Larry Sonsini

BW: What makes Silicon Valley tick? What makes this place work differently than anywhere else in the world?

SONSINI: Well, I think it has a lot to do with the whole entrepreneur and technology paradigm. You know, I think it's important to understand the culture because that's what makes it work. The culture is very entrepreneurial and by that, I mean individual effort looking for making significant impact in industry. I think that there is no real particular culture that people have to follow, other than the culture of merit-based performance. It doesn't matter whether you belong to any social club or not. The main thing is to continue to pursue goals in the industry and those kinds of things. So, that's the distinguishing aspect that makes it different. You don't have a lot of tradition. The tradition's been built in the last 30 or 40 years. And consequently, it has a youthfulness and energy to it. And that's much different than anywhere else where you do business. People are not necessarily strapped down to old rules and old guidelines.

People are willing to push the edge of the envelope, so to speak, to achieve business goals. There's a focus, also. There's a diversity here that feeds on itself. It's a wonderfully diverse group of people. And you put that all together, it's a mini-melting pot of this country. Instead of politics and social change, it's technology and industrial change.

BW: Do you think it's the same as it always was? I mean, the cycle's been here for 20, 25 years. Have you noticed changes?

SONSINI: No, it's just gotten bigger and more dynamic. But the fundamentals are still there, the foundation is still there. Of course there have been changes. There's been a maturity setting in. There's a higher sophistication. What's really unique about the Valley, to me, today, is it still has its entrepreneurial, build a company, build an enterprise, take on the world type of attitude. But, yet, now, you've got multi-billion dollar enterprises with experienced management -- with more sophisticated infrastructure. And you put that all together and it's more powerful, more influential. It does what it does better. It's more efficient.

BW: Can you give examples of how that maturing process has made the Valley more powerful?

SONSINI: Well, I think that you just look, for example, in the mergers and acquisitions that the companies do. You take a look at the size, of the number of people they employ, I mean, take a Seagate, for example, who literally dominates the disk drive business worldwide. Take a Sun Microsystems and its growth, and a Hewlett-Packard.

If you look at those kinds of companies you can see that they have created a tremendous number of jobs. They're global companies, and they do sophisticated transactions, as well as still hire dynamic, young entrepreneurs. So, it's power, and not in the sense of political power, but it's industrial power. The ability to demand presence in worldwide markets.

BW: Silicon Valley is a cyclical place. When the economy's great, when the stockmarket's great, it all works really well -- when there's money flowing in, venture capital and all of that. What happens when another down cycle comes around?

SONSINI: It doesn't change. I've been just as busy in down cycles as up cycles. What we do is different, but technology doesn't slow down. People don't stop work. People's enthusiasm doesn't slow down. The desire for an individual achievement doesn't change because the market is down. I mean, that's a myth. We're not doing initial public offerings, we're not doing equity offerings, but maybe what we're doing is we're acquiring companies, or doing joint ventures, or doing the strategic alliances, or finding new ways to sell goods and make products. The market is a wonderful impetus for this country's industrial situation. But it's a tool. It's not the end game.

BW: What do you think is the greatest achievement of Silicon Valley? We talked about the incredible wealth that's been created here, we talked about the jobs, we talked about the technology itself and the infrastructure. The community -- the wealthiest community in the country -- all those things. What is really the nub here of Silicon Valley?

SONSINI: It is the cult of the individual. It is, when it comes right down to it, the spirit and creativity and energy of individual enterprise. It isn't the wealth. That's just a byproduct. People get wealthy, other people don't get as wealthy. That's a function of what type of product you bring to the market, and what the market thinks that particular month. That isn't a measure of anything. What's the measure is the ability for an individual, someone just out of college, or an immigrant from India, or Hungary, or a lawyer like me going into a small town and building a 400-person law firm in 30 years. That's what the Valley's about. The ability to build and create, that's the greatest reward, that's the greatest byproduct, and that's the whole impetus.

BW: Would you still be able to do what you did today? You know, you were in at an opportune time.

SONSINI: It would be harder. But it's happening all of the time. I mean, new businesses, new firms. But it is going to become more difficult because we've got powerful competitive companies. You've got this law firm, which has been able to maintain a mixture of all of that individual entrepreneurialism, and yet has some of the best legal talent in the country. So, that would be tough to compete against.

BW: Give me an example of the entrepreneurialness that comes into a law firm. People don't think of law firms as being very entrepreneurial.

SONSINI: Well, take our own firm ... About five years ago people said that Wilson Sonsini was dominant in micro-electronics and software but not dominant in life sciences. And so, one of our partners, J. Casey McGlynn, took the challenge in the firm that we were going to become dominant. And he's built one of the best life science practices in the country. That is an example that within this institution an entrepreneurial effort going on. I sit back here as a leader in this firm and I think about where he have to be five years from now in order to continue to deliver the top service to these creative companies. And so, I'm no different than a CEO of a Silicon Valley company. The product I deliver is different obviously. But the motivation, the drive, the energy, and the creativity, and the brain power are the same.

So, I try to learn from my client base. When I talk to someone like a Scott McNealy or an Al Shugart or a Steve Jobs, I'm trying to emulate the issues that they have. We're all builders.

BW: Now, let me flip the question. All this success here has its downside. I mean, the cost of living here is enormous. The traffic is enormous. The hiring problems because there aren't enough people to do the jobs there are. What to you is the biggest problem of Silicon Valley?

SONSINI: Oh, I think that the biggest problem is that we've got to continue to focus on the community. We've got to build a community and continue to build a community. And what does that mean? That means education. It means quality of life. It means putting back into the system the kind of social support things that we need. It means diversity of interests. I think we'll continue to expand. I think we're fortunate that California is a great place for us and we'll keep spreading out.

I remember when I first got here, that I could get to any client in fifteen minutes. And now, if I'm not flying on an airplane, sometimes I go two hours. So, we'll have to deal with the dynamics of physical growth. But I think the issue is more than the physical plant. I think it's going to be what do you do in building a quality community? What do you have to do? What are the infrastructure things that we need to do? And like I say, I think they have a lot to do with culture, education, social support systems.

BW: Do you see the community doing that, though?

SONSINI: I think so. John Doerr, has gotten recently active with a couple of people -- like Jim Barksdale at Netscape -- to do things in national education. Some of us are doing the same with respect to community support areas.

BW: Are you doing some of that?

SONSINI: Yeah. I teach at Berkeley, basically for no salary, and I love to try to bring to that great institution some of my learning and teaching. I lecture at Stanford. And I support other organizations in the community.

I think each of us has a different project. I happen to be high on education. And I serve as a trustee at a private high school. I'm a trustee of the University of California -- trying to bring to the educational sector a little of what we've learned. I think we've all got to do that. If we can do that, we'll be fine, because technology's going to be there.

And the world markets are huge. We're just beginning to scratch the surface. You take the opening up of China, my goodness, talk about a growth market. So, it isn't going to be an issue of building things or selling things, as long as you can keep the quality of the individual alive -- the entrepreneurialism.

BW: Why hasn't anyone else been able to duplicate Silicon Valley? I mean, there're efforts in Austin, and Boston, and Malaysia, and Israel. But nobody seems to get the exact right mix. Or maybe you disagree with that.

SONSINI: I think that we will have many Silicon Valleys. They're all over there now. But people have always wondered when this place is going to top out. And it's not going to because of the mix.

First of all, you have a combination of the great universities right here. Second of all, you have an ideal location to serve the world market. Third of all, you've got a wonderful cultural institution, San Francisco to Carmel. Fourth of all, you've got the great infrastructure of venture capitalists of the legal, accounting, banking, investment banking... And then, you have the great companies that have dedicated their headquarters here, the Hewlett-Packards, the Intels, you name them. And you put that all together and that's quite a mix. You just don't build that overnight somewhere else. That's institutionalization.

And then you've got a buy-in to the culture. That is to say, everyone of those institutions I've mentioned come from the same agenda. So, there's a lot of momentum.

I feel as excited and enthused and as challenged about what we're trying to do than I ever have. But now, instead of thinking of just the state of California as I did in the early '70s, and then the western United States in the early '80s, and then the entire United States in the later '80s, the '90s are global. I mean, I wouldn't be surprised, being the largest law firm in the country without a branch office, that our first branch office was outside the country.

BW: Is that right?

SONSINI: Sure. I mean, there's no reason why we shouldn't think of Hong Kong, Shanghai.... Because that's where it's going. And if you look at our company, over 50% of the revenue comes from outside the United States. If you look at their employment, every increasing percentage to their employment, outside the United States. This is beginning global-- now, it's not going to happen right away. But that's the next frontier.

BW: What, in your mind, is the role of venture capitalists here?

SONSINI: Well, it's threefold. Number one, to provide capital. Number two, to provide support. And number three, bringing people together. A venture capitalist today who's good is almost an executive recruiter. You take a company like Netscape -- now you had the money that was provided by Kleiner, Perkins, Caufield & Byers primarily, then you have the entrepreneur in Jim Clark, and then you had to go find the management team and they found Jim Barksdale. In a venture capital firm... Kleiner Perkins does that. They provide that. So, it's more than "let me write you a check." It's "How should we form a business? What should this business be?" And then, "Who are the people we're going to get to run this business?" It's become more sophisticated. More competitive.

BW: Who's the best?

SONSINI: Who's the best? I happen to believe in a lot of them. It's the same thing for a law firm. I think a law firm here -- you've got to bring more than a legal answer to the table. You've got to be able to bring a business and legal solution and anticipating the next issue. See, my practice and this firm's practice is primarily focused upon taking a business from a startup stage to a multi-billion dollar stage and be totally focused on every aspect of that. We're different because we reflect Silicon Valley.

Where are we different? I've always had my business plan. There are three segments. The entrepreneur/venture stage, and the public market stage, and the multi-billion dollar stage. Those three stages -- we look at every company hoping that they'll go through all three stages. So, I'll invest a lot of time, meeting with a team of entrepreneurs about a new idea to start a company, one hour, and the next hour, maybe I'll be in a meeting with a Hewlett-Packard talking about a major acquisition. And that's different -- characterizes what we're doing here differently than what people are doing elsewhere.

BW: When you take on some of these startups, you won't charge them?

SONSINI: A lot of times we won't. I mean, they don't have the money. So, I'm not going to say to a entrepreneur, "Well, I want a retainer for you to come in here." I look at the individual, his or her background, try to get an idea. Are they committed to being a builder? And if they are, I want to be onboard. And I'm not going to send you a legal bill as we try to figure out how to go. If you're successful I expect to be your lawyer and we'll do fine. If you're not successful, then we'll go do something else.

BW: How often does that work out?

SONSINI: What is the hit ratio? I don't know what the percentage is. It's low. People look at Silicon Valley and think 'my God, it's all of these wealth of things going on.' That's because they don't know about the failures. Not everybody here is a multi-millionaire. Not everybody here has been successful. There are a lot that haven't been but are trying again. I don't think that people should get the impression that Silicon Valley is utopia. It takes a lot of hard work, a lot of dedication, a lot of sacrifice, and I think sometimes to the detriment of people's families. That's the downside. It's not the traffic. It's not the cost of living. It's the enormous pressure of time.

The biggest problem we've got is we're changing everything. We're improving everything. But the one thing we can't seem to change is we've only got 24 hours in the day. So, instead of trying to change that, which we threw the towel in on, we'll just figure out how we can pack more into the 24 hours a day. And the problem you've got is now we're all having to prioritize. And a lot of things are left at the bottom of the totem pole. Sometimes it's the community, and that's a risk. Sometimes it's the family, and that's terrible. Sometimes it's the individual, which is a tragedy. So, I think that maintaining balance and perspective is important.

BW: How do you do it?

SONSINI: I don't know if I'm very good at it. I think that you try to become conscious of it. And I think you try to not take it too seriously. Technology is making geography irrelevant. We don't send anything by mail anymore. We must put out 20,000 documents a week. And I think that 90% of those are either faxed, E-mailed, or Fed-Ex'd. And that says it all.

BW: I think we'll probably lose the Fed-Ex and the fax pretty soon.

SONSINI: You've got it. What we'll be doing is video conferencing. I don't have to fly to New York for a four-hour meeting and lose two days. It's ridiculous to be on an airplane. Why not video conference when you can get the meeting done now?

BW: And yet, you're contemplating opening an office in Asia.

SONSINI: Yeah. Because there you're dealing with culture. You see, what's happened here is the culture gap, the differences of doing business, be it Silicon Valley or Armonk, is minor to zero. But it's different in India and it's different in Beijing. And I don't know if we can do that remotely right now.

BW: Let me take you back for a second to venture capital. People talk about how now there is so much wealth in this community, there's lots of individuals who are venture capitalists themselves: put money into funds and things like that -- and eventually, are we going to need so much of this venture capital...

SONSINI: I do think the so-called "band of angels," as they're called, is having an impact on the financing and start-up company. But let me go back to what I said distinguishes the great venture capitalist: it's more than providing money. Again, it's business solution recruiting and designing. And it's hard for a band of angels to do all of those today.

A band of angels is good for infrastructure support and early capital -- but they're getting more sophisticated. And many of them are outstanding. The band of angels is a great Silicon Valley phenomenon. And isn't it interesting, rather than retiring and making money and going to Phoenix to play golf, they're back doing the very thing they wanted to do, and that is build businesses a different way.

BW: Do you consider this firm, sort of an angel, because you invest?

SONSINI: No. We don't really compete on that basis. I mean, we will put a little money into enterprises, but only as a tag-along, and help build glue and bind with those entrepreneurs. But we don't view ourselves at all as a financial backer. It's not our job.

I think that it's exciting for a lot of young people to find a way for an institution to invest and be a part of this growth. It's part of the culture in the Valley. "Let's go public." We did it, initially, as you might recall ... I didn't want to have lawyers compete with each other. I mean, corporate lawyers would get to see the deals, tax lawyers and litigators would not, how do you build a firm with some perhaps getting wealthy and others not just because of the type of work they do?

That's the impetus for WS Investments. I would be a wealthy man if we didn't have WS Investments -- if I invested personally. But it was more important to me to build a great law firm -- and I think that's the difference with the Valley. What's more important? It's not making money. It's nice, and if we're successful we do, but I've been at this for 31 years and I'm working harder than I ever have.

BW: But it's also probably being a club, right?

SONSINI: I don't know if it's a club. I just think it's very exciting, and it's very energizing. I think it keeps you young because you're always chasing the next challenge -- you never feel like you've quite arrived.

BW: That's interesting. There are a lot of people who would say if Larry Sonsini hasn't arrived, who has?

SONSINI: Yeah, see, but that isn't what drives me. I don't think that I'm always looking for what we can do better. It's what it's all about. To me, it's a very dynamic thing.

BW: Let's talk about the IPOs and their going public and that whole world. How big a part of that is that Silicon Valley success? And do we overdo it? We push companies to go public so quickly now ...

SONSINI: The U.S. capital markets, which are the most efficient in the world, are a major key to what Silicon Valley has done. Because the ability to -- quote -- "go public" means three important things. One, it's a measuring stick that you have built an enterprise to some level of acceptance and success. Because not everybody can go public.

BW: So, it seems like it?

SONSINI: It seems like it. But not everybody can. Two, it provides the capital to take you to the next stage because there's no capital after that that's really available. So, it's absolutely critical to growth. And three, it's the liquidity accent. If you did not have the capital markets, you would not have Silicon Valley. And that's why I spent a lot of time working with the government and the Securities and Exchange Commission and the New York Stock Exchange and ASD, being on those advisory committees. Because the most important contribution I can make in the future is the success and efficiency of our capital markets. And that's what's happening globally. That's why companies, foreign companies, are entering the U.S. market -- to have those measurements.

BW: Foreign technology companies?

SONSINI: Foreign technology companies.

BW: Give me an example. I mean, you talked about how foreign markets enable all of this stuff to happen.

SONSINI: How about a Netscape? There's a company that was less than two years old that was going to help define a new paradigm, the Internet -- there's no way that they could have gotten the credibility, capital, and exposure without the public market. And in such a short period of time. And there's an example where the IPO was as much -- it wasn't an endgame, it was a stepping stone to get to where they had to go in order to compete against Microsoft -- you gotta have the public market. So, I think Netscape is a classic example where the IPO was but a tool, an essential tool...

BW: What about the companies that are now going public without having revenues?

SONSINI: I call them project IPOs. You get these project IPOs and those aren't bad, those are good things to do. They're risk. So, we've got to be sure that we protect the investing public. But we can do that because we've got the most efficient legal system in the world when it comes to security markets -- regulation.

BW: You don't think that sort of the lure of the riches -- you know, you go public then you're rich. That doesn't drive things too quickly?

SONSINI: Not on the whole. I have turned away companies that go public that I felt had nothing in mind but a public offering. I don't think I'll do a public offering without a very credible underwriting firm and independence representatives on the board of directors. I've had a number of entrepreneurs call me up and say "I want to go public and raise five million dollars, 10 million dollars," and I send them away. I think the industry has to self-regulate a little bit.

BW: For every one of you, though, there's got to be someone who says "Yes, let's do it."

SONSINI: Yeah. But that's the American Way, isn't it? That is, I suppose, the ugly American side. But that isn't dominant. If you are going to have freedom of speech, someone may burn a flag.

BW: How big a factor do you think Microsoft is?

SONSINI: Microsoft is a phenomenal company. My hat's off to Steve Balmer and Bill Gates. And yet, I'm on the other side of Microsoft. I'm probably the anti-Christ to Microsoft. I doubt if I have any impact on them whatsoever. Do they have a major impact? You bet. They are affecting companies and how they get started. They're affecting company business plans. They're affecting a company's defeat. And I think that one of the downsides of their dominance is that they do create certain barriers to entry. That's not a criticism of them, you know. Monopoly is a great business plan. Not that they're monopolistic. But the point is, they're for real and they have major influence.

BW: But major influence just because they are so dominant? Or major influence because they're a target for the companies here to shoot at?

SONSINI: Because they're so dominant. I mean, who is going to start a company today developing a new operating system for a PC? Even a new spreadsheet. This isn't doomsday. Remember IBM? And no one thought of forming a computer company until Steve Jobs and Steve Wozniak redefined it. I remember when Fairchild's semiconductor was dominant. And who was going to start another semiconductor company until Bob Noyce got the courage with his team? Is this more dominant than those examples? I don't know. Right now it seems pretty daunting. But nothing is forever.

BW: Is it, in your mind, Silicon Valley versus Microsoft?

SONSINI: No. Microsoft is part of Silicon Valley. I mean, they're not here but they were here. A lot of what they do is so much tied into it. We're all in the same technology but just happen to be competing and they happen to be the toughest.

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