How the most powerful lawyer in Silicon Valley became a startup's first attorney — and how a Cornerstone war story made a cease-and-desist evaporate
Larry Sonsini took Hare as his entrepreneur of the year — for the Berkeley loyalty and the Microsoft bridge — and handed him venture capital's true blueprint in one speech: all art, no science. When Ceridian tried extortion-by-legal-letter and the fast-track associate froze the financing, Hare swapped in a Stanford first-year, closed the checks, and told Ceridian the story of the $90 million verdict. They dropped it without another call.
The trail exists so that people who were there can reconstruct their own memories, recognize what they helped incubate, and add to or correct the record — or forward the few pages that belong to someone they know.
Before Evolve even had its first term sheet, I knew I needed an elite law firm that could connect me with VCs and strategic partners. The connection came through Ken Rudin — a Harvard grad who finished his MBA at Stanford GSB a couple of years after me, following a long stint at Oracle where he managed their data-warehousing division and built PL/SQL. In 1994 Ken founded a company called Emergent, and was the anointed one selected as Larry Sonsini's entrepreneur for that year. In the 1990s, Wilson Sonsini Goodrich & Rosati was the absolute center of gravity in Silicon Valley — working exclusively in technology, representing roughly 70% of the tech firms in the region — and Larry himself was by far the biggest name in the Valley: he didn't do legal grunt work; he personally represented the C-suites and boards of companies like Hewlett-Packard. Ken knew Larry's model, thought Larry would like my concept for Evolve — and understood the strategic matchmaking: I was deeply connected up at Microsoft and close with David Marquardt, and Larry would find that useful for his Silicon Valley clients' M&A and partnering deals with Microsoft.
I went in for a thirty-minute pitch, having been advised to keep it tight and strictly factual, and Larry agreed to take me on as his mentee for the year. Later I learned exactly why. First, institutional loyalty: Larry was a fiercely proud UC Berkeley alumnus — he remains on Cal's Board of Visitors, advising the Chancellor — and he loved that I was a third-generation Cal graduate. Second, the strategic bridge: Larry possessed every relationship that mattered in Silicon Valley, but admitted he lacked similarly senior connections at Microsoft — and in those days the Seattle brain trust notoriously despised the Valley ecosystem of VCs, consultants and lawyers. Because I had worked directly for Steve Ballmer, knew Jim Allchin and the rest of the brain trust, and carried Marquardt — one of the only VCs they actually respected — as a reference, Larry saw me as a useful liaison to Seattle.
During that initial pitch, Larry handed me the defining blueprint of the industry. ‘First of all, you seem to have a very strong technical and financial background,’ he told me. ‘Forget all that. In venture capital, it's all art, no science. You're going to dilute anywhere from 15% to 90% in one to five rounds, assuming you don't go completely bankrupt. Valuation has nothing to do with value. It's driven by the size of the round, the investor competition you generate, and the tier of investor you're interacting with — basically how big their fund is.’ Coming from a background of rigorous financial models, this sounded completely unscientific and kind of weird. But I accepted that it was simply how venture capital worked, so there was no point in debating the merits of the model. The terms Larry offered were incredibly founder-friendly: WSGR would invest in our first round — their policy capped it at $20,000 to avoid conflicts — Larry would take a board seat, advise on strategy, and provide free legal services until a major financing event.
I thanked him but didn't accept immediately — asked for a week, which he granted with a smile. This was an opportunity to spread my name, so I met the other top technology firms of the era: Cooley Godward, Brobeck, Gunderson Dettmer, and Venture Law Group. Naturally, I casually mentioned Larry's offer, and they universally agreed he was the most connected tech lawyer in the Valley — but assured me he was just being dangled to lock down the client, and that some other lawyer would run my account, with Larry seen once a year until we got really big. At the follow-up I asked Larry directly whether he would personally be my lawyer or hand me off. He assured me he would do the work himself — and true to his word, he did, for the first month or so: drafting proposed term sheets and walking me through the venture process. His work was, in fact, a bit sloppy — he probably hadn't personally drafted a term sheet in a decade — but soon I was persuaded he was deep enough in our deal to be my attorney for real, so I mentioned I wouldn't object to an associate for the grunt work. Which is how I met Aaron Alter.
Not long after Aaron took over the routine work, Ceridian noticed that five key Tesseract employees had quit and joined us, and we received an extortion attempt disguised as a cease-and-desist letter — claiming our leading-edge Forte-based product strategy might involve stealing confidential intellectual property from their struggling mainframe HR vendor, whose products were written in COBOL and a proprietary forward-firing inference engine. Because I had worked in litigation consulting before Stanford GSB, I instantly knew it was frivolous: they had agreed to waive the non-solicitation and non-compete provisions of my employment agreement, so this was a shameless attempt to manufacture leverage — or spite. The litigation risk was practically non-existent; their lawyers would face sanctions if they actually sued. The problem was our attorney. Aaron Alter was a fifth-year associate, a Harvard JD-MBA on the fast track to partner — and Harvard people think like corporate people. He didn't understand the wild-west culture of a barely funded cowboy startup: he insisted we couldn't close the angel checks piling up — money we desperately needed for month-to-month salaries — and flat-out refused to draft the stock purchase agreements. I explained that the litigation risk was zero and the consequence of not closing was my business dying in the cradle. Aaron remained adamant.
So I met with Larry, explained the situation, and asked for a more junior associate — ideally someone from Stanford who understood the startup world and real-world business judgment, not the kind they teach for wood-panelled boardrooms back east. Larry listened, agreed, and assigned Ramsey Hanna: a first-year associate six months out of Stanford Law with an economics undergraduate degree, who understood the basic reality that startups need money to continue operating. He drafted the stock purchase agreements, and we cashed the checks. I disclosed the cease-and-desist to our investors, who recognized it was meaningless.
Then I handled Ceridian myself. I called my contact there, told him his lawyers should go fuck themselves, and dared them to sue me. To make the point, I told him a story from my time at Cornerstone Research — the only plaintiff's case I ever worked. A Baker McKenzie attorney had taken it on contingency for a solo researcher who had licensed his ultra-high-molecular-weight polyethylene process for knee implants to a major medical-device company. The corporation allegedly never intended to use the technology — it would have cannibalized their market-leading product — and just wanted it away from competitors: the exact sort of dirty deal big corporations do against the little guy every day. The plaintiff would have settled — he just wanted to keep the equipment, worth about $250,000 new — but the corporation's lawyers took it to trial to avoid a ‘bad precedent,’ driving over $1 million in fees. When we were done, the jury's compensatory verdict was $90 million — exactly what the damages model I developed indicated, after Robert Hall, our expert witness, cranked every parameter to the maximum: every vendor licensing the innovation at a 5% royalty for the patent's full twenty years. I thought the assumption ridiculous; he assured me his testimony would persuade the jury. And it did. Why? Because the defendants had violated the element of law that matters most to juries: the implied covenant of good faith and fair dealing. When a big corporation screws a little guy and then hires teams of lawyers to crush him for complaining, juries get pissed — they want to send a message; you just need an expert to give them an excuse. I was sitting next to the defendant's General Counsel as the verdict came in. He turned white, and then he literally cried. His career was over.
I tell that story any time anyone threatens me with a lawsuit: you're threatening me? Go ahead — make my day. Suffice to say, after Ceridian heard it, they dropped the topic entirely; no one from WSGR even had to talk to them. Ramsey cleared our funding path simply by doing what was needed, and he became my lifelong corporate attorney and friend. I'm the only entrepreneur I know of who has never paid a retainer to a corporate law firm, and always gets deferred billing until we raise a round.
The most connected lawyer in the Valley did the paperwork himself — sloppily, endearingly — until the right first-year took over; a big company's bluff met a war story with a $90 million ending; and the blueprint held: all art, no science, and never pay a retainer.
Episodes are building blocks. The same material appears in more than one where it belongs in more than one, and every claim traces back to a primary source.
One young entrepreneur a year. Thirty minutes.
Open →In the graphThe introduction to Sonsini
Open →In the graphHarvard JD-MBA, fifth-year at WSGR — right lawyer, per Hare's account, for a different kind of company
Open →In the graphFirst-year out of Stanford Law, economics undergraduate, the associate who understood that startups need money
Open →In the graphThe acquirer whose extortion-by-letter evaporated after one phone call
Open →In the graphExpert testimony, and where arguments learn to survive attack
Open →In the graphThe expert witness of the $90 million verdict; the damages model was Hare's
Open →In the graphA mainframe company turned client-server, and sold for a 500% year
Open →In the graphMicrosoft's board, the TOPS study, and the door into everything
Open →In the graphThe executive crucible
Open →In the graphArchitect of Windows NT, in the next chair
Open →In the graphThe company of the vignette cycle: Draper's term sheet, the Woodhill coup, the walkout, and two Series A term sheets from a $250k base
Open →In the graphConsilient Architect — the node this graph was seeded from
Open →These are specific and addressed to named people. If you are one of them, or know one, a single reply closes an item that has been open for twenty-five years.
Write to evidence@qpncatalyst.io. A timestamped confirmation comes back with your submission attached, as your own independent record — and the correction is published with your name on it.
Answer a question →