“We’ve made the tough decision to restructure”: Atrium’s co-founder explains u-turn on legal services

Atrium’s co-founder and CEO Justin Kan has confirmed that the legal services sector disruptor is restructuring the company and backpedaling on its original ambition to provide broad legal services alongside its software for startups business, with the majority of in-house attorneys let go and given “the option to become preferred advisers in our professional services network.”

Atrium will instead focus on providing its startup client base with a broader business advice and tech offering and, as sources with knowledge of the company predicted, upskill its remaining internal legal workforce. A blog post from Kan confirming the restructuring says: “In our next phase of growth, we will continue expanding outside of legal services as trusted startup advisors by building a professional services network dedicated to founders.”

The California-headquartered company will retain a small group of lawyers in-house to serve clients with strategic services like financing and M&As, as well as work – in a notably traditional way – with Atrium’s “network of vetted and trusted firms” to deliver general corporate legal services.

Kan also says: “We will continue to invest in legal and are excited to shortly announce new senior partners. Our partners will work with the specialists in our professional services network to deliver exceptional legal services in a fast and transparent manner.”

Sources close to the company tell us that Atrium has recently attempted to take on more complex work but has lacked the senior legal bandwidth.

It is unclear how many staff are affected but Kan told TechCrunch, that “more than 10 but less than 50 staffers are impacted.” Atrium had a headcount of 150 as of June 2019.

Atrium has raised $75m over four rounds of investment to date based on a model in which its legal services arm will work alongside and leverage its technology company, providing professional services advice with purpose-built technology. The model looked set to enable the company to work around US legislation, which restricts law firms from sharing profits with outsiders. It has also enabled Atrium to monetise startup services that are often loss leaders for larger, more established law firms such as Cooley.

Kan says in his blog post “Through my 15 years in Silicon Valley and with each startup I founded, there were always challenges. Even for Justin.tv, in order for it to become the Twitch you know today, we had to make a very difficult and risky decision at one point to pivot our focus and double down on just 3% of our business – gaming.”

This strikes a very different tone to the one taken when Atrium launched in 2017, when Kan said: “My founding team is ready to break down the barriers that have been keeping this $96 billion industry from adopting innovations in business and technology.”

The ambition was sound and is being delivered by law companies such as Elevate. But traditional players who fear new entrants like Atrium will blow up their market will no doubt take some comfort that legal services is many things, but, particularly in this sector of the market, easy isn’t one.