Atrium

What did it do?

Atrium was a model that combined a law firm serving start-ups with a separate technology company developing software to automate work such as investment paperwork, employment contracts and cap tables. The technology side, Atrium LTS, handled the firm's operations, marketing and software.

Why did it shut down?

Justin Kan raised $10.5 million in a round led by General Catalyst in June 2017 and $65 million in a round led by Andreessen Horowitz in September 2018, bringing total funding to $75.5 million. The company reached 110 employees and 250 clients in 2018, but according to Kan, companies of this kind failed to find a way to make a difference in operational efficiency. Co-founder and managing partner Augie Rakow left in April 2019. In January 2020 Atrium laid off most of its legal staff and tried to turn itself into a professional services network for founders; the departing lawyers set up an independent firm that took on the former clients. Kan said it had been hard to regain momentum after the transformation, and the company closed on 3 March 2020, laying off its remaining 100-plus employees.

The story

Justin Kan was one of the founders of the live-streaming platform Justin.tv and of Twitch, which grew out of it; Twitch's sale to Amazon in 2014 made him one of Silicon Valley's best-known names. In 2017 he turned his attention to legal services. In Kan's view, part of corporate legal work was an art, while part consisted of repeatable processes that could be automated with software.

Atrium was built on two legs: a law firm in San Francisco serving start-ups, and Atrium LTS, which ran the firm's operations, marketing and software. Kan set out together with former Orrick partner Augie Rakow, lawyer and entrepreneur Bebe Chueh and software engineer Chris Smoak. In June 2017 they closed a $10.5 million round led by General Catalyst, with around 100 institutional and angel investors taking part. In September 2018 a further $65 million came in, led by Andreessen Horowitz; at the time the company had reached 110 employees and 250 clients, including start-ups such as Bird.

Software, however, did not deliver the expected efficiency in legal work. Rakow left in April 2019. In January 2020 Atrium laid off most of its legal staff and aimed to turn itself into a professional services network for founders; the departing lawyers set up an independent firm that took on the former clients. Kan said it had been hard to regain momentum after this transformation.

On 3 March 2020 the company announced it was closing, laying off its remaining 100-plus employees, and returned part of the funds to investors. In a statement to TechCrunch, Kan acknowledged that companies of this kind, Atrium included, had not managed to make a real difference in operational efficiency. The independent law firm carried on as a separate entity.

Lessons for founders

• Before funding a service-heavy business like a software company, measure how much the technology really reduces the expert hours spent per job.
• A dual structure made up of a law firm and a separate technology company can confuse clients about who is representing them at every pivot; manage that risk from the start.
• Rapid hiring on the back of a large round locks in the cost base before the model is proven; validate unit economics first.

Sources

1. $75M legal startup Atrium shuts down, lays off 100 (TechCrunch, 2020-03-03)
2. Atrium, $75M Company that Vowed to 'Revolutionize' Law, Shuts Down (LawSites, 2020-03-03)
3. Venture-backed, technology-focused law firm launches (ABA Journal, 2017-09-14)

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