People thought Thomas Wallerstein might be nuts.
Last summer, as a senior associate, he left Quinn Emanuel Urquhart & Sullivan to start his own two-man shop. With the recession in full bloom, and Big Law associates across the country losing jobs by the hundreds, the response to his plan was unanimous: "Are you crazy? In this economy?!" Wallerstein recalled. "Most people could not understand why I would turn my back on the security, prestige and money associated with big firms."
It turns out their fears -- and his own -- were exaggerated. Colt Wallerstein, based in Redwood Shores, Calif., celebrated its one-year anniversary in July. Wallerstein and fellow associate Douglas Colt left Quinn with just three clients, but their roster has since expanded to include Sunnyvale, Calif., company Intuitive Surgical Inc., and startups like SerialTek Inc., according to court documents. (Wallerstein declined to name clients without their permission.) There's even enough work to consider cautious expansion: Wallerstein is studying resumes for an associate position he says he'd like to fill in coming weeks.
It's a similar story for Omair Farooqui, who started his own firm after being laid off from Manatt, Phelps & Phillips last June, for former Wilson Sonsini Goodrich & Rosati attorney Troy Valdez and for ex-Mayer Brown associate Shirish Gupta. Setting out in the worst recession since the 1930s hasn't made for an easy voyage, but the worst seems to be behind them.
Along the way they've learned that marketing is never optional, that their practice can take them in unplanned directions, and that worry about the next piece of work is a constant companion and motivator. "That anxiety is what makes us all continue to work hard and think about where our next client's coming from even when we're doing well," said Valdez, who opened Valdez Dunson & Doyle a year ago. "I wish I could say we're over it, that we made it."
To be sure, going small isn't for everyone. Intellectual property lawyers Gerald Swiss and Lorna Tanner are returning to Foley & Lardner next month, a little more than a year after leaving to form a patent prosecution and counseling boutique. Swiss, who had cited high rates as the reason for leaving Foley, said it didn't go as planned. "There are a lot of people who thrive in a boutique practice," he said last week, "but our clients are a little different."
GETTING THE WORD OUT
To compete for employment litigation, Wallerstein and Colt slashed their rates by up to 40 percent and aimed at middle-market companies whose business they thought they could win from bigger firms.
It helped to have ongoing matters for three institutional clients that the two continued co-counseling on with Quinn. That provided income while Wallerstein and Colt developed new clients. To save money, Colt put the firm's website -- with photos of the new office and client testimonials -- together himself. They got the word out every way they could. Even posting a job ad for temporary help on Craigslist served as a form of marketing. A bunch of their friends at law firms responded. "It's amazing how many attorneys working at big firms are checking Craigslist every day," Wallerstein said.
The firm put up a Facebook page, too, but Wallerstein said he doesn't know how effective it's been.
The 42-year-old Wallerstein says the firm found a niche in handling trade secret disputes arising when employees change jobs. This year, they raised rates for new clients from between $300 and $350 to $400, he said.
Some practice areas haven't panned out, such as wrongful termination and other traditional employment litigation representing companies, which are already crowded with competitors. "That turned out to be a really tough practice area to get into because there are established players like Littler Mendelson that are not that expensive," Wallerstein said. "It's a really tough sell."
Wallerstein said there's nothing like in-person meetings for potential referral sources. Earlier this year, he had lunch with a Big Law lawyer to help her explore going solo. Several months later, the lawyer sent a trade secret case to Wallerstein that she'd been conflicted out of. "Business building is purely random," he said. "What I've learned is it's about networking without an agenda, meeting someone even if they don't have a case for you."
But once business picks up, it's harder to find the time. Wallerstein said that when he and Colt opened for business they had just five open matters and there was plenty of time for coffees and lunches. Now, with 25 active matters for about 20 different clients, Wallerstein is too busy to do as much, but because almost all their new business comes in through referrals, he knows not to stay complacent for long.
"I always worry about the next case," he said.
MOVING WITH THE MARKET
Farooqui, who opened Ellahie & Farooqui in San Jose " target="new">last summer, said in the first several weeks he "networked like a fiend." He joined a number of organizations, like The Indus Entrepreneurs and The Organization of Pakistani Entrepreneurs and Professionals. The clients didn't come immediately, but he created a spreadsheet with contact information and reminders to follow up in six months. Though digital media helped, Farooqui said he's found in-person meetings to be more powerful. "You make a stronger connection than when you put up a Facebook page."
Like Wallerstein, Farooqui had to adjust his expectations about the type of practice he would build. As a midlevel associate at Manatt, Farooqui worked exclusively on patent litigation and prosecution and thought he'd continue in that specialty. But nearly all his clients are tech startups, some founded by engineers who had been laid off and some run as side businesses. These types of clients don't have money to sustain patent litigation, Farooqui said, so he built on the experience he picked up in his first law firm job at Manatt and has become a business practitioner focused on corporate, patent and trademark matters. "You've got to be quick on your feet and move with the market," Farooqui said, adding that he hopes that as his clients grow, they'll continue to turn to him for corporate and litigation work.
He counts himself lucky for the forethought to pair up with Javed Ellahie, a more senior lawyer well-versed in bankruptcy law. Farooqui says his own client list has expanded from about 40 to about 140 individual companies in the past year -- not all of them with active matters -- accounting for about a quarter of his firm's revenue. About half the firm's income comes from bankruptcy work brought in by Ellahie and the rest through partner Lawrence Boesch, a civil litigator, Farooqui said. In the past year, the firm added two young lawyers: one just took the bar and the other is a second-year associate working near-full time as a contractor.
A new hire may be in store soon for Valdez, who opened his firm in San Francisco last year with two former Wilson Sonsini colleagues. They've stuck closer to their original business plan for an employment litigation and counseling shop. Valdez says the bulk of their work is still for corporations like Comcast, which used to send his team work at Wilson, and other corporate clients that found his $500 rate there too high. He said he's held his rate at about $300 since starting his new firm.
NO WORD PROCESSING
As gratifying as it is to be the boss, there are a few creature comforts Valdez and others say they miss from their big-firm days. Valdez said he and his partners have to do their own typing in the middle of the night if a brief is due at noon the next day. At Wilson Sonsini, the word processing department would have that on their desk the next morning, he said.
In the early months, what Farooqui missed most was the steady paycheck. He said he occasionally felt like giving up and looking for a job again. "You're scared more than anything else because as an associate you're used to getting paid at the end of two weeks," he said. "But now you realize why the partners were always stressed out. You kind of appreciate that."
After a year or so, Farooqui's first clients began referring other clients, and some of the tension eased. "That's when you really feel good," he said. He buys thank-you-for-the-referral cards, sometimes tucking in a Starbucks gift card, every time someone refers new business. But relying on that channel isn't enough to sustain a practice, he notes, adding that he wishes he was less busy so he could get back out and do more marketing so he doesn't find himself idle in a few months.
The worry became a reality for former Mayer Brown associate Gupta. Gupta saw his year-old solo practice lose half its workload when five open matters resolved in February. Gupta, who handles commercial litigation, employment, real estate, franchising, patents, trademarks and a host of other matters for small and midsize companies, had to scramble for new business. "At a law firm as an associate once you wrap up a matter they feed you another matter," Gupta, who upped his rate by 15 percent for new clients in the last year, said. "Here I had to go out and get new matters. There's a lead time. It's hard." He said within a month he was back to busy, but the dip was stressful. "My wife doesn't work. I have two kids under six and I own a house," he said. "That's a strong motivator."