My friends Gordon Smith and Darian Ibrahim have posted an interesting short paper on whether there is a “law of entrepreneurship” (“Entrepreneurs on Horseback: Reflections on the Organization of Law“). The first half pokes some fun at the stodgy view that there is nothing (and never will be anything) new under the sun – hence, there is no Law of the Horse, Law of Cyberspace, Law of Entrepreneurship. (For a detailed tracing of the Law of the Horse allusion from Llewellyn to Wellington to Easterbrook to Lessig, see the first few footnotes of the article.)
I can’t deny that there is some unique law to entrepreneurship (the most prominent being the effect of the so-called “down round” which invokes the anti-dilution clause of the venture capital agreement, on which Gordon has written a perspicacious article), as well as a host of legal skills and disciplines (many of which Gordon and Darian ably summarize) that need to be in the “toolbox” of any lawyer who hopes to do work for entrepreneurs and startup companies .
Not to beat a dead horse, but if horse is the image du jour, then I can’t help thinking of lawyers and law, at least in the traditional way of thinking about lawyers and the law, as flies buzzing around (and trying to keep up with) the galloping steed. Gordon and Darian are absolutely right to highlight the necessarily interdisciplinary nature of the study of entrepreneurship, but I keep thinking that focusing on the legal is the fly’s-eye view – one that is not invalid or wrong, but pretty much of primary interest to the fly. (I’ve read Ronald Gilson’s iconic piece on Value Creation by Lawyers, and I’m still not fully persuaded on the “transaction cost engineer” model, at least from the examples Gilson gives in a sophisticated M&A agreement. The one place I do think lawyers serve a cost-reducing function is in the transmission of information about what is “market” in VC term sheet boilerplate. But that’s informed intuition, on my part, not rigorous data. And, as Gilson points out, there’s no reason particularly why lawyers as opposed to VCs have to be the repositories of that information.)
Does the horse even notice the fly? Well, I’ll let you ponder that while I change horses in the middle of this stream of consciousness, and continue below the fold about some really interesting work outside the legal academy on the subject.