listen to my story in California, for me personally, it became a very frustrating project, because the intelligence behind the project was, unfortunately, me, I project was, unfortunately, me, which is kind of a scary proposition, but what we did that they had great, grand ambitions to create an M A negotiation simulator. They didn’t know a lot about M A, and they didn’t know about a lot about the, you know, the the sensitive points that arise. So what we did is we carved out, we went for the term sheet in the first instance, which hasn’t been completed, and we carved out a slice of the term sheet, which is the liability profile. And all of you M and A experts are going to say, oh, it’s covered by M and A insurance, but not always, particularly in the smaller deals we. We picked the M A profile. There’d be no liability profile, because it’s so codified or so structured, you know, the caps and baskets and survival periods and fundamental reps, non funnel, you could define all those things. And what we found, guys is, you know, in the first instance, when we tried to ask the large language model to, to, you know, to respond. It was just junk, you know, that on a, on a on a naked basis, throwing complex issues on M A to a large language model without prompting or guidance, was, was, you know, was useless. And it actually kind of discouraged me when we started this project. By the way, I thought this is going to be a one month project a year ago or two weeks. And so what we what we did over time, and we learned a lot about Lenny, would say, prompting, guiding, putting guard rails around the model, pointing the model as to what we wanted to look for. We started feeding them spoon, feeding the model pieces of the liability profile a fundamental rep. Is this a non fundamental rep? Is that a market for the market rate for a survival period? Is this, that market rate for a basket? Is that the non fundamental reps, the sensitive points are cybersecurity and intellectual property. Over a course of time with me writing basically a mini treatise, and Lenny Turney parsing it and turning it into spoon bites for the for the mall. We went through this over course of six, seven months, and then one day, as I said, in California, we’re playing around with with the simulators. This is supposed to create an agent, which is now going to negotiate with the lawyer and teach them. So I at some point, I started playing with the simulator, and I was frustrated because I had been doing this now for seven, eight months. And I said, you know, I want, I want 50% I want a 50% cap on liability in a five year survival period. And the agent came back to me and said, You’re out of your mind. That’s not market. You know, it should be. It should be 12 months, and it should be capped at 15 or 20% and then I said, Wow, that is then I woke up because that then we hadn’t, we had prompted the model, and if you go to her, if you’re going, I’ll send you the link. I’m sure you’ve seen it of the demo that Megan Ma has done. Why is this relevant to anything? And partially because, you know, we may actually take the next iteration of this and take it private, because it’s open source right now, anybody can use it. But also, we learned so much about about how to use large language models to both summarize information and find complex information by prompting it. And we’re, needless to say, going to incorporate some of that learning into our own due diligence and intelligence extraction efforts. So now, when we use this h i We’re going to you add AI, so that make that even more powerful. So it’s a cool story, and for all the effort I put into it, it gave me a lot of publicity. So now I can’t, but I was not at six months ago, I was not that happy about it, and we’re, by the way, now we’re opening up the tent to everybody to participate. We need tax lawyers to prompt that. We need, you know, other experts, and we’re going to create a village here of different experts that are contributing to this thing. So it’s been a very cool experience at the end of the day, and it’s useful to what we’re trying, you know, our our vision,
Marlene Gebauer 43:33
all right, well, I hope that we can help in getting the word out for those volunteers. Yeah,
Conrad Everhard 43:38
if you want volunteers, you know, and your firm wants a volunteer. We got couple law firms that want to volunteer. There’s equity in there. We know, for the next iteration. It’s a for profit enterprise the next iteration, okay?
Marlene Gebauer 43:54
Spark some interest, right?
Conrad Everhard 43:56
It also helps, you know? It also helps planar, which is always nice? Yes, I know that I blew you guys away with all my stream of consciousness.
Marlene Gebauer 44:05
You have done a great job. And we have one more question for you that we ask everybody, and I think you’re a great person to ask this question. So we ask all of our our guests what we call the crystal ball question. So you look into the future for us and tell us what you see. Oh, it sounds he’s not liking this. Tell us what you see on the horizon for the legal industry that will be a change or a challenge that you think flatiron or others in the industry will face in the next two to five years.
Conrad Everhard 44:40
You know, it’s so hard for me to predict radical innovation the legal industry, because I’ve been predicting it for so long, and it hasn’t happened. But I go back to what I said before. I think, you know, if you’re looking at a 20 year horizon, there’s going to be somebody probably out of the magic circle. Because they’re already dabbling in innovation. Who’s going to spin off something and offer a different model to challenge the market and to try to get themselves a lead in a changing marketplace, then they’re going to bring down their price, their rate structure by using innovation and keep their margins. So they’re going to be in a very competitive position. I imagine it would be done in some sort of a spin off or off brand, because if you tried to do it within the firm, it would be so disruptive to the compensation system and the promotion system. But I can’t believe that there’s not going to be somebody who makes the jump in the next you know, 1020, maybe five, that’s out there to do something radical. I think there’s going to be more Flatirons out there, and we’re going to try to power them up by licensing some of the stuff that we’ve created, enough to create some competition and create a market. And then, thirdly, again, what I said before, beware the alternative legal service providers and the alternative providers of legal services. Combine them with the sandboxes, which are very mature at this point. The sandboxes were not really built for commercial for profit. They’re really more social when they’re the full amount of the full potential of the sandboxes can be met, and you combine them with the legal zooms of the world, or the alsps and others, there’s a potential there for some real competition to law coming from outside of law, because now a company with shareholders can raise money and provide legal services out of the sandbox. Now, I talked to Utah about it, and they’re not ready for that rep. But in theory, when you’re asking me to think 20 years from now, you’re going to have new entries that are going to that will force big law to evolve, because they won’t have any choice at that point. But that’s looking far in the future, and I still think, you know, for flatiron, there’s a lot of green field under our model before anybody tackles us, and it’s going to be a while for the ocean liner to turn around. Yes,
Greg Lambert 47:07
well, as the great Yogi Berra says, it’s really tough to make predictions, especially about the future. So future
Conrad Everhard 47:16
of law especially, I was involved in a startup 20 years ago. I’ve been preaching this stuff. That’s why, you know, frankly, that’s why I got out and started just do it myself.
Greg Lambert 47:28
Well, Conrad Everhard, founder of and founding partner of flatiron. LLP, we want to thank you very much for taking the time to talk with us today. It was great.
Marlene Gebauer 47:39
And of course, thanks to all of you, our listeners for taking the time to listen to the geek and review podcast. If you enjoy the show, share it with a colleague. We’d really love to hear from you, so reach out to us on LinkedIn
Greg Lambert 47:50
and Conrad. We’ll put some links on the show notes for things that you’ve referenced. But for those listening, what’s kind of the easiest way for people to find out more about flatiron?
Conrad Everhard 48:00
Go to flatiron dot legal, or website. You can go to my LinkedIn address, Conrad Everhard, if you’ll. There’s not a lot of Conrad everards out there. Or you can always email me. I’m at C Everhard, at Flatiron dot legal. I’m always happy to talk philosophically about anything in the legal business model, so don’t worry about bothering me. And
Marlene Gebauer 48:22
as always, the music you hear is from Jerry. David desika, thank you so much, Jerry. Thanks,
Greg Lambert 48:26
Jerry. All right. Marlene, I’ll
Marlene Gebauer 48:27
talk to you later. Okay, bye, hey, don’t
Speaker 1 48:40
take me to don’t take me away. I could walk home by the North Star, but I failed to notice that still daylight time, the devil’s back on my ball, the devil’s back on my ball, and the devil’s back on my ball.