An Overlooked Part of Entrepreneurial Ecosystems? Lawyers

In 1735, just a year after the paper was founded, New York printer and journalist John Peter Zenger was tried for publishing essays criticizing the colonial governor. His chief lawyer was Andrew Hamilton, who had come from Philadelphia.

Hamilton’s improbable victory set a fundamental precedent: truth is a defense against defamation.

Hamilton was the canonical example of what became the “Philadelphia lawyer,” a long-cherished term for a particularly astute lawyer. It’s perhaps fitting that the term began with the support of what was essentially a startup.

If most lawyer jokes hinge on the punchline that they’re expensive, startup lawyering might seem like a strange specialty. Most startups fail, and many start-ups don’t grow much.

However, in an era of rapid turnarounds, the few startups that survive tend to grow very rapidly.

Hence, many large law firms are paying a surprising amount of attention to very small firms. Good thing, because many startup ecosystems rely on service providers—for organization, insight, and sponsorship. Anyone interested in startup clusters should consider where the startup lawyers are.

From Service Provider to Advisor – An Evolving Role

“Twenty or thirty years ago, lawyers were primarily sought out for contracts—the actual piece of paper needed to close a deal,” said Kim Klayman, a partner at Ballard Spahr, a midsize law firm with 600 employees and 15 offices, including its headquarters in Center City Philadelphia, where the firm was founded in 1885.

Klayman focuses on startups, venture capital, and arcade basketball—which, for the record, I finally beat her at at Technical.ly’s Builders Conference in May. She writes a monthly tech startup column for us.

“Today, I think of lawyers as executioners,” Klayman said. “We’re here to help you close the deal, to get you from point A to point Z with the least amount of friction.”

A whole range of online tools have emerged in the standard document preparation space, from publicly traded LegalZoom to new startups like CommonPaper, as well as a host of alternative generative AI-based solutions.

Across the country, savvy law firms have made the same shift that most professional services have made: from results (documents) to outcomes (strategy).

I remember many years ago a business development director at a Baltimore law firm told me that they didn’t sell expensive legal services, but rather inexpensive management staff to startups that needed expertise that complemented their own.

Klayman is the natural heir to the best of the modernized Philly lawyer archetype. But the focus on startups isn’t a natural outcome, especially in a traditional regional city like Philadelphia. Many credit the late Steve Goodman with doing the oddest thing for a respected guy at an elite law firm in the 1990s: staking his career on early-stage tech and internet companies. In 2017, before he died, we called him “the fairy godfather of Philadelphia startups.”

Goodman’s previous firm, Morgan Lewis, is one of the largest in the country, serving most of the Fortune 100, with 2,200 lawyers and 31 offices, including its own flashy new headquarters in Philadelphia, where it was founded in 1873 by a Civil War veteran. Startups, on the other hand, may seem like something for kids. But Goodman gave legitimacy to the specialty, allowing his successors, such as Jeff Bodle and Doug Kingston—as well as Klayman—to enjoy prestige in the role.

In virtually every active startup ecosystem I know of, there’s someone like Goodman (who first brought the power lawyer into the volatile world of tech entrepreneurship) and people like Klayman (a lawyer whose specialty is both contract law and how startup ecosystems work).

In D.C., entrepreneur Anthony Millin is building a legal startup at midsize law firm Shulman Rogers, and Baltimore boutique law firm Nemphos Braue has focused on building a startup practice. These quiet service providers are part of the infrastructure of an entrepreneurial ecosystem that is commercializing technology and vying for M&A deals.

As digital marketing has become more expensive for law firms to acquire clients, more traditional tools have come back. Thought leadership, public speaking, organizing and sponsoring local entrepreneur events, and referral networks all look like good business tactics — and they help build startup ecosystems.

“We are part of the community,” Klayman said.

They all taught me a pattern: Eager startup organizers, smart founders, and curious business journalists should know who the serious startup lawyers in town are. But just like tech talent, experienced lawyers aren’t evenly distributed across the board.

So where are all the startup lawyers?

I haven’t done any exhaustive analysis, but I’d guess that every region of a given size has a certain number of startup lawyers who have worked in corporate structures, intellectual property, venture capital, M&A, technology, and science. Lawyers gain expertise through referrals—one founder introduces the next. More established tech hubs tend to have more experienced service providers. But because leaders like Goodman built early startup practices at large, prestigious firms, the regions with the highest legal density are the same today as they were a half-century ago.

Take, for example, the world’s most important center for technology commercialization.

Silicon Valley giants like Google and Meta are headquartered closer to larger San Jose than to older San Francisco. But San Francisco has a larger legal community—with nearly 10,000 lawyers working within the city limits—and more big-tech veterans. As a small example, both companies used the boutique firm Keker Van Nest, which is headquartered a few blocks from the Embarcadero. Similarly, law firms on the East Coast in D.C., New York, Philadelphia, and Delaware (given its influential state court system) handled their antitrust cases.

Other tech hubs that have grown in recent years in regions with younger business climates have surprisingly small legal communities, according to an analysis by Technical.ly. One helpful metric for this type of analysis is job concentration, which economists use to show how common a job is in a given location. Anything above 1 is above the national average relative to population size, and anything below 1 is below average.

So regional economic powerhouses like San Jose and Seattle (0.84 and 0.9, respectively) have relatively fewer lawyers. Large, fast-growing regions like San Antonio (0.93), Nashville (0.86) and Phoenix (0.83) do, too.

Even Atlanta, Austin, and Boston, which are economic stars in their own right, do not have particularly dense legal communities.

So which regions have the densest nodes? Not surprisingly, Washington (1.76) and New York (1.82) are at the top, with Philadelphia (1.59) and Chicago (1.33) not far behind.

One surprise might be South Florida, which leads Technical.ly’s analysis of 20 regions with a 2.14 percent industry employment concentration in the Miami-Fort Lauderdale area. Many old, established Midwest cities like Cleveland and Pittsburgh also make the list.

The nuances become apparent when we look at the scale of the city rather than the entire region.

The three largest cities in the United States for legal services are New York, Washington, D.C., and Philadelphia—a list that’s been relatively unchanged since 50 years ago. Most of those lawyers don’t work at startups. But there are far more of them than there used to be, even after higher interest rates cooled the crazy startup boom fueled by cheap money in the 2010s.

However, this will not change the approach that many companies attach to startups.

“We always go for exits, and an exit doesn’t have to mean a unicorn exit,” Ballard Spahr’s Klayman said. “Even a smaller deal, like a $50 million sale, can be a significant win for a law firm, especially if you’re involved from the beginning.”

It had never escaped my attention that Hamilton had made a name for himself as a Philadelphia lawyer backing a startup founder (a thirtysomething publisher-entrepreneur at that).

Law evokes nobility when it evokes justice. Not all law is glamorous or celebrated. Misused patent farms and anticompetitive practices are not entrepreneurial. Like law, journalism and entrepreneurship can be misused and misled. At best, they are among the oldest foundations of American life.

Hamilton’s world-famous closing remarks contain a phrase as powerful for courageous startup founders as they are for outspoken journalists. We must protect, Hamilton said, “the freedom to both expose and resist tyrannical power by telling and writing the truth.”