Lesson: Startup IP with Jack Russo

Step #9 Opportunity: Intellectual capital over venture capital

We occasionally had entrepreneurs that would literally walk into the offices with no appointment. They would come up to the eighth floor of the Palo Alto Square Building that we were in. They would come to the reception area and said, "I heard you guys are a really great law firm. I'm starting a new company and I need some help.” Of course, there was no one more flexible than I would be with those people because I understood entrepreneurship. I understood that there's a certain impulsiveness that entrepreneurs that have passion will just do.

I don't think you see this anyone but back then you would occasionally see it. Jaron Lanier, who has since written a number of books about entrepreneurship and about where the world is headed. He’s a famous guy because he walked in saying, "We, my partner and I have invented what we're currently calling virtual reality.” I asked what that is and he said, "Imagine that you can literally play a guitar in the air and the computer will play it. It will all be with no strings, with no connection and this can happen with any instrument. This can happen eventually with gesturing.”

Of course, you have to sit back and suspend disbelief about what computer is going to enable that. He had the vision of a gesturing language which even to this day, he still believes that a lot of what is going to come out has not yet come out. It's how we interact with things like an iPhone. Right now almost everyone has an iPhone, has this screen that you can gesture on and move stuff around but you're still touching it. Everyone believes eventually that gesturing will be in free space. Instead of being tethered to a mouse, you'll actually move your hands and get things to happen in ways that are magical and not yet here.

I saw him and remembered saying to the new client committee that we should take him as a client. They asked if he had venture capital and I said no. They asked if he had angel investment and I said no. They asked if he had any money at all and I said probably not. They asked why I did I think that and I said when Jobs and Wozniak walked in, they were just as bad. They had no money, no venture capital, no angels, nothing. This is a true story, they offered the firm a chance to have somewhere between 5-10% of the equity just for giving them some services for the first year. Stupidly, the firm had said no and came to regret that for many years and decades later.

Even to this day, a couple of weeks ago, I took Bill Fenwick to lunch. He’s like 77 now and just about starting to retire. He smiles and laughs and says, “Yeah, we've squandered a lot of opportunities here in Silicon Valley. Had we been a little bit more entrepreneurial as a firm, we would have done well.” I really want to do much more entrepreneurship with startups, inventors, innovators, founders and co-founders and startup teams. They're probably not going to do it unless it's tied to venture capital. Most of the companies are tied to venture capital. Where in my mind, not necessarily the best companies. They were the companies that the venture capitalists believed would be successful. They weren't necessarily the future Steve Jobs and Steve Wozniak.

At one point or another, I remember I was then married, had two or about to have a second child, I remember thinking that this is kind of risky but I have some savings. I'll blow through my 401(k) and life will go on in the big city. I remember Bill said what are you going to do if this fails. He’s a Southern gentleman, “What are you going to do if this fails?” And I said I guess I’ll have to crawl my way upstairs to Wilson Sonsini. It was funny because he looked at me like, “You’re going to go to our competitor of ours?” I said, “Well, if you guys won't take me back, I could always go upstairs.” Luckily, that day never occurred. We think of ELG as targeted specifically at founders, founding teams, co-founders, groups, what we call the intellectual capital not the venture capital. We respect the intellectual capital far greater than we respect the venture capital. That's not to disrespect venture capital. We have respect for them and they’re lots of friends but they’re basically money is fungible and you can get it in lots of ways.