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07 January 2021

'Don't build a services company' - Justin Kan reflects on failure of new law darling Atrium

Serial tech entrepreneur looks back on mistakes that led to high-profile closure of $75m San Francisco startup

By John Malpas

The Golden Gate Bridge with San Francisco in the background

By kropic1; Shutterstock

The entrepreneur behind West Coast new law startup Atrium, which failed last March amid a blaze of publicity having raised $75m of funding, has reflected on the reasons for its closure, warning he believes San Francisco’s Bay Area in now too expensive for new ventures.

In a series of Tweets this week, alongside commentary on Reddit, Twitch and Justin.TV founder Justin Kan said he had taken the early and correct call to lay off 180 staff because he couldn’t see a future for the business.

He wrote: ‘It came down to: do I really think there is a path forward for this business, or am I just making everyone do a fire drill until we reach an inevitable outcome?’

‘Start remote,’ he went on to reflect, “SFBA is over for startups: the cost of housing and rent gives you much worse operating leverage. Many talented people choose jobs they want to be flexible re: location. Remote is better at this time in the market.’ 

Atrium launched in 2017, tagging itself as 'a corporate law firm and technology company' for start-ups. It developed a subscription-based pricing model, growing its client base to more than 450 companies.

Membership options started at $500 per month - a package that included unlimited initial legal consultations on new matters and a software platform that automated simple legal tasks - with a deluxe upgrade priced at $1500 a month.

The first sign the business was in trouble came in January last year when Kan laid off most of the Atrium’s attorneys and paralegals, unveiling a new strategy to focus on the tech tools it had developed for start-ups.

Looking back on the venture this week, Kan suggested the company should have moved away from its hybrid model more quickly.

'Don’t build a services company,' he said. 'It’s more work to manage everyone and the reward isn’t there at the end of the day.'

He added: 'We should have moved more quickly to a flat rate hourly model and iterated the business model. We didn't do enough turns of business model iteration quickly enough.'

But he also said there should have been more pre-launch effort refining the business model “to develop something differentiated” as well as a leaner team because “the more people you have, the harder it is to bubble up feedback or turn the ship. The emperor has no clothes effect is real.”

In addition, he seemed to reflect on his own suitability to lead the venture. 'Only work on things where you have intrinsic motivation,' he wrote. 'If you don’t, you’ll lose motivation when times are hard or your own goals change.'

He added: 'CEOs can’t delegate getting in the trenches in the beginning.'

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