If you graduated from law school in the late 1990s, you may have warm and fuzzy feelings for Gunderson Dettmer, the high-powered Silicon Valley law firm that represents many startup and technology companies. As you may recall, back in 1999 the firm made waves by offering new associates a starting salary of $125,000 — significantly higher than the $100,000 that was standard at the time.
This pay raise then spread around the country, adopted by law firms nationwide as the new standard. Gunderson’s gutsy move generated goodwill from young associates around the country.
But these days Gunderson is getting some less favorable publicity….
Over at TechCrunch, lawyer turned writer Michael Arrington explains:
The Founder Institute, a very early stage startup accelerator and entrepreneur training program, was launched in 2009 by Adeo Ressi. The company now has programs in a variety of cities in the U.S. and around the world – ten cities at the last count….
[This week Ressi] began publishing a blacklist of these companies, available only to people who’ve gone through the program. First on the list is a law firm, Gunderson Dettmer, that often represents venture capitalists and startups. Over-lawyering by the first apparently caused one venture deal to fall apart.
Ressi sent out an email describing the blacklist. Here are the allegations against Gunderson:
An example of one blacklisted company to avoid is the law firm, Gunderson Dettmer (http://www.gunder.com). This firm has caused problems for Founders around the country. In New York, Gunderson has told Founders that Class F stock hurts entrepreneurs and allegedly spread negative rumors about other law firms to secure clients from the program. In San Diego, associates at Gunderson billed Founders for cosmetic changes to template agreements that have been accepted “as is” by dozens of lawyers from other firms across the country. In the Bay Area, Gunderson billed multiple rounds of cosmetic changes to standard investment agreements that caused at least one Graduate financing to fall apart needlessly. The Institute has contacted various attorneys at Gunderson and had unsatisfactory responses.
Spreading “negative rumors about other law firms”? Billing for “cosmetic changes to template agreements”? Would these allegations, even if true, make Gunderson that different from countless other law firms?
We’ve reached out to Messrs. Gunderson and Dettmer, and we’ll let you know if they have any comment.
UPDATE (7:45 PM): Some interesting perspectives in the comments. Here are two that are sympathetic to Gunderson:
Whether or not this firm actually did these things, there is an actual problem that could be the real issue: startups will sign just about anything. Half of the challenge of representing startups founded by non-lawyer entrepreneurs, particularly when you haven’t been there since the beginning, is unraveling the Gordian knot they’ve gotten themselves into by agreeing to directly conflicting obligations with various stockholders, which you’ve usually got to sort out in order to do the preferred financing round. And nearly all startups view every change as “cosmetic” even when it’s actually substantive. So I have some sympathy for a lawyer who finds that an entrepreneur has a different view of what changes are necessary.
Lots of cash-poor clients like to characterize lawyer work on contracts as “cosmetic” as an alternative to actually paying for that work.
As we’ve frequently seen in the past, if you take a close look at a client complaint about a law firm, you’ll often find a billing dispute not far from the surface.