Two Step's Private Company Equity Management Blog

I'd like to share with our Corporate Focus and Equity Focus users three great resources that I recommend for equity planning, equity transactions, and understanding equity instruments. Our customers have used all of these, and I want to make sure the Two Step community is aware of them. This is Part 2 of a three-part series.

If you're looking to create a virtual deal room for your next equity transaction, you'll want to check out Firmex: www.firmex.com. This is a SaaS deal room application that has been used by many of our law firm customers for transactions of all sizes. Firmex features a unique "all you can eat" pricing model that allows you an unlimited number of deal rooms. If you're a law firm with a lot of clients that do equity or M&A transactions, Firmex can be very attractive - and even better, your ROI increases the more you use it. You can even private-label the application to reflect the branding of your firm's website.

The Firmex website says:

"With its virtual data room solutions, Firmex helps organizations securely share confidential information and collaborate online. Since 2006, Firmex has been licensing its on-demand virtual data room technology for corporate transactions, contract management, litigation, governance and compliance. Firmex focuses on delivering highly secure, reliable, fast and intuitive document-sharing technology with top-tier, 24/7/365 support and security."

When comparing the tool to other options, one Firmex law firm client says: "Firmex allows us to provide a valuable service to our clients at a significantly lower price than other third-party providers. The features, functionality and reliability of Firmex rival or exceed other providers and the customer service is excellent."

If you're doing equity transactions of any type and need a virtual deal room, take a look at Firmex. They'll get you up and running fast - and help you make a winning impression on your clients.

And here's more good news: with the export feature in Corporate Focus, it's easier than ever to move large collections of entity, ownership, governance and compliance documents from Corporate Focus to Firmex and meet the tight deadlines of your next due diligence request.

Recently a Corporate Focus customer posted an interesting comment on our LinkedIn Discussion Group. In her opinion, there should be a special "Twelve Step" program for people looking to break their years-long addiction to paper documents and go electronic with their minute books. This poster shared that she herself wants to "go paperless," but is finding it difficult to make the switch.

Although I don't actually have 12 steps to offer you, these 10 steps will help anyone looking to take their corporate records and minute book documents online. If you can think of any steps I've missed, I welcome you to add them to the comments.

1. Take a deep breath and admit that you are powerless over your paper documents and, as a result, your work has become somewhat unmanageable.
2. Write down exactly why you want to go paperless.
   • To help you get started, here are some reasons I've heard from our customers:
     • They want easy access to their documents from home and at work.
     • They want to provide access to their clients.
     • They want attorneys to have easy access to critical documents.
3. Determine which minute book-related documents you want to scan.
   • I recommend scanning a company's articles of incorporation/organization, the ongoing minutes for the company, and stock certificates and option agreements.
   • Depending on your situation you might want to scan more or fewer items than this.
4. Buy a high-quality scanner.
   • If you don't have a simple way to scan documents as you receive them, you will find it too easy to skip the scanning process.
   • I recommend the ScanSnap S1300, which is small and easy to use. We use it here at Two Step and are very impressed by it.
   • Ignore this step if you have someone who will do the scanning for you (and if you do, consider yourself lucky!).
5. Find yourself a consolidated online system that allows you to easily store and view your scanned documents.
   • There are many systems available that may fit your needs.
   • If you need to scan minute books and other entity and ownership records, check out this short slide show featuring Corporate Focus sample screens.
6. Start with a reasonable goal.
   • After you've found the right system, begin by scanning only new documents that come across your desk, or initially select only certain key clients.
   • The trick is to not let the work overwhelm you; that will prevent you from scanning documents consistently.
7. Expand to more documents.
   • Once you've achieved your initial goal, such as scanning all new corporate documents, start going back and scanning historical minute book documents.
   • Schedule at least one hour every week to scan your historical documents. Put it on your calendar as a recurring event so that you don't forget. In no time, all of your minute book documents will be online.
8. Show off and share your work.
   • If you are taking the time to make your minute book documents paperless, be sure to show your boss and let her know where she can access the documents.
   • When others are able to open a document electronically in seconds for the first time (compared to hours of searching for physical documents), the time you spent scanning in all of the documents will have paid off.
9. Review, review, review.
   • Every 3 months, review your scanning process. During this review, check to see if there are any additional document types you want to scan.
   • You might also want to see if your system has any upgrades that make the process even easier for you.
10. Help others.
    • Going paperless takes a lot of work and commitment. As soon as you've achieved success, why not share your experiences by posting your thoughts to our discussion group or writing your own blog post? I'm certain others will appreciate your help.

If you have not yet started moving toward paperless corporate records and minute book documents, the time is now. Our Corporate Focus customers have done it for thousands of entities and, without a doubt, they are all glad they did. Want to hear some real feedback from lawyers who have already gone paperless--and are reaping the benefits every time a client calls? Just read one of our user stories.

On my way to the International Legal Technology Association's 2009 conference, I read the Wall Street Journal's front-page article, "Billable Hour Under Attack - In Recession, Companies Push Law Firms for Flat-Fee Contracts," with great interest. The initial talk about a change in the ways law firms bill their clients came as the financial markets were on the brink of collapse. Now, almost 12 months later, the evidence shows that there is a real shift taking place-and it may not be as temporary as the current economic downturn.

Some interesting facts from the WSJ article:

• Pfizer will save 15-20% on outside legal fees "largely through flat-fee arrangements"
• Cisco uses fixed fees or other alternatives to the billable hour for about 80% of its legal work
• American Express has not had any firm tell them they would not consider alternatives to the hourly billing model
• $13.1 billion has been spent on alternative billing arrangements so far this year, compared to $8.6 billion in the same period last year (BTI Consulting Group survey)
• Lawyers reported average cost savings of 15% from using alternative billing arrangements (BTI Consulting Group survey)
• 63% of the 370 in-house lawyers surveyed plan to increase their use of alternative billing arrangements (BTI Consulting Group survey)

With this type of compelling data supporting the use of alternative billing arrangements, it's clear that the tide has turned. Whenever appropriate, companies will be asking their outside counsel for billing options that align the interests of clients with those of their counsel. This is in stark contrast to the traditional hourly billing model which favors the law firm at the expense of the client.

Firms are Shifting Their Focus to Productivity

Pfizer's General Counsel, Amy Schulman, articulated the new legal billing mindset, stating that she did not want a discount on hourly fees, but a fundamental change "that will last beyond whatever people think they have to tolerate because of the economy." 

This change is pushing law firms to look for ways to work more efficiently since, unlike the hourly billing model, they will now have an incentive to get more work done in less time. As an example, the WSJ article says that Orrick, Herrington & Sutcliffe in San Francisco has tripled the revenue it generates from alternative billing arrangements "but has maintained profitability through efficiencies," according to their chief client-service officer, David Fries. How do they do it?  Among other things, the firm employs workflow technologies that substantially increase productivity. 

Now, this is not rocket science. Aren't these essentially the same types of productivity enhancements that have become standard practice at most businesses (that aren't working by the hour)? Implementing technologies that help you get your work done faster and better simply makes good business sense.

In working with hundreds of corporate law firms over the past 15 years, we at Two Step Software have seen remarkable productivity improvements in the more routine areas of business law, such as:

• Calculating capitalization tables and managing ownership information
• Searching for minute book records and historical filings
• Creating documents, stock certificates and standard forms
• Tracking compliance information and generating alerts
• Sharing information and documents with clients

One example is our Corporate Focus customer Macfarlane, Ferguson & McMullen which is now "able to complete an organization from start to finish within 30-45 minutes" instead of the time it used to take to complete the process. The attorneys get the documents faster- which means their clients also get them faster, at a lower cost, and with fewer errors. (We've captured more of these examples in our Law Firm Productivity Kit.)

In the end, legal clients will shift more work to firms that offer the greatest value for every dollar billed. There's no going back to the days when hours were not monitored carefully or alternative billing arrangements were not an option. External pressures from increasingly sophisticated clients are shifting the legal landscape in ways that were never even dreamed of five years ago. 

As I spent the past week at the 2009 ILTA annual conference, I spoke with CIOs from leading law firms across the country and discussed ways to improve the levels of efficiency and client service at their firms. Everyone is on the same page now and it's an exciting time to be looking at how technology can help make a profound difference in legal productivity.