Lawyers swap services for equity - Local firms copy California in taking piece of dot-com action

February 21, 2000

by Jennifer Darwin for The Houston Business Journal

More and more Houston law firms are making motions to supply legal services to technology start-up companies in exchange for equity in the firms.

Taking a cue from their counterparts in Silicon Valley, Houston attorneys are lining up to cash in on tech clients that could prove to be the Internet's next hot stock. At the same time, more law firms have begun catering to technology companies because so many of the deals getting done these days end in "dot-com."

Equity-for-service deals may be catching on, but they are creating some controversy in the process. Critics say a law firm's choices may be affected if it has a vested interest in a client, but the jury's still out...

...While most entrepreneurs don't want to give up part of their company as they develop their dreams, some start-ups may never get online without some financial assistance.

"These Internet start-ups are capital-starved," says Charles Powell, a partner in the technology section of Haynes and Boone. "They can't really afford the kind of fees we'd ordinarily charge a company."

Powell, like other attorneys, won't say what companies his firm has a stake in, but he does say his latest equity deal closed in December.

"It's something we recently focused on," he says. "We think it's important."...

..."I think the firms that aren't willing to adopt a new model are going to lose out," Powell says. "They're not going to be hired for transactions."...

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