Welcome back to the Big Law Business column. I’m Roy Strom, and today we look at how virtual law firm spin-offs increase competition and broaden the offerings available to partners. Sign up to receive this column in your Inbox on Thursday mornings.
Big Law firms aren’t known as paragons of innovation. Most employ a version of a business model that dates to the early 20th century, known as the Cravath System.
But there is a segment of the business evolving on the fly. Here, new law firms pop up from established players all the time. They keep the parts of their old firms that they liked. They change things they didn’t.
I’m talking about “virtual” law firms. They’re sometimes called “distributed” or “new model” firms. They provide few frills and let lawyers keep a much larger portion of their revenue than traditional Big Law firms—as much as 95% in some extreme cases.
Every time a virtual law firm splits, competition increases. And partners considering a move to, or within, the virtual world get new options.
With recent upheaval and interest from private equity funds and segments of the AmLaw 200, the virtual law firm world might be poised for its own version of a Cambrian explosion.
“This is corporate Darwinism happening right before our very eyes,” said Frederick Shelton, CEO of Shelton & Steele, a national legal recruiting, M&A and consulting firm that specializes in new-law models.
“It is survival of the fittest. The firms that do not continue to evolve will continue to lose partners, groups, and clients,” Shelton said. “The firms that continue to evolve will continue to improve the practice of law overall, because breaking a model that hadn’t changed in over a century was long overdue.”