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Silicon Valley law firm Gray Cary Ware & Freidenrich is blazing new territory in ancillary consulting work, formalizing the hand-holding law firms do for their entrepreneurial clients through a nonlegal business services unit. “Startups come to law firms to draw up option agreements and incorporation documents, but beyond that, most of what we do is business consulting,” said Mike Krenn, a nonlawyer who will be managing director of Gray Cary Venture Pipeline. “What we are trying to do is institutionalize that work and make sure that all the resources of the firm can be directed into it.” Gray Cary is believed to be the first law firm to formalize such a practice, though it is a big part of what any firm does for startup clients. Krenn said the firm hopes to create a structure where different specialties within the firm could be coordinated to address different aspects of technology and fund raising. Venture Pipeline will be based out of Gray Cary’s San Diego office and will have a handful of nonlawyers in various offices to work specifically for it. Krenn said the unit will not be a profit center but will work to boost the firm’s corporate and venture practices. Krenn said Venture Pipeline will set up a structured system to help startup companies enhance their chances of getting funding by reviewing business plans, addressing management and recruiting issues, as well as market development and strategic partnerships. “All firms have lawyers that are good at helping entrepreneurs with business issues and doing the kind of screening and scrubbing that business plans usually need before going out for funding,” Krenn said. “I’ve always wanted to build something where that could leverage all the strengths of the firm.” Krenn formerly worked in the San Diego office of Cooley Godward, where he coordinated similar functions, but in a less formal way. After leaving Cooley Godward, Krenn was recruited by Gray Cary corporate securities partner Paul Kreutz to establish Venture Pipeline. Kreutz was one of the originators of predecessor firm Ware & Freidenrich’s venture capital practice in Silicon Valley. He went south to jump start a venture practice when his firm merged in 1994 with the San Diego litigation firm Gray, Cary, Ames & Frye. Kreutz said that in addition to Krenn, the firm already has a person working full time on Venture Pipeline in its Sacramento office and will add at least one person in its outposts in Seattle, Austin, Texas and the Bay Area. Their charge will be to coordinate venture activity with all of the firm’s 500 lawyers and to maintain close ties to venture capitalists. “We don’t see this as a revenue generator, though we could eventually charge for nonlegal services,” Kreutz said. “The value is that we expect when the venture gets more strategic deals from Gray Cary they will recognize that we can bring greater value to their portfolio companies.” In establishing Venture Pipeline, Gray Cary expects to be able to widen the framework for referrals it can offer clients in both fund-raising and potential strategic business relationships, and help entrepreneurs polish the approach they take with potential investors. Venture capitalists are generally respectful of the business services law firms bring to companies seeking initial funding, but some are wary of being “overlawyered” by law firms formalizing such services. “Coaching always helps, whether it is with a lawyer or an accountant or a successful executive, and we like entrepreneurs to know what to expect,” said veteran venture capitalist Dixon Doll, managing general partner of Doll Capital Management. “But the test is if an entrepreneur or engineer is so naive that he thinks that an intense amount of involvement with lawyers before funding is going to improve the chance of getting funded.” Doll also said that even though law firms can make introductions to other entrepreneurs within particular industry areas, he doubts whether nonlegal services in technology markets or financial services would appropriately be handled within a law firm “Traditional relationships with lawyers have always involved references and referrals, and it is certainly fair to say top notch law firms know how things work in the venture financing area,” Doll said. “But infrequently have their services included any knowledge of technology or industry markets.” Copyright (c)2001 TDD, LLC. All rights reserved.

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