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Some Law Firms Ditch Traditional Model

Want to start a business? You’re going to need legal advice.

Brian Dirkmaat, an attorney in North San Diego County with a track record of working with early-stage companies, says entrepreneurs are demanding more transparent and efficient legal services from an industry largely unchanged by advances in technology.

And he’s betting his newly minted business on what he perceives to be growing interest in more innovative law services: He recently left Encinitas’ Coast Law Group, where he was a partner, to start a solo practice.

“I wanted the flexibility to offer more innovative, easier, cheaper ways for founders to do what they want to do,” said Dirkmaat, 50, who incorporated Coeptus Law Inc. in late 2017.

Startup Services

Lawyers like Dirkmaat see a business opportunity in catering to a growing San Diego startup community and the region’s entrepreneurial-minded millennials, some of whom are looking for a less intimidating and inexpensive way to access legal services.

Dave Werth, who heads the San Diego luxury real estate team The Werth Group, became a client in 2017 of Hillcrest-based firm DuFord Law, which offers flat fee arrangements and markets the firm as a more-approachable alternative to traditional firms.

“One of the big draws was, when you’re a small business, one of the challenges is that sometimes you’ll avoid seeking out legal advice because, typically, there are pretty large costs involved,” Werth said. “We want to do it right, and the fact that they gave me options as to the fee structure was super appealing.”

Lack of Access

Wife-and-husband legal duo Kelly and Craig DuFord, who are in their early 30s, launched their eponymous firm in early 2017.

The pair, who has been practicing law for six years, met at California Western School of Law. She started her career as a deputy district attorney before moving to business law; he practiced civil litigation, with a focus on insurance.

But after a few years, they found themselves put off by the industry’s persistent “old-school mentality,” said Kelly DuFord, the firm’s managing partner. She felt their legal services were inaccessible to many prospective clients, who felt uncomfortable even reaching out for advice because of high and unpredictable hourly fees.

The couple started out in a tiny office in Little Italy, but moved into a 2,600-square-foot office in November. Since launch they have worked with 56 clients, some on multiple projects, tripled monthly revenue and hired six people.

Flat-Fee Packages

The firm offers flat fee packages that start at $350 per month. In comparison, some elite law firms charge more than that per hour of work by a first-year associate.

DuFord said she is comfortable sacrificing the income from billing per hour up front to establish long-lasting relationships with clients seeking legal services.

“I want to be there when you start your business, and there when you sell it,” she said.

But it’s not just that the services are less expensive than they would be if billed hourly: The DuFords believe the less traditional way they run the firm will also keep clients coming back.

They hold Facebook Live chats weekly; rarely don formal business attire to meet with clients; and have more than 1,000 followers on Instagram.

“I know that doesn’t sound like a lot,” Kelly DuFord said, “but who wants to follow a law firm on Instagram?”

They have found that clients in their target demographic, many of whom are used to interacting with businesses online, respond positively to the firm’s dedication to digital engagement — and resulting transparency, which parallels the firm’s clear fee structure.

“(Clients) want to know you’re a real person,” she said.

From Start to Exit

Dirkmaat says he also wants to offer clients a more collaborative approach in the interest of working with them from company start to exit.

The University of San Diego School of Law alumnus moved out of town after graduation in 2001 for a job in Silicon Valley, working with an attorney who represented French clients doing business in the region. He returned to San Diego in 2009.

Admiration for the audacity and drive of the entrepreneurs to whom he has provided legal advice over the years spurred a desire to strike out on his own, Dirkmaat said.

The name of his firm was inspired by the Latin phrase “annuit coeptis,” which appears on the $1 bill and has been translated as “favor our undertakings.” A reference to the American colonists’ decision to break away from monarchical overlords and form a new nation, Dirkmaat interprets the phrase as a blessing on new ventures — like those to which his clients have committed. (Also, he’s a Revolutionary War buff.)

Alternative Fee Arrangements

In an age where the entrepreneurial path continues to gain popularity because of the flexibility it can provide, Dirkmaat sees an opportunity to establish himself as an attorney able to accommodate the cash-strapped realities of the startup struggle.

If that means, for example, eschewing hourly billing for alternative fee arrangements, he’s in.

He’s also game to suggest, for example, that a startup sign a simple agreement for future equity (SAFE) with an investor or investors, rather than a convertible note, which is a more complicated way to raise money before a company’s initial equity round. While that means less upfront income because the paperwork is comparatively simpler, Dirkmaat says clients provided less expensive, more creative ways to achieve their goals are likely to return for additional services.

“As services providers, our job is to provide the best, easiest, cheapest solution to the client,” he said. “I think I (will) make more money in the long run if I’m doing that for my clients.”

Dirkmaat says about 20 clients have signed on with Coeptus in the two months or so since its incorporation.

Commoditization of Some Legal Tasks

Constraints on revenue growth in the legal industry likely to intensify in coming years include increased pricing competition and the commoditization of more basic legal work, according to an industry report published in July 2017 by IBISWorld.

Cooley LLP, the first Silicon Valley law firm to open an office in San Diego, is working to get ahead of those trends. In recent years the firm launched a site, called CooleyGo, aimed at entrepreneurs that provides basic forms at no cost.

“Ten years ago, we and, I think, most other firms would have considered (this) proprietary and the sorts of things we would do on a billable basis,” said Jason Kent, a San Diego-based partner with the firm’s emerging companies practice. “That was the first big move we made to really make express use of technology in the emerging company space.”

Competing With Smaller Firms

Kent said the firm has also made internal changes to improve the efficiency of how it delivers legal services in an effort to compete with smaller firms that can offer cheaper rates.

“As a large firm, we don’t always have the same flexibility,” he said. “What we’ve been really focused on doing is how we can use technology to allow us to do things more efficiently so when you look at the entirety of a project we’re still coming out with the equivalent or hopefully better value than a smaller, lower-priced firm.”

The firm uses an internal document system to generate paperwork for recurring transactions.

“Instead of doing it from scratch, you can essentially spit out a set of documents that is customized, yet consistent with our typical approach and practice,” Kent said.

The firm is also exploring the use of artificial intelligence to analyze data and help with due diligence, he added.

Increased access to online tools has also proved a benefit to practitioners, especially those without the backing of a large firm.

Tapping Technology

Dirkmaat said the thought of going solo a decade ago was daunting.

“Back then I would have had to get all these hardcopy legal treatises, and now it’s all online,” he said. “I have practice management software; I can do billing online.”

That frees him up to focus on the core of his business.

“Right now, any of us, no matter what our position in life, can go out and do a startup,” Dirkmaat said. “It might be scary, a ton of risk, but …it’s like surfing: You might wipe out, but you might get the ride of your life.”

Jason Kent
Kelly DuFord

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