Jones Day goes one up on Silicon Valley firms with ‘no equity’ plan

CLEVELAND firm Jones Day Reavis & Pogue is launching an office in Silicon Valley with a plan to set itself apart by refusing to accept equity in lieu of fees.

The firm is moving in two partners to spearhead the growth of the practice, which is being established to service new venture capital client Sequoia Capital.

Corporate finance partner Todd Johnson, who is moving to the office from Washington DC, says clients will be attracted to the firm because it will not take equity in lieu of fees. Most firms in Silicon Valley insist on a share of between one and five per cent of a firm’s business before working for them.

He adds: “The fact that we don’t take equity gives us a competitive advantage. [Our decision] was driven by concerns about an appearance of conflict. We are the second-largest law firm in the US, and the bigger you are, the more people perceive you have deeper pockets.

“Being invested in a client that is having problems certainly raises the spectre of getting sued at some point. Maybe the case wouldn’t [succeed], but you could certainly get held up, and that’s not a position we want to get into.”

Johnson will be joined by securities partner David Porter, who is being drafted in from Cleveland. They will start off with three assistants, but hope to double to 10 lawyers by the end of next year.

The firm won work advising Sequoia Capital this year after being introduced to the client to discuss litigation reform programmes. Now that the relationship has taken off, both sides decided a move to Palo Alto would benefit them.

Sequoia also uses traditional Silicon Valley firms like Wilson Sonsini, Cooley Godward and Gunderson Dettmer Stough Villeneuve Franklin & Hachigan.

But Jones Day believes it has an advantage over them because of its international reach.

Chair of the firm’s technology issues practice Joe Sims says: “I think many companies that start in Silicon Valley quickly realise they need not only US legal services, but also global legal services. What we’ll offer, which many Silicon Valley firms find hard to offer, is 13 offices outside the US.”