Most people are as well versed in the language of law as they are in Sanskrit, and most lawyers would prefer to keep it that way. A new breed of lawyers, however, is hoping to profit by bringing legalese to the masses through Web-based companies like L.A.-based LRN Inc.
Founded in 1994 by lawyer Dov Seidman, LRN is like a virtual law school with a student body of deep-pocketed Fortune 500 firms.
“The goal is to demystify and democratize the law by translating it into a common business vernacular,” Seidman said. “Despite the legal profession’s traditional control over legal knowledge and its dissemination to non-lawyers, democratization is inevitable.”
Whether that democratization is paying off remains to be seen, but Seidman insists that his company is growing exponentially. He declined to comment, however, on revenues or on the company’s cash burn rate.
After getting two grad degrees in philosophy and graduating from Harvard Law School in 1992, Seidman lasted two months as an associate at the Washington, D.C. office of O’Melveny & Myers LLP. That’s when he got the “polarizing idea” to sell legal research to non-lawyers, essentially arming them with information that could protect them from lawsuits.
“Corporations applauded it,” he said. “My contacts in major law firms frankly thought it was bad. When you polarize customers and providers you’re typically onto something.”
LRN initially provided legal research and analysis to corporate customers as well as law firms. Seidman formed a network of 1,700 experts law professors, senior partners at law firms, authors and built up a database of research on nearly every field of law. The experts, managed by a full-time in-house staff of 40 lawyers, answer queries on everything from sexual harassment in the workplace to antitrust issues.
LRN’s database now holds 15,000 documents that address more than 50,000 legal questions. All of that information is accessible for a fee to law firms and corporate customers whose employees can access them through the Web.
Members of LRN’s legal team are not exactly giving up their daytime practices. “LRN provides them with marginal income for their marginal time,” Seidman said. “They’re not quitting their jobs.”
The subscription-based service quickly attracted more than 200 Fortune 500 customers, including Toyota Motor Corp., General Motors Corp. and Johnson & Johnson. Seidman wouldn’t give details about the payment structure of the standard three-year subscription contract.
Funding followed the growing client base. Early last year, Softbank Venture Capital put $30 million toward Seidman’s business model, which by that time had expanded to include online compliance training.
Through its compliance training, LRN uses the Web to teach employees about antitrust, discrimination, trade secrets, sexual harassment and other areas of law.
Will this automation of legal services render lawyers useless?
Not according to Seidman, who insists that LRN offers law firms an opportunity to lower costs and to “focus on more important matters.” As he sees it, LRN takes care of the time-consuming research often done by junior lawyers.
However, if Seidman has his way, LRN will protect corporate giants from lawsuits by prepping employees with legal know-how.
“The idea is to try to use systems proactively and in an educational way to design our way out of mistakes, and it’s working for us,” said Phillip Crowley, an in-house lawyer for Johnson & Johnson. “And it has been a way of lowering our legal expenses.”
Crowley said that LRN cut Johnson & Johnson’s legal research costs by 40 percent and that the health concern now has just 100 in-house lawyers a lean legal staff for a company with $29 billion in sales last year.
For Johnson & Johnson, LRN’s compliance training programs have also warded off potential lawsuits and lessened federally imposed civil and criminal penalties, according to Crowley.
In those cases, the company’s compliance efforts are rewarded if Johnson & Johnson has to prove good faith efforts to comply with strict federal laws and regulations.
“It’s where the practice of law is going,” Crowley said. “It’s just a matter of time before it gets there.”
LRN apparently isn’t much more than a blip on the map of some of L.A.’s top firms.
Several lawyers with Latham & Watkins said they had heard of LRN but that they knew nothing about its services or who was using it.
Morgan Chu, managing partner with Irell & Manella LLP, said he hadn’t used LRN and didn’t know any lawyers who had.
“An LRN client could get an answer to a standard question from a canned memo and they get it promptly and at a lower cost,” he said. “But it could be a detriment because the client could be led to believe that the answer is straightforward when, in fact, it is usually much trickier. There’s always a need for the creative juices that a lawyer offers.”
Funds Available
Early-stage information technology, communications and biotech firms in L.A. with solid business models might want to consider calling on TL Ventures, the Santa Monica venture capital firm that closed its sixth fund last week with $675 million raised from CalPERS, the Pennsylvania Public Employees Retirement System, J.P. Morgan, BancBoston and Atofina Chemicals Inc.
TL Ventures, which also has offices in Wayne, Pa. and Austin, Texas, said the new fund will target approximately 50 to 60 early-stage companies in information technology, communications and life sciences.
The fund brings the firm’s total capital under management to $1.4 billion.
“We target under-served, emerging markets,” said Managing Director Massoud Entekhabi. “This fund further emphasizes that Southern California is a major tech center that is under-served.”
TL Ventures has been in Santa Monica for just over four months and has since backed several companies that will, according to Entekhabi, benefit from the new fund.
Among the companies backed by TL are Calabasas-based Malibu Networks, a wireless broadband provider; Torrance-based WebVision Inc., a provider of various Web solutions for businesses; and OE Waves, an L.A.-based optical photonics company.
The Poop on Koop
The surgery on ailing DrKoop.com continues. The health content site named after former U.S. Surgeon General C. Everett Koop last week decided not to go for a 10-for-1 reverse stock split, citing opposition from “significant stockholders,” according to DrKoop CEO Richard Rosenblatt.
The company, which was notified by the Nasdaq National Market that it would be de-listed if its stock did not meet the $1 minimum bid requirement for 10 consecutive trading days prior to Feb. 22, will instead seek to enhance shareholder value by “striving to achieve a profitable future.”
DrKoop.com recently dumped 45 employees and moved its headquarters from Austin, Texas to Santa Monica, where Rosenblatt operates his VC firm, Prime Ventures LLC.
After hitting a high of $45.75 a share in July 1999 soon after its IPO, the stock as of last week had dropped to less than a buck.
“Our focus is to get our burn rate to below a million a month,” Rosenblatt said. “To do that, we’re not going to focus on advertising. We’re going to grow our licensing content and focus on the larger wellness space.”
That wellness space, Rosenblatt said, is a trillion-dollar market with only one clear Internet leader: WebMD.
“If DrKoop is run like a real business, it could be a real turnaround story,” Rosenblatt said.
He said the new DrKoop will focus on licensing content to hospitals. And, the firm will be exploring offline opportunities in the wellness space.
Staff reporter Hans Ibold can be reached at [email protected].
