Organisation: Intel Capital
Employees: 300 worldwide
Legal capability: 25 lawyers worldwide, four in Silicon Valley
Head of legal: General counsel Suzan Miller
Reporting to: Director of corporate affairs Cary Klafter
Main location for lawyers: Santa Clara, California
Intel Capital is an example of all that matters in Silicon Valley – a heady combination of venture capital and high technology. The investment and acquisition arm of silicon chip giant Intel made 250 financings worldwide last year and, since it started nine years ago, has invested $6.8bn (£4.65bn) in ventures. So one would think that general counsel Suzan Miller would have a steady stream of law firms pitching her for all the work. Wrong. This is Silicon Valley, where clients must prove themselves to law firms before they can get representation.
“Law firms right now can turn away work,” says Miller. “If you have a couple of deals, you can find someone to do that, but if you need to do a major amount of work you need to market yourself as a client. We have to give feedback on associates so that they want to work on our deals, and we have to give them interesting deals. We spend time giving them training and letting them know that we're interested in them.”
At the moment Miller uses Los Angeles firm Gibson Dunn & Crutcher for a lot of the corporate work, but she still had to send a delegation to the firm's corporate retreat to talk to the associates and get them to want to work with her. She originally chose Gibson Dunn because it handles Intel's work.
“It's not that firms don't want to service your deals, but it's not easy for them to get support,” says Miller. “Associates want to bring in business, so they won't get the same credit for doing the Intel business because it's business that was already there.”
Even though it is a game of relationship building, the company has been careful to review the lawyers on a fairly regular basis. At the moment it uses Gibson Dunn, Pillsbury Winthrop (a New Year merger of San Francisco's Pillsbury Madison & Sutro and New York's Winthrop Stimson) and Morrison & Foerster (MoFo).
Miller says: “We're constantly looking at who we're using for outside counsel. The businesspeople give us a lot of feedback. At both levels we continue to critique both the lawyer and the law firm to see if they're the right people for our businesspeople. We've changed firms twice out here – we've always used Gibson Dunn, but the other firms have changed.”
Miller has tried out Venture Law Group (VLG) and Gunderson Dettmer Stough Villeneuve Franklin & Hachigan. With both she found that they wanted to work only with the start-ups and were unable to provide enough available people to service her deals.
And that is one of the biggest problems. The law firms want to represent the start-up companies rather than the venture capitalists. Start-ups are the types of companies that are going to make them a lot of money through the acquisition of equity, and where firms do represent venture capitalists they are often using them to get in with the start-ups. This, then, gives Intel Capital a limited number of firms to choose from.
Miller says: “There are a few identified firms which are experts, and it's hard to get their attention. Younger and younger lawyers are being put on things, and a lot of our moving around has to do with whether they've been able to handle the amount of work that we have. It's hard to use very general people to work with our businesspeople.”
She says that the most obvious firms are Wilson Sonsini Goodrich & Rosati, Cooley Godward, Brobeck Phleger & Harrison, Gunderson Dettmer and VLG.
“Wilson Sonsini and Cooley Godward have tended to build their practices around the company side,” says Miller. “They're the ones we see on the other side with us as the investor. Firms that are focused on start-up companies would most likely have a fair number of conflict issues, so when we look at firms we look at that, and we also consider whether they have the bandwidth.”
Intel Capital has tried to develop stronger relationships with firms by having specific teams in each firm that specialise on their work. She says it is all about building up personal relationships with individual lawyers. “In the US the way we do deals is we have an identified team of lawyers that we give a fair amount of training to, so that they know how we act,” says Miller. “They work a lot like an inside lawyer and they just come back to in-house for a final check. Outside counsel and inside counsel work together. It isn't the law firm so much as the people. For us and for this kind of work we want to be able to work directly with whomever is working on our transaction, and we need these people to work directly with our in-house people.
“We want a firm with the right kind of infrastructure support, and then we look for specific skills sets; a firm that is willing to pick and dedicate a team and bring them up. We want five or six lawyers who do our deals and get to know Intel and the way we work. Personality fit is very important.”
At the moment Miller has a team of four in-house lawyers in the US and a team at both Gibson Dunn and Pillsbury Winthrop. In choosing between the two firms, the company looks at how complex the deal is, and if it decides that it needs a senior lawyer to do the work, it will go where the most senior person is available. If the deal requires a significant amount of knowledge about the company, Miller will try to give it to an in-house lawyer.
The number of in-house lawyers at Intel Capital has grown to 25 worldwide, with offices in England, Germany, Hong Kong (The Lawyer, 29 January), India and the US. Miller says that the company has been spreading out internationally at a rate faster than the spread of venture capital, and in some countries lawyers have been slow to work out how the deals should be done.
“I think it's been interesting watching the international growth of venture capital in the last year or so,” says Miller. “In the US, the model that Wilson Sonsini pioneered of taking on clients for lower fees and getting a piece of the equity means that these small companies from the very beginning have sophisticated legal advice. That's really helped the venture capitalists.
“In countries without that it really hampers venture capital, because it takes so much longer to do a transaction. From the practical standpoint of trying to get a transaction done, it might take eight weeks in the US and four months in Germany or China. Outside the US, countries are going to have to look at that. It was hard when we first started doing deals to get people to understand that we weren't trying to buy the company. Everything is different between the minority purchase of a company and an acquisition – there's less due diligence.”
That is one of the criticisms that has been levelled at the New York firms, which have been opening offices in the Valley. Local lawyers have criticised them for failing to understand the way venture capital deals are done. Miller says: “I've interviewed a number of New York firms that have been opening offices here. People say they over-lawyer and over-document, but when I was talking to them their mentality seemed to be more the opposite – that theirs was the correct standard of lawyering. It's definitely a different approach. I think the New York firms that have been most successful here have moved off from the New York standard.
“The companies out here, the traditional big company which can afford to go to a big law firm, tend to have inside counsel who can translate what the law firm says into business-speak. But the venture capital and small companies want firms that can talk business – they want a lawyer who has a strategy for figuring out what risks to take instead of helping avoid all risks.
“I think it's more people-specific. With the right people out here, the New York firms can be very successful, but they don't necessarily have big enough offices to service us.”
Either the New Yorkers will have to expand their capability or the local firms will have to ramp up their service standards if clients like Intel Capital are going to be kept happy.
Miller is optimistic that things are going to get better. She has found it easier to hire for the in-house team since the downturn because her group is seen as stable compared to fragile dotcoms. And with the falloff of initial public offering work, law firms might just have to refocus towards venture capitalists. “The venture capital funds have so much money to be invested and that's not going to slow down. Then, when you look at the number of transactions done, we do more than any traditional venture capitalist,” she says.
Intel Capital might sound like a
dream client for a London firm, but it has yet to convince the Valley.
Miller will just have to keep practising the marketing mantra. n