The inexorability of commoditization
Posted By Rob Millard - 0 Comments -
How much would your firm charge to compile a term sheet for a typical venture capital deal?
$100,000 .... ? $10,000 .... ? $1,000 .... ? $100 .... ? $10 .... ?
Whatever your answer, you've just been undersold. Wilson Sonsini Goodrich & Rosatihave (amongst the most august US law firms by anyone's standards) have just launched an apparently very comprehensive Term Sheet Generator for venture financing . . . free of charge. Ross Holman at Strategise takes up the story:
"Why would Wilson Sonsini do this? It's not really costing them anything -- by their own admission, it is a web-based, generic version of a tool that they already use in-house. Maybe the end result will work for some venture money, but my guess is that there's enough that's generic that you may need to call Wilson Sonsini for advice and/or customization: give away the artifact (i.e., the term sheet) and make your money on the resultant service. Will some other attorneys use this and charge their clients for it? Probably. But my guess is that Wilson Sonsini is not after the clients that would go to those types of attorneys.
I think there's a massive paradigm shift that needs to happen in the field of law. Instead of charging hours to create what are essentially templated forms, agreements, contracts, etc., why not just sell the template for, say, $200? Buy some Google AdWords and advertise for very little per month, especially if you are selling a very specialized document. People can buy the template 24/7/365 from your website and if it's good enough as is, then you are still making money while you sleep and the purchaser feels like they got a good value. However, if the purchaser needs further advice or reviewed changes or some other service related to the document, then you can work out an hourly (flat?) fee for the services."
Ross and others preaching a similar message including Mark Chandler (general counsel of CISCO,) and Richard Susskind (author of 'The End of Lawyers') are dead right: the days of selling knowledge or standardized templates by the hour are almost gone forever. In the (near) future, information and "artifacts" (I love that term ... ) will be freely available in the market. Professionals will only make money where they need to apply deep expertise and judgement to their clients' specific businesses in ways that yield high value. For this, they will be able to charge superior rates not only because of the high value to the client, but because such deep expertise and judgement will remain rare in the market given the effort required to acquire it and remain up to date. For those relying on less sophisticated services, the price race is on .... all the way down to zero.
Same goes for the consultants that serve those professionals :)
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