When Is a Law Firm Not a Law Firm?

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Seizing a unique niche for itself, VLG was created to redefine what a law firm could do for a start-up. "They are geared to providing the kind of support that you need as a start-up," observes client Amyl Ahola, president of TeraStor. "The service we've gotten has been surprisingly, consistently positive."

At the outset of each relationship, VLG acts a lot like a venture-capital firm, picking and choosing as clients the start-ups in which it sees the greatest likelihood of long-term success. And while VLG does not actually finance the companies it jump-starts, it does routinely purchase small equity positions (typically less than 1%) through a venture fund called VLG Investments. As it did with Financial Engines, Johnson's outfit then helps assemble an external team of other advisers well suited to the clients' business needs. Along the way, VLG tries to become an integral player in refining its client companies' business plans and financing strategies--all with an eye toward building companies that will succeed and ultimately produce investment returns for VLG years down the road. The lawyering--and the bills--don't come until later.

It's a business model that's radically different from what traditional law firms have used. It initially relied heavily on Johnson's personal reputation. He had built up his "platinum Rolodex" while at Silicon Valley's top legal powerhouse, Wilson, Sonsini, Goodrich & Rosati, where he practiced for 18 years. As a partner there, Johnson attracted a strong following among early-stage companies and formed deep relationships with the venture-capital community. "He was really the number two person at Wilson, Sonsini," observes venture capitalist Kramlich. But by 1993, Johnson was consumed with the idea of creating a different kind of firm--one that would concentrate primarily on early-stage companies.

Johnson claims that the idea for VLG came to him in a dream in early 1993. For months he had been frustrated in his efforts to set up a Wilson, Sonsini satellite office on Sand Hill Road. He'd been worried, too, by turnover and growth at the firm, which in his time had expanded from 10 to roughly 250 lawyers. That growth--accompanied by expansion and maturation of the companies on Wilson, Sonsini's client roster--had diluted the firm's focus on the early-stage companies that were Johnson's passion. His dream seemed to spell out a clear solution to it all.

When he had been a computer programmer for Burroughs Corp. in Pasadena, Calif., in 1970, Johnson typically would not hammer out a single line of code until he had a clear picture of an entire program laid out in his mind. Now, he says, he awakened from a deep sleep with a complete vision for a new business in his head. Before any of the details faded, he got out of bed and, still in his pajamas, wrote down everything. By dawn he had filled 15 pages.

Within a few months of committing his plan to paper, Johnson quit Wilson, Sonsini. As commander of a 15-person group that concentrated on serving emerging companies, Johnson had long been an independent player. Still, he suspects that some of his colleagues thought he was nuts. He was, after all, forfeiting his post at one of the valley's most powerful and influential institutions, as well as a $1-million-plus annual pay package, to start something brand-new--under the logo of an acorn.

The dream seemed to have set in motion something Johnson could not turn back. "I went to sleep on a Friday evening with no idea of leaving the firm and woke with the reasons fully formed in my mind," he explained in his resignation. "I was skeptical at first, but the conclusion now seems inevitable."

Johnson designed for his new firm a brand-new business model, based on the framework of a venture-backed start-up. The name as much as said so. Rather than trumpeting the names of its founding partners, as the appellation of virtually every other law firm in the country does, the moniker Venture Law Group evoked the nature of the practice. "At first we weren't even sure if it was legal," Johnson recalls. (Since VLG's inception, more than a dozen firms have latched on to the VLG trend, among them Enterprise Law Group, Genesis Law Group, Commerce Law Group, and Technology Law Group.)

Johnson, who firmly believes that there is value in innovation simply for the sake of innovation, championed a marketing campaign that features frequent giveaways of coffee cups, tote bags, and fleeces emblazoned with the VLG logo--"Ã la Hard Rock Cafe," he jokes. He has bucked law-business norms in more profound ways as well, giving everyone--from the most junior secretaries to the most senior partners--a slice of the firm's profits. In addition, VLG has flattened the traditional pyramidal law-firm model of staffing, in which a cadre of newer lawyers works under the supervision of a few senior ones. Instead, VLG promises its clients that its big-name senior partners--lawyers like Johnson and his partners Joshua Pickus and Jim Brock--will be deeply involved in servicing the business.

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