Atrium Kills Re-Birth Plan, Hands Back $$$ – But, Nub Of Firm Remains, Led By Newbies

Atrium, the great hope for a new approach to legal services in the US, co-founded by a tech billionaire and backed by $75m in funds, has killed off plans to re-start with a new strategy, after in January laying off a number of staff when the initial business model failed.

The move is a surprise as CEO, Justin Kan, had been bullish about a new phase of growth – a sort of rebirth of Atrium – after the January debacle. The firm’s press team had sent this site (see full statement below) word that life would go on and that:

‘In our next phase of growth, we will continue expanding outside of legal services as trusted startup advisors by building a professional services network dedicated to founders.’

I.e. the impression was given that a new kind of network for lawyers, and perhaps other professionals, would be launched. The affiliated tech group – which had made some fairly useful, but not Earth-shattering, applications would carry on. A small group of more senior lawyers would also stay.

But, now, CEO Kan, told TechCrunch last night: ‘We decided to call it and wind down the startup operations. There will be some capital returned to investors post wind-down.’ The tech news site added: ‘The startup has now laid off all its employees.’

In short, it’s all over for the tech efforts. The plan to start in a new direction is not going to happen – it would seem. Money – and we don’t know how much – is going to be given back to the funders.

Although…..Kan also told TechCrunch: ‘The standalone Atrium law firm will continue to operate under partners Michel Narganes and Matthew Melville, but the startup developing legal software is done.’

But – (see more below) – these two partners named by Kan have only just arrived at Atrium, in January this year. I.e. these are not lawyers who have been with Atrium from the start, which makes you wonder why on Earth they are staying there if they don’t have long term client relationships through this particular firm?

This is a bit like most of a law firm’s partnership leaving, but handing control of what remains to a couple of recent lateral hires.

AL Autopsy

It’s perhaps indicative of Atrium that its CEO – who had made his money creating an online streaming service for gamers – felt most comfortable giving the death notice to a mainstream tech news site, rather than a legal site.

So what went wrong? A lot was written back in January about this – see here.

It gets quite convoluted in parts, but the basic story is this: the idea that a chunk of money, some tech, and a new legal brand could take a big slice of the lucrative legal advisory work to the US startup and investment sector didn’t work.

From what AL has seen, Atrium got confused about what clients are buying. Tech certainly helps….(after all….this is Artificial Lawyer….) but, great client relationships don’t appear over night and they are essential.

Also, while you can cheaply package up legal work for some of the most basic tasks, law firms need a lot of money to operate. It doesn’t have to be on the billable hour, but you do need a large, healthy funnel of cash coming at you to feed all those salaries. After all, commercial lawyers are not cheap.

The big chunk of money that Atrium had – and it is still unclear how they structured the spending of it – appears to have been used partly in loans to subsidise the operation of the lawyers (or at least that is what AL believes). This was needed as in the US you cannot take outside equity investments as a lawyer.

Then the tech apps. These all seemed to be fairly useful applications around doc building and storage. But, that was low impact stuff. VCs and young tech companies choose law firms on the basis of great reputations, brilliant service and strong relationships. Some tech sprinkled on top couldn’t do it alone.

And, as one comment at the foot of the TechCrunch story said:

‘David Park

We (KippoApp) parted ways with Atrium after 3 months. We were pitched on transparent pricing and lower fees but the business model kept changing and we were paying so much for so little. The legal team seemed like 2nd rate lawyers who constantly made typos on legal forms. Still, surprised to see them shut down so quickly.’

To sum up, there was a degree of understandable hubris that money and tech could change the legal world alone. It can’t. As readers of this site have seen, the view of Artificial Lawyer is that tech is there to liberate the lawyers and allow them to be great professionals, not to replace them, and not to make all the difference.

A law firm – certainly that’s giving high value advice – remains grounded in the people, no amount of tech or the shiny glitter of money can divert the clients from that fact. And, Atrium was going up against an array of very established US law firms with decades of experience and client relationships. It was always going to be a tough fight.

That said, a nub of a law firm, apparently operating under partners Michel Narganes and Matthew Melville, will continue. However, it’s unclear what chance it will have following what has happened.

And….this seems totally odd……both Narganes and Melville, according to their LinkedIn profiles only joined Atrium this January….!? What?????

Why would you join a law firm that is going through something like this?

Melville had most recently been a VC lawyer at Pearl Cohen, and Narganes had been inhouse at a company called Sitecore. And in the latter case her LinkedIn profile shows she only left her former place of employment in January this year. Wow.

Moreover, the fact that this ‘end’ is in fact not quite a clean-cut end is a further sign of some sort of indecision strategically.

Why kill off the tech bit, go through massive lay offs, hand money back, and then keep a small law firm called Atrium that operates in a ‘traditional’ way?

That really is baffling. And….to be honest, AL can’t shake the feeling that despite the death notice Kan may just be tinkering with a new idea….

Maybe the parrot isn’t totally dead…? Hmmm. This is not a clean ending. AL will reach out and see what they have to say.

And, for those of you who’d like to consider what could have been, here is the statement from Jan 13, 2020, by Justin Kan, Atrium CEO and co-founder. 

‘At Atrium, we are on a mission to accelerate the growth of our clients. When we started Atrium two and a half years ago, our idea was to transform the legal industry to become better for both lawyers and founders. For the entrepreneurial lawyers who joined us on this mission, we strived to be a workplace that offered the lifestyle and control missing in Big Law. For founders, we redefined the relationship they have with their legal counsel by providing fast, transparent, and price-predictable services managed through the most client-centric platform for legal applications.

Through my 15 years in Silicon Valley and with each startup I founded, there were always challenges. Even for, in order for it to become the Twitch you know today, we had to make a very difficult and risky decision at one point to pivot our focus and double down on just 3% of our business – gaming.

Similarly, at Atrium, we’ve made the tough decision to restructure the company to accommodate growth into new business services through our existing professional services network. This change impacts our workforce in a couple of ways.

Our in-house attorneys will shift to have the option to become preferred providers in our professional services network. I want to recognize the dedication and hard work of those who are impacted by this. Their knowledge and investment in Atrium over the past two and a half years is invaluable.

We will keep a small group of partners in-house who will serve our clients with strategic services like financing and M&As, as well as work with our network of vetted and trusted firms to deliver general corporate legal services. 

This model of collaborating with firms through our professional services network has been an integral part of Atrium’s success to date. The specialists in this network, most staffed by attorneys formerly in Big Law, share our entrepreneurial spirit to deliver exceptional legal services through our technology platform.

Our legal team is continuing to work on existing client projects, and we will make sure that there is no interruption of service.

What’s Next

In our next phase of growth, we will continue expanding outside of legal services as trusted startup advisors by building a professional services network dedicated to founders.

We will continue to invest in legal and are excited to shortly announce new senior partners. Our partners will work with the specialists in our professional services network to deliver exceptional legal services in a fast and transparent manner.

While building Atrium, something also became greatly apparent: founders trust Atrium for advice on how to grow their business – not only surrounding legal but with questions such as when to hire a sales leader, how to best announce their latest fundraising, how to handle recruiting technical talent in a job seeker’s market, and so many other areas that are important to scaling a startup.

We’ve seen undeniable proof that the needs of our customers go well beyond legal.

For example, through our Fundraise Concierge team, we help minimize the frustration of fundraising while maximizing results. We do this by coaching founders — from crafting their narrative and pitch to running an effective process for their business. In just the past year, this has resulted in clients raising over $200M in additional funding.

I love that we’ve seen such great success in sharing our knowledge in this way. This is just one proof point that founders are seeking holistic business services and advice for the key issues they face.

Therefore, we plan to continue to deliver startup solutions through our client-centric platform solving the hardest founder problems through customized mentorship, technology, and a concierge program of expert advisors.