In Washington, D.C., a city of a thousand law firms, newcomers don’t typically create much of a stir. But in early 1999, news that two major Silicon Valley firms were launching local outposts rocked the legal community. First came San Francisco-based Brobeck, Phleger & Harrison’s new office in the heart of downtown Washington. Weeks later, Palo Alto, Calif.’s Cooley Godward opened 25 miles across the Potomac in the technology hub of Reston, Va. And within a year, another Palo Alto firm, Wilson Sonsini Goodrich & Rosati, one of the leading players in the Bay Area technology business, landed in McLean, Va. As a set, the trio had helped launch or grow some of the most important companies in the high-tech world and last year brought in revenue of more than $1.2 billion. Their arrival meant much more than a new source of competition for D.C. firms. It heralded a transformation in the region’s legal economy. They brought a sense that the Washington area had come into its own as a significant technology center. There was also a sense that the Silicon Valley firms, with their exotic California ways, might fundamentally change the practice of law in the nation’s capital. And they did. In 1999, area business was exploding. The roof had blown off the local venture capital market, and there was nothing but blue skies overhead. Firm after firm, even those relatively inexperienced in the representation of emerging companies, opened technology offices along the Dulles Corridor. Firm after firm, even those that traditionally shunned the practice of taking equity in clients, began establishing investment funds. And when salaries for young lawyers skyrocketed in California, firm after firm, even those that could ill afford it, dug into their coffers as well. But what a difference two years has made. Since Brobeck and Cooley first planted their flags, the region’s nascent high-tech market has boomed and faltered. By the numbers, Brobeck’s local team has completed the most public offerings — nine since the office launch on March 1, 1999. Cooley has been the most successful in wrapping up emerging company business, closing approximately 200 rounds of venture capital financing since their local launch — more than the local offices of Wilson and Brobeck combined. And Wilson Sonsini, on the ground less than a year, has quietly worked to make a name for itself in an uneasy economy. Now, scarcely having had time to establish a local presence, the high-tech giants must brace for a downturn along with everyone else. And for the first time outside California’s borders, all three are competing head to head. As the economy cools and the competition heats up, their strategies are about to be tested. BROBECK: FIRST TO ARRIVE
More than any other segment of the legal industry, Silicon Valley’s premier firms have approached expansion with near technical precision. At Brobeck, the decision to open a new office ultimately rests on two straightforward criteria, says firm chairman Tower Snow Jr. First, the regional technology community must be seen as mature enough to support an outpost with at least 50 lawyers. Second, the new office must match or add to existing firm profitability. “We don’t expect either one of those things to happen Day One,” says Snow. “We look for head count in about two years and the comparative economics in a two-to-three-year period.” Once Brobeck has targeted a region for expansion, implementation is equally systematic. The Brobeck formula was perfected in its 1994 foray into Austin, Texas: Be first on the ground; grab market share; scorch the local competition. And in Washington, where few local firms boast sophisticated corporate practices, Brobeck seemed to have a prime opportunity to sweep in and corner the market on local public offerings when it arrived in March 1999. But Brobeck’s execution has been complicated by two unexpected roadblocks: Cooley’s explosive arrival in the region just six weeks later, and the effective shutdown in the public offering market last April. At 39 lawyers, the office remains short of its 50-lawyer target. Like many technology-oriented groups, the outpost is shying away from growth in its corporate practice, focusing instead on recession-resistant practices such as intellectual property litigation and employment. “When the market softened, frankly, it affected D.C. a little more because of its size and because it doesn’t have all practice areas,” says Snow. “Unquestionably, it slowed the economic growth of the office, but our views of the region’s prospects haven’t changed one iota.” Brobeck’s first local hire was Stephen Riddick, a partner at what was then Piper & Marbury. Riddick, 37, first met with Brobeck attorneys in December 1998 and committed to opening the office just two months later. His background representing underwriters in public offerings matched Brobeck’s aspirations to build a premier IPO practice in the mid-Atlantic region. Initially, three associates from Piper & Marbury’s Baltimore office joined Riddick. Palo Alto partner John Missing, a securities litigator, came out to head the office. According to several Brobeck attorneys, firm lawyers knew hometown rival Cooley Godward had at least a casual interest in opening a Washington-area office and had been talking to local lawyers and venture capitalists. Still, Brobeck partners, who had expected it would be at least 12 months before Cooley took action, were caught off guard when their competitor mobilized so quickly. With Cooley’s arrival and its more rapid growth rate, Brobeck suddenly lost its advantage in the Washington area. Indeed, by heading straight for Reston, Cooley became the first Silicon Valley firm to aggressively immerse itself in the local technology and venture capital community. Brobeck’s decision to locate its mid-Atlantic headquarters in the District, and not in the Northern Virginia suburbs, was influenced by Riddick. His practice representing underwriters in public offerings centered on Washington and Baltimore, not Northern Virginia. Riddick stands by Brobeck’s decision to open in the District, which he views as more centrally located. The downtown D.C. location has allowed Brobeck to recruit more easily out of established D.C. firms like Howrey Simon Arnold & White and Baker Botts, and out of Boston and New York, according to Riddick. But if being in Washington has helped in some recruiting, it has also made it difficult to compete for attorneys with active emerging companies practices who view Northern Virginia as ground zero of their practice. Later this month, Brobeck is finally preparing to open a second area office — in Reston, under partner Kevin Lavin, who joined the firm in 1999 after a stint as general counsel of Iridium, the failed satellite company. The office will open with just a handful of attorneys and grow to approximately 12 over the next year. “We thought from Day One that this market needed to be served from two offices,” Riddick says. “It makes a lot of sense to have troops on the ground in Reston and looking southward to Virginia Tech, UVA, and Richmond.” The new office may boost Brobeck’s local venture financing practice, which lags behind those of local competitors. Brobeck has had its greatest local success representing underwriters and later-stage technology companies. D.C. attorneys completed nine public offerings in 1999 and 2000, including the IPOs of Dulles, Va.’s Vastera and New York’s HotJobs. In 1999, Riddick served as counsel to underwriters Hambrecht & Quist in the initial public offering of Herndon, Va.’s Lifeminders, and then Brobeck replaced Venable as company counsel in Lifeminder’s 2000 follow-on offering. Brobeck attorneys now counsel Lifeminders in a variety of areas including privacy and securities compliance. But because of Brobeck’s local orientation toward representing underwriters and issuers in public offerings, the D.C. office was significantly impacted by the weakening of the IPO market in April 2000. “We built on the corporate side. That’s where we thought the opportunity was and where we could bring the most value. I think our analysis was correct given what we knew at the time,” Snow says. And up until April, Snow notes, Washington was the firm’s busiest office — billing more hours per attorney than any other office firmwide. “Washington is exactly where we would expect them to be at this time,” he says. “The office has actually grown by any measure faster than any office we’ve ever opened.” COOLEY: SOMETHING VENTURED, SOMETHING GAINED
On Feb. 6, Mark Pitchford, Cooley Godward’s new firmwide chief operating officer, gave a pep talk to the Reston office. His message: In a down market, only the strong survive. Reston managing partner Joseph Conroy, 39, subscribes to this Darwinian view of the market as well. “We see this as a year of opportunity for us, as firms not as well-suited to this market fall away. It’s a client opportunity for us. And a hiring opportunity,” he says. While at odds with the current economic climate, the firm’s confidence is not entirely unwarranted. Since July 2000, even as venture capital investment into the region slowed, Cooley’s Reston lawyers closed approximately 60 venture financing rounds — more than any other D.C. area practice. In comparison, Wilson’s new office completed approximately 25 VC deals, and Brobeck’s just 18. Less than two years after opening in Reston, Cooley Godward has secured its spot on the short list of local deal firms, alongside established area practices, such as Piper Marbury Rudnick & Wolfe and Shaw Pittman. But Conroy and office co-founder Michael Lincoln, both former partners in the McLean office of Richmond’s Hunton & Williams, point out that the current success dates back well before April 1999. “This really started when Mike came over to Hunton & Williams in 1994. A huge amount of work traces back to relationships we forged during that time,” says Conroy, who also serves on Cooley’s firmwide executive committee. “Of course, adding the Cooley platform was a huge acceleration for us,” Conroy adds. “There were people who wouldn’t give us the time of day at our previous law firm who called us the day we opened the Cooley office.” According to Pitchford, absorbing the established local practice deviated from Cooley’s typical new office model. “Historically, we have opened offices with the fundamental partner being a homegrown Cooley lawyer. To the greatest extent ever we broke that mold,” he says. Conroy and Lincoln opened in Reston with seven Hunton expatriates and went on to mobilize an army of corporate lawyers in Reston virtually overnight, overflowing its available office space. In the first six months after opening, Cooley’s attorney ranks soared to 35 lawyers. And by August 2000, that figure had doubled. Committed to building a full-service office from the outset, lateral hires include four former Securities and Exchange Commission lawyers; a prominent real estate group; and a former vice president at McLean’s Microstrategy Inc. “In the early days we were talking about building to 20 or 30 lawyers in a year and seeing where we went from there,” says Daniel Westman, a litigation partner and transplant from the firm’s Palo Alto office. “As it turned out, there were a lot of lawyers in established firms who believed their practices would develop more quickly with us than at their firms.” In the wake of such staggering growth, however, some VC clients complain of uneven service. “The biggest problem Cooley has had is building a balanced office,” says a partner in one local venture fund. “They have some very knowledgeable partners. The biggest problem is getting that depth of talent.” Conroy and Lincoln maintain that their hiring criteria are rigorous and training is a top priority. Recently, the office has placed even greater emphasis on providing consistent work quality. “We made a conscious decision to slow down our hiring independent of the market downturn we’re in the midst of now,” says Lincoln, 38. “We thought we needed to slow down, catch our breath, and focus on client management.” Though still active in private financings, Cooley’s public market work has dried up since last April. Top client Cidera pulled its registration in December 2000, and several other companies that were interviewing investment bankers in preparation for an IPO have changed course. “That aspect of practice is dead and not likely to come back any time soon,” says Conroy. Despite the downturn, firm leaders say there is no plan to lay off attorneys in Reston. An unexpected success for the new office has been the rapid growth of a substantial patent practice, led by former Morgan, Lewis & Bockius partner Scott Talbot. Talbot, a Reston resident interested in tapping into the region’s vibrant technology community, called Conroy the day the office opened and joined the team in June 1999. He now heads a group of approximately 25 practitioners in Reston as well as the firmwide patent group. More than half of Cooley’s patent capability is now based in the Reston office. “When we started building in Reston we were very focused on integrating our group with other practice areas and really using it as a differentiator from our other competitors,” Talbot says. “None of our other competitors — Brobeck, Wilson, Shaw Pittman — have the same depth of capability.” Prior to Talbot’s joining the firm, Cooley’s entire patent group had resided in Palo Alto. The shift reflects a firmwide commitment to building a full-service office on the East Coast. But despite the breadth of expertise, some wonder if Cooley targeted its local client base too narrowly. “Cooley focused a lot on Internet companies in Northern Virginia,” says former Palo Alto Cooley partner Alan Mendelson. Mendelson, who left the firm in May 2000 to work for Latham & Watkins in San Francisco, played an active role in launching the Reston office. “There was not any ambition to try to do a life sciences practice. I think Cooley will suffer in that respect.” But in the end, Mendelson also believes that natural selection in Northern Virginia will favor his former firm. “Knowing what we know now about the market, I think we would have still gone forward,” Mendelson says. “While some VCs are going to spend most of this year digging themselves out of bad investments, other VCs will still be doing deals. And those law firms [best] positioned during the downturn may be ones who benefit in long term if they hang in there.” WILSON SONSINI: THE GIANT UNDERDOG
It’s not often you hear a partner at Palo Alto’s Wilson Sonsini Goodrich & Rosati — the Goliath of Silicon Valley law firms — say he feels like a David. But 37-year-old Trevor Chaplick, head of Wilson’s local corporate group, cannot help evoking the metaphor to describe his first year in Northern Virginia. “We’re a small office and we’re trying to make a presence here,” says Chaplick, a Palo Alto partner who moved out to spearhead the firm’s expansion in Northern Virginia. “We didn’t buy a practice and a local network, so it will take awhile for us to make ourselves known.” Indeed, Wilson Sonsini approached the region so differently from its brethren Bay Area firms, it’s hard to compare the respective offices at all. Wilson made little effort to arrive early to the game, continuing to evaluate the market months after Brobeck and Cooley were off to running starts. And upon opening in Northern Virginia, the firm made far fewer lateral hires. Approximately one-third of the 28-lawyer office and four of the office’s five partners hail from Palo Alto. The firm’s sole lateral partner, Michael Raschid, left the D.C. office of Chicago’s Winston & Strawn to head the local technology transaction practice. While Wilson Sonsini has approached big name corporate partners, they haven’t yet met a match. For now, the firm has had to settle on building its local client base one company at a time. “You hope the community will embrace you. You build bridges. You try to do great work. And you hope the word gets out,” Chaplick says. He adds that since opening the office with three local clients, the client roster has expanded to more than 50. But for those expecting a flashy entrance from the high-tech powerhouse, the launch has been anticlimactic. “It’s a different philosophy,” explains partner Laurie Smilan, 41, who relocated from Palo Alto to build an East Coast securities litigation practice. “I think we’ve been willing to sacrifice size in favor of having a group that’s really integrated with the firm as a whole.” Behind Wilson Sonsini’s low-key approach, however, is a focused strategy, placing equal emphasis on the firm’s two premier practice areas: corporate representation and securities litigation. Few guessed at the time that securities litigation would take off first. “The one thing about litigation is that it’s really counter-cyclical,” says Smilan. “We had initially planned to staff up this area relatively slowly, but we’ve exceeded our expectations in terms of number of cases and revenue.” According to Smilan, the group of two partners and seven associates is currently juggling 10 active securities cases. Both Smilan and Chaplick assert that despite the firm’s conservative start, Wilson Sonsini plans to dramatically expand the Northern Virginia office and has lined up future office space in Reston Town Center to accommodate more than 100 attorneys. WERE THEY JUST CALIFORNIA DREAMERS?
After years of fighting for turf in California, Brobeck, Cooley, and Wilson have found themselves jockeying for market share on the East Coast. Washington law firms are eyeing the newcomers — at once curious and wary. The three Silicon Valley firms share a similar assumption about the local market: that it offers an opportunity for a firm built on the technology sector. That assumption, as well as each firm’s maneuvers in the market, are about to be put to the test of a faltering economy. Despite local hires, Brobeck has not seemed to crack the clubby community of entrepreneurs and venture capitalists. But in a slowing economy that might not matter. Even as the firm opens in Northern Virginia, Washington may be emerging as the more important destination. A presence in the nation’s capital may help Brobeck solidify its reputation as more than a Silicon Valley firm. In contrast, Cooley Godward got a running start by acquiring a practice with deep roots in the local venture capital community. The immediate success of Cooley’s Reston office in winning start-up and VC clients has provided the base for rapid growth across a variety of practice areas. But some wonder if the firm has overextended itself. With a model built around emerging company business, what will feed Cooley’s supporting practices if start-up activity slows? For Wilson Sonsini, it’s still unclear what lies ahead. With few local ties and a low local profile, the firm has scarcely rippled the D.C. legal market. In a boom time, the Wilson Sonsini name alone would almost certainly be enough to draw clients, but the challenge is greater in this tepid market. After all, the Silicon Valley firms still face formidable local competition from area firms like Shaw Pittman; Hogan & Hartson; and Piper Marbury, as well as from scores of out-of-town firms. As the shakeout begins, many of those firms will have to pull out. And at the end of the day, there will undoubtedly be room for the services a Silicon Valley firm brings to the table. Perhaps, there will be room for all three.
By the Numbers: D.C.-Area Offices
Facts and figures about the D.C.-area offices of Cooley Godward, Brobeck, and Wilson Sonsini.