Hoopla over automated term sheet may be legit

-- Deborah Cohen covers small business for Reuters.com. She can be reached at smallbusinessbigissues@yahoo.com --

By Deborah L. Cohen

At first blush, we wondered what the big deal was when Wilson Sonsini Goodrich & Rosati - one of Silicon Valley's best-known law firms and a leader in start-up technology ventures - launched an automated term sheet generator on the Internet.

We followed the fervor. The comprehensive - and free -- do-it-yourself sheet went up on Wilson Sonsini's site <here on April 22nd. Word spread fairly quickly in the financial community, with business and legal news outlets such as the Wall Street Journal, Barron's and the American Bar Association Journal posting items. Even Guy Kawasaki, a founding partner of early-stage venture capital firm Garage Technology Ventures and a columnist for Entrepreneur magazine, weighed in; soon the Twitterati, as well, began to buzz.

At a time when templates for everything from business plans to supplier agreements abound on the Internet, what was so special about this development? Mainly, we've found, because the private equity community and its watchers smell real winds of change brewing if a well-respected law firm is willing to make such an unconventional move. It speaks volumes about the future of legal services, and the likelihood of a greater shift toward putting front-end legal work into the hands of cash-strapped clients.

"Everyone is concerned about cost cutting," says Yokum Taku, the Wilson Sonsini partner who spearheaded the project, noting that the response by venture capital firms, angel groups and entrepreneurs has been "overwhelmingly positive."

"Everyone needs to move forward and innovate," Taku says, cautioning that automated tools such as this don't replace lawyers, but allow for more procedural education on the part of clients and would-be investors.

Anything that can reduce billable hours is perceived as a welcome change. In recent months, law firms have come under siege as companies of all sizes push back against what they see as exorbitant hourly rates. Many companies have asked their law firms to hold the line on yearly rate increases and are pushing for alternative models, such as project-based billing.

Given these recessionary pressures, it's not surprising that a savvy law firm wants to be seen as helping to relieve some of the burden, both for current and prospective clients. Add the slowdown in deal flow and scarcer private equity dollars and the rationale behind and automated term sheet - and its ancillary marketing benefit to the firm - becomes a lot clearer.