Screen Shot 2014 05 13 at 1.12.27 AM 300x196 MassChallenge Doesnt Really Reject Anyone: My Experience of the Application Process Through the Final RoundAs someone who likes to build innovative products for underserved markets, I am not a stranger to rejection.

So, when I received an email last night informing me that my company, UnionConnect, did not advanced beyond the semifinals for MassChallenge in 2014, I was surprised that “rejection” was not a part of the experience.

MassChallenge, which is one of the most well-respected and largest startup accelerators in the world, had advanced UnionConnect from our initial application through to the semifinalist round, but declined to accept us as finalists into their four-month accelerator program. They promise to tell me why, in detail.

I look forward to that.

But I am not stressing over their decision. This post is about why.

Putting it in Perspective

I am used to rejection from all kinds of people. Since founding UnionConnect, however, one place I have never heard rejection is from the market. In the six months since we have been in the market, we have signed over a dozen large, organizational customers and we are just getting started.

Therefore, I know I am on the right track.

Additionally, we are well on our way to making back our initial investment out of profits, so my partner and I will soon own a profitable company outright. With zero dilution, we can have the full freedom to listen to our customers and build the products they truly want and need.

As such, I am feeling fantastically optimistic about where we are going.

That is not to say we do not have our challenges. We have many ahead of us, which I look forward to tackling at the appropriate times. There is no doubt in my mind that MassChallenge could have helped us to do so in their four-month program, and in that specific sense, I am disappointed.

But the fact is that MassChallenge has already helped us tremendously.

MassChallenge Only Provides Value

MassChallenge does a wonderful job of providing value at every stage of the process, from the moment they offer up their initial application.

For $99, any founder can get access to questions that not only help MassChallenge identify promising startups, but also serve as an incredible microscope under which every entrepreneur should place his or her business at least once.

The MassChallenge application process is not easy. They require that entrepreneurs distill very complex answers about critical business logic, often into 250-character slots. As a loquacious lawyer, that is particularly difficult for me.

But I love that I struggled with the MassChallenge application. It forced me to think about issues that will affect the success of UnionConnect.

Some questions were easy to answer in the sense that the business embodied a strategy that lent itself to a good answer. Other questions forced me to think strategically about how to address weaknesses.

When we advanced to the semifinals, we faced even more helpful scrutiny. The process of creating what is essentially an investor-oriented a pitch (in the sense that it differs from how I pitch to prospects) meant that I had a reason to assemble an astounding panel of experts for business advice.

Each one of them gave me at least some advice I now consider to be essential. I took that advice and composed a pitch I would be proud to deliver again-and-again.

Bringing the pitch before the seven MassChallenge judges we encountered only illuminated so many additional questions that are going to help us to think about. And, the judges were also very encouraging, which I appreciate.

All told, I had a hard time thinking of the application process as an application at all. Rather, at every turn of events, MassChallenge used the application process as an excuse to help every entrepreneur it possibly could. What’s more, their commitment to delivering detailed feedback is outstanding.

***

Going forward, I look forward to continuing to be involved in the MassChallenge community, not only because it can continue to help, but because I am thankful for what they have given me.

As I see it, any organization that would go out of its way to give what they gave for a mere $99 deserves my involvement.

And as far as not making it to the finals? Thanks to the way MassChallenge runs their organization, I feel like I already won.

shutterstock 84730207 300x196 Why I Closed the Boston Expert Witness Group: A Post MortemI have closed a chapter in my business life, and it’s time I ensure that everyone who wants to know about it knows.

In January, I made the decision to close the Boston Expert Witness Group after over two years since I had my initial vision for the business.

Though I was making money and helping my clients with a genuine need, I ultimately realized that I was not creating the kind of business that I wanted to create.

Along the way, I learned (at least) six hugely important lessons about entrepreneurship, which I want to share with anyone who cares to read them. For each, I will explain how learning this lesson directly impacted my business and my decision to move on.

But before I get there, let me back up just a few meters in case you don’t know what I have been doing in this business.

About the Boston Expert Witness Group

The Boston Expert Witness Group offered the expertise of a premium group of high-integrity medical expert witnesses. We went to work on a variety of cases that all had a common thread of requiring medical expertise to explain material facts that were the subject of litigation.

We worked on personal injury cases, insurance defense cases, medical malpractice cases, and even some patent litigation. We gave expertise from both plaintiff and defendant standpoints. We worked on cases throughout the United States.

By the end of my running the business, we were revenue positive, and even a little profitable. We contributed essential expertise to our clients’ cases and in some situations were able to do so early enough to prevent litigation from happening in the first instance.

The Group worked with some of the leading boutique firms in Boston, as well as a handful of solo practitioners. We handled some very interesting cases and also some pretty typical ones.

Ultimately, we struggled with finding a product-market fit that could stand on the business’s core values: integrity, efficiency, and legal innovation. The lessons I learned explain why.

Lesson I: Put Markets First, not Ideas

I come up with a lot of interesting ideas. None but maybe two of them have ever been marketable… maybe. These are not good odds.

Contrast the process of starting with ideas to find markets with the process of starting with a market need to develop a business idea. When you start with market need, you know that as long as you can build a product or service that addresses it and connect with enough customers, you will have a business.

The Boston Expert Witness Group started as an idea in search of a market. Though I found the market late in the life of the business, it didn’t look anything like a market that would support a business built on our core values.

Most attorneys I worked with were not in the interest of using my business to find a vetted expert. Rather, they simply wanted a list of people who they could show to the firm’s partner handling the litigation.

The chance that a prospect was going to return to the business to hire our expert was minimal, yet we did not get paid until that happened.

Because our business put a lot of work into vetting experts before adding them to our database, we ended up doing a lot of work for free. That turned out not to be a good business model (obviously).

Catering to the market of attorneys who wanted lists to bring to their partners, we would have had to:

  1. lower our cost to build and maintain a database of expert witnesses;
  2. lower the quality of our referrals;
  3. charge for our lists; and/or
  4. support the business with another source of revenue.

These turned out to be approaches that were unmarketable, lacked innovative character, did not lead to improvements in the efficiency of law practice, and put our database at risk of containing experts who lacked integrity. These were not acceptable options.

Lesson II: Have a Sales Plan from the Beginning

Prior to starting the Boston Expert Witness Group, I had no sales experience. About a month after turning my idea into a full-time job, I began to realize I would have to learn to sell the services of medical experts or perish.

I embarked on a year of the best sales training I believe money can buy, which is Sandler Training. I got good at setting expectations, digging for pain, and talking about money and decision-making processes. But when I began to calculate just how much time I would have to spend selling our particular products to the prospects we were encountering, I realized I would have to spend most of my waking moments engaged in sales.

It left very little time for me to plan how my business was going to operate and to do what I had to do to support myself while the business still lacked sufficient revenue to pay me a decent salary.

Perhaps I could have hired others to fill either the sales or other functions, but when I thought of doing that, I ran into my next problem…

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I recently finished reading Walter Isaacson’s excellent biography, Steve Jobs What Steve Jobs Taught Me About Attracting A List Talent, in Two Childhood Maxims.

I was late to the party on doing so, I realize, but I’m glad I did get through the book because I feel like I knew the guy and had the opportunity to learn from his successes as well as his mistakes.

One (of many) obsessions Jobs appeared to have had was an absolute insistence on only hiring A-list players. Anyone he met was either on the A-team or a “bozo”; their work was either “insanely great” or “absolute shit.” (His words.)

Though I’m not as black-and-white of a thinker, I understand the notion.

It has been clear to me for a long time that companies, especially those in super-competitive markets, succeed by making massively innovative leaps and selling the fruits of vision and hard work to excited customers. Only a team of top talent can accomplish this.

What has been harder for me to understand is what it takes to actually attract talent from the top tier of the talent pool.

As someone who runs a business attracting top medical experts and motivating them to take on unusual work outside of their routine practices, this is of great concern to me.

After reading Steve Jobs, I realize the answer has existed in two maxims I have always heard since I was old enough to remember the sensation of hearing itself. Jobs embodied those maxims and put them to use as the fuel in his wildly successful approach to innovation.

So, what are these maxims I have been hearing since childhood and how do they apply to this challenge?

Maxim I: “Actions Speak Louder Than Words”

Simply put, you are not going to attract top talent unless you behave with a commitment to your cause that tells of its importance.

Simple rhetoric may get you an initial conversation with someone who can help you, but the luster of your words will quickly fade when their gloss is eroded by the challenges time brings.

Another way of saying this is that you have to have your own skin in the game.

When I read Steve Jobs, I understood that the power of Jobs’s leadership came from his actions. There are so many ways people have described Jobs, and there have been many critiques of his leadership style. But one thing that no one said of Jobs is that he led with words alone.

What people saw in Jobs was a commitment to his vision in the way he acted.

This display of actions was so powerful and motivating that it allowed people to look past his sometimes supremely nasty way of treating his subordinates.

Maxim II: “Lead By Example”

As leaders, we are responsible for conceptualizing a vision and then communicating that to those who we want to motivate in the effort of achieving it.

We have to routinely take time to communicate the vision. Very few people who work for the leader will be able to grasp the vision without this.

If that weren’t the case, those people would be out leading the way themselves.

One way we can set an example is with our work ethic. If we show that we are truly committed to our vision with our time and energy, our employees and contractors will catch on. They will be inspired to do the same with their own commitment.

This was a pervading theme in Steve Jobs. When Jobs demanded his Macintosh team work “90 hours a week and lov[e] it,” he led by example.

His employees could criticize his lack of appreciation for their effort (he often told them their work was “shit”), but they could not say he was too demanding.

Instead, they understood that Jobs was leading a team of like-minded individuals, all equally committed to his artistic brand of innovation.

boston law firm biglaw profit margins 198x300 Law Firm Profit Margins for Boston BigLaw: Some Surprises
Boston BigLaw Law Firm Profit Margins

One would have to be delusional to expect that reports on BigLaw profit would be anything but bleak.

So, when I picked my most recent copy of the Boston Business Journal out of the mailbox in my office on Friday, I hardly gave the front page article on the legal industry a second look.

But later, as I hunkered down to read what I expected would be mere numerical verification of something every lawyer knows, I was struck by some key data that were missing but which could be extrapolated from the report.

The article, New Reality Sinks in for Law Firms, by Boston Business Journal’s Lisa van der Pool, offered the usual metrics on BigLaw health — annual revenue, and profit per partner — for three of Boston’s leading BigLaw firms.

What were missing were data on the overall profit for each firm, and thus, what I assert are actually the most interesting data of all: margins.

Why Care About Profit Margins

If you know that each law firm is making a profit per partner, and that number seems large, why care about profit margins?

The reason is simple. The BBJ article dealt with some of the world’s preeminent law firms. This means it was assessing:

  • The demand for some of the best and brightest minds in the entire legal industry.
  • The premium some of the world’s most successful clients are willing to pay to get the most prestigious legal representation available.
  • The profit-making capability of some of the world’s leading brands in the industry.

Now, in essence, I am talking about the same thing in all three points, above. But it is important to look at the question of profit from these perspectives because it says something fundamental about the legal industry: how lucrative is law, as a business, at its pinnacle.

Getting to Profit Margin

Note, the numbers displayed in this analysis are actually an expression of markup, not margin. See below.

Summarizing a recent report from Citigroup and Hildebrandt Consulting, van der Pool offered the following metrics:

Firm Revenue Profit per Partner
2012 figures, reported in millions.
Goodwin Procter  $715  $1.5
WilmerHale  $1100  $1.5
Holland & Knight  $598  $0.95

To convert this information into profit per firm, and then, in turn, profit margin, I needed one additional metric for each of these firms: number of partners.

So, I searched the websites of each of the firms listed, and returned the number of partners. Armed with those numbers, I was able to determine firm profit by multiplying the profit per partner by the number of partners per firm.

I was then able to subtract profit from revenue to derive the cost to each firm to provide its services.

Finally, was able to divide revenue by cost to get the profit margins. These numbers represent the amount each firm was able to mark up the services it provided to its clients. Here are the numbers:

Firm Revenue Profit per Partner Partners1 Profit Cost Profit Margin
2012 figures. Dollar amounts are reported in millions.
1 The number of partners was determined by a February 2013 search, and as such, may be slightly different from the 2012 figure.
Goodwin Procter  $715  $1.5  324  $486  $229.5  311 %
WilmerHale  $1100  $1.5  308  $462  $638  172 %
Holland & Knight  $598  $0.95  618  $587.1  $10.9  5,486 %

Let me note that something seems off about the Holland & Knight number of partners, which is over double the number of partners at WilmerHale, even though they have loosely the same number of attorneys overall. Because my ability to determine profit was based on multiplying the number of partners by the profit per partner, this made a huge difference in my calculation of their margin.

But that aside, even if we look at the numbers of Goodwin and Wilmer alone, here is a visualization of the data:

Boston BigLaw Profit and Cost 2012 Morris Singer1 300x225 Law Firm Profit Margins for Boston BigLaw: Some Surprises
Boston BigLaw Profit and Expenses (2012)
Boston BigLaw Margin 2012 Morris Singer 300x225 Law Firm Profit Margins for Boston BigLaw: Some Surprises
Boston BigLaw Profit Margin (2012)

Based on that, we can reach a few conclusions:

  • Though Wilmer looks bigger and healthier according to the data van der Pool reported, once we factor in the number of partners, we see that Goodwin is actually doing a better job capturing profit from the services they provide.
  • Despite an economic context that van der Pool described as “modest,” and “slow,” there are still healthy margins at all three of the firms she covered.

For more information, see the original article at the Boston Business Journal [subscription required].

Update: Yelena Tsvaygenbaum, a transactional attorney in Boston tipped me off that I had made two missteps in my analysis. For starters, by dividing revenue by cost, I derived markup, not margin. It’s a silly mistake, I confess. But, it does not diminish my analysis of the profitability of law.

To provide the most accurate figure of markup, I would also need to subtract 1 (or 100%) from my numbers. I did not mention this because I felt it would be obvious. But, for the purpose of providing a technically complete analysis, I will do so here.

The revised table should look like this:

Firm Revenue Profit per Partner Partners1 Profit Cost Markup Profit Margin
2012 figures. Dollar amounts are reported in millions.
1 The number of partners was determined by a February 2013 search, and as such, may be slightly different from the 2012 figure.
Goodwin Procter  $715  $1.5  324  $486  $229.5  211 % 67 %
WilmerHale  $1100  $1.5  308  $462  $638  72 %  42 %
Holland & Knight  $598  $0.95  618  $587.1  $10.9  5,386 %  98 %
 Oxymoron no more: why legal innovation is going to be big in this decade
Credit: ShutterStock.com

I am going to go out on a limb, and it may offend some of you. The recession of 2008 and the ensuing crisis in the legal industry may have been a good thing.

Now that I said it, I know I am inviting a lot of upset; many of you lost jobs, lost career prospects, and saw your school loan debt become seemingly unrecoverable. I am one of them.

But I am not bitter because I see now that the end of this roller coaster is going to be in a good place.

Take, for example, just five stories that have appeared in the past month alone:

There seem to be a lot of innovators turning their sights on the legal industry to make law practice a more efficient industry. (Full disclosure: a service I run to help lawyers recruit and hire expert witnesses is taking advantage of web-based database-driven technology, as well.)

Even five years ago, this would not have been possible.

Why? Because alternatives to the billable hour were caught somewhere between intellectual fodder and a joke. Efficiency lay at the short end of any practitioner’s legal career. And while every other industry on the planet became more efficient through clever uses of new technology, lawyers became more productive simply by working longer hours (from 1,700 billable in 1970 to over 2,200 billable at some firms in 2010).

But now, lawyers are facing higher-than-ever pressure from clients to perform efficiently, and to revise billing practices. While there may or may not ever be a true shift away from hourly billing as the gold standard for attorneys, it is hard to argue with the fact that lawyers are now being rewarded for efficiency.

Lawyers are competing with outsourced and automated options when it comes to winning client business. For a great argument that many functions of lawyers will soon be completely outdated, see Jordan Furlong’s blog post, Back When We Used Lawyers.

Efficiency means opening doors to new clients, and winning business in a more competitive market. And that is the ticket to survival when slogging through the legal economic doldrums.

So, how does that make the recession a positive thing for lawyers? Great question. Here is the answer:

The recession is a positive thing for lawyers and for the practice of law because it has finally created an economic picture in which legal innovation is rewarded, in which technology has a true place in law practice other than novelty, and in which increases in our productivity will not come at the expense of sleep, our families, and our happiness.

Have you been forced to become more efficient as a lawyer? Has technology helped you?

 MassChallenge 2012 Finalists Include Legal Innovator
Boston Innovation District, home of MassChallenge and iAgree. Courtesy OpenView Venture Partners / Flickr

Powerful legal software sold as a service — it’s not just the province of Big Blue and Big Red anymore.

With the list of the 125 finalists to have made it through MassChallenge, the largest startup accelerator in the world that does not take equity from its participating companies, one stands out that will have special significance to lawyers. That company is iAgree.

The company has developed innovative software as a service that helps lawyers:

  1. Easily initiate, facilitate and track the resolution of disputes through a secure platform
  2. Simplify the upload and information gathering process among multiple parties
  3. Find or add the most qualified mediator or arbitrator for a case

As of this writing, the company is in an invite-only launch, but I, for one am looking forward to seeing how this pans out.

In October, iAgree will be one of the 125 new companies at MassChallenge’s awards ceremony, in which a total of $1,100,000 in grants will be awarded to winning teams.

For information on iAgree, see this page.

For information on MassChallenge, see this page.

For tickets to the MassChallenge Awards Ceremony, see this page.