Law Firm Wilson Sonsini Now Preparing Term Sheets For Free
No, this isn't a recessionary move to give away unbilled lawyer time nor is it some sort of shift to being a pro-bono only firm. Today, Wilson Sonsini announced the launch of a "term sheet generator." It's basically a web tool that creates draft preferred financing term sheets for startups. I got a preview of it a couple of weeks ago and my review is that it is really impressive!
The way the tool works is that you answer a bunch of questions (north of 100) and then when you are complete it gives you a perfectly formatted Word file term sheet. Most of the questions are structured as "select from" several options often with an optional to "write your own." The beauty of having the option to select from "standard" options is that WSGR has included some market data, e.g. what percent of term sheets in up rounds in 2008 included this term. Last year, I spent a lot of time attempting to reverse engineer this data based on a small personal sample size. Obviously, WSGR has a much larger sample size and the fact that they make it public (in aggregate) is impressive.
The Term Sheet Generator originated as an internal tool for WSGR attorneys to rapidly generate draft term sheets which they would polish up and then deliver to their clients. Not surprisingly, WSGR Partner Yokum Taku, who I've previously written about, is the key co-conspirator behind making this tool public. I exchanged email with Yokum about this tool and I wanted to excerpt a few take aways from that conversation:
- Apparently this is the first of many online document generator tools that WSGR intends to make publicly available on the web. There are three categories (startup, equity financing and bridge loans) so we can expect more to come.
- I would have thought that internally there would have been a debate about giving away for free what they used to charge for, but Yokum insists this did not come up.
- The biggest challenge in building this tool is that each branch in the question tree is associated with unique verbiage. Building that must have been crazy.
So I think this is a brilliant step toward "open source law" which I've been advocating for a while. I am certain there will be hundreds (ne thousands) of lawyers who will use the WSGR Term Sheet Generator to create draft term sheets for use with their clients. In fact, I bet Google Analytics will quickly show Yokum and his colleagues at WSGR that his real userbase for this tool will be other attorneys both at firms and inhouse. What this tool really wants to evolve to is having an open, wiki-style back end where practitioners can change and comment on the myriad of options and verbiage which would keep the tool evergreen based on the best crowdsourced legal opinions.
In the meantime, I wouldn't be surprised to see some sort of watermarking of term sheets created by the tool that would allow WSGR to offer discounted legal fees if they created the draft term sheet using the tool. It would certainly reduce WSGR's time/costs as they would know the underlying terms