Building Venture Funds in Silicon Valley

Shane: So when I started, it was 1999 and that was the very height of the possible peak of the apex of the internet boom. And venture funds were popping up everywhere. Until 2001 and then, the bubble bursts and the whole thing explodes. And you were instrumentally involved in the creation of a whole bunch of it.

Every dang day over the last three months, it's like, gosh, this great decision that I made. And I'm so energized. And, even as, being an old guy, this is really exciting stuff.

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Sophie: Welcome to another episode of the File Notes Podcast. Shane, you've had quite the journey from meeting six U.S. Presidents to founding a venture fund involving Snoop Dogg. Before we dive into all of these big moments that I'm sure everyone would love to hear about, what were you like as a kid? What was it like growing up in Wyoming?

Shane: Gosh. It was wonderful. So for those that aren't familiar, Wyoming is in the middle of the United States and it's like living on the moon in many places. It's pastures and prairie lands and giant mountains but literally no humans. It is the least populated state in the union. So, not a lot of people. I grew up in a town called Laramie, which is the site of the only four-year college in all of Wyoming, the University of Wyoming. My dad was an English professor there. My mom was the student’s attorney. So as a kid, I was into sports, mischief, hunting, and fishing. A lot of people I knew had ranches, and I would help out with livestock. It was this wonderful amalgamation of country life. But having my parents, who were from the New York City area, was almost completely like Martians on the moon, living in Wyoming. New Yorkers in Wyoming. It was very much a sketch comedy-like existence in many respects, with parents who had thick Brooklyn and New York accents, living out in the country. But it was wonderful. The people of Wyoming are incredible. They're just open and generous with their time and spirit. It was a great existence. Living in Wyoming as a kid was wonderful.

Sophie: You mentioned your mom was an attorney, and you’ve ended up being an attorney yourself. I'd love to know if she ever shared any stories that compelled you to become an attorney yourself or that really got you interested in the profession.

Shane: Yeah. I think, not necessarily any words of advice, but just the kind of human she was. She was just… she's since passed and was the wonderful light of my whole life, and the person I take all of my spirit and direction from. But it was more just as a young child, observing her, being in her office. She’s on a call with a client, and I’m sitting in the corner, reading a book or doing some homework, and just being around a lawyer who's in the law. You just find a vibe, and you get a sense that something important is happening, without understanding absolutely anything that's going on. And it was always so cool just to watch her work and be on calls, and yet remain deathly silent, lest there be repercussions at home if I said a word during her calls. But it was more the kind of person that she was—so diligent, and the kind of attention she gave her clients. So, I think it was more the aspect of viewing her as a professional, and I’m sure somewhere subconsciously I decided that this is something I wanted to do for a living. Through a very circuitous route, Sophie, that I know you and I have talked about, my life took a turn to the law. And here I am today.

Sophie: Yeah, so tell me about your education. How did you end up doing a law degree?

Shane: Yeah. So I was a political science and history major at the University of Wyoming, and that’s where I did my undergraduate studies. I also played on the baseball team, and I played in the minor leagues in baseball. I didn’t immediately go into professional life. I was a baseball player for about three years professionally, but then realized that it was going to be a much longer road to far less success. So, I made a career choice to do something different, and I leaned heavily on my political science degree. I went from being a baseball player to working at the United States Congress for the senator from Wyoming, an amazing man by the name of Alan Simpson—Big Al, as we called him for those that knew him. It was that experience of working on the legislative side of things, along with probably having some granular pieces of magic instilled in me from my experience watching my mom as a lawyer, that I think all of that directionally headed me toward being a lawyer at some point. So, when I got done with my three years on Capitol Hill working for Senator Simpson, I knew I wanted to be a lawyer of some kind. It was a very circuitous route to what I thought I wanted to do, compared to what I actually wound up doing. But that’s the genesis of where the journey started.

Sophie: And so, when you were working on Capitol Hill, was there a particular moment or policy discussion where you realized, "Oh, I’m going to go do my law degree now"?

Shane: Yeah. When I was at Senator Simpson's office, I worked—he was the minority whip at the time. He was a Republican senator. I was the token Democrat on an all-Republican staff, but they still treated me very well. In that experience, it was working with the constituents on a day-to-day basis. The people from the great state of Wyoming, with their problems and their issues, and getting a chance to talk to them about the ways in which we, as legislators, put the law down on paper. Just working with people and ultimately drafting the law together resembles what I do now, working with clients. I loved working with the constituents. I loved having conversations with them about their problems and being in a position to help them in many respects. That, for me, began the "aha" moment of what I thought I wanted to do—become a lawyer of some kind. I had seen the way in which my mom moved through the world and the value she brought to people’s lives, and I knew at that point that’s where I wanted to head. I didn’t want to be a career politician. Making the sausage was enough for me. I didn’t need to be somebody out there being a politician. Although I still love politics and talk often with professional and private friends about it, for me, it was about helping people from the legal side. Even though I was on the legislative side, I started to think that maybe that was my life’s calling.

Sophie: So now you're a venture fund lawyer. Did you always want to be a venture funds lawyer, or did you have another type of law you were interested in?

Shane: Oh, God, no. This was the last thing in the world. I didn’t even know what venture capital was as a young, spry 20-something coming out of Capitol Hill. I had no idea. I just knew I wanted to do something. When I was on Senator Simpson's staff, I got to work on a lot of environmental issues. And, not surprisingly, being from a state like Wyoming, which is very outdoors-oriented, it’s quite scenic and beautiful. The environment is something near and dear to any Wyomingite's heart. I thought maybe combining that passion for the outdoors and protecting the environment with the law might be a really cool way to spend one’s day. So, the first notion I had was that I wanted to be an environmental lawyer. That sounded like a great job. What better way to spend your days than helping to protect the environment? I applied to a number of law schools in the U.S. that had focuses on environmental law—the University of Oregon being the number one school on that list. I was lucky enough to get into Oregon, and I went to Oregon with that in mind. But both you and I know that’s not where the journey ends—it only just starts there.

Sophie: So you ended up at Cooley. Bridge me through that little gap of how you went from studying environmental law to working at Cooley, which is one of the largest and most known firms for venture fund formation.

Shane: Yeah. So, I thought I was going to be an environmental lawyer. First year of law school is the first year of law school. But when I actually started selecting the courses I wanted to take, I took a number of environmental courses, and it turned out to be the most boring, awful thing—at least for me personally. It was highly regulatory, and very few people get to actually do what you think environmental law is about. This was more just reading through codes of EPA protections, and it became not at all what I thought environmental law was going to be. I discovered that in my second year of law school. Then I had to redesign what I thought I wanted to do. I took a bunch of tax courses as part of a corporate tax course, and I actually did really well in the class. I loved the way it was taught, and how having great tax counsel could be very important. That

was the next thing I thought I wanted to do—be a tax lawyer. So, I took a lot of tax courses at Oregon and decided that was going to be the future of my career. I wanted to be a tax lawyer—an international tax lawyer at that. I designed the rest of my law school experience around that. I graduated from the University of Oregon and went to New York University (NYU), which has a post-doctorate LLM program in tax—the best tax program in the world. I went there thinking, "Oh my God, this is going to be the best thing since sliced bread." It was wonderful. I loved the academia and the challenge of the tax courses at NYU. I graduated from NYU thinking that’s what I wanted to do. I took that tax degree and moved to the San Francisco Bay Area, starting with what was then Pricewaterhouse, now PricewaterhouseCoopers. I was working as a young international tax lawyer, which ended up being a lot of research and writing memos for clients. I never really talked to clients or interfaced with them. All I ever did was talk to my bosses, discover a lot of things, and help with research and writing. That was going to be it for the next 10 years. But as you can already tell, I talk a lot, and I love talking to people. I love counseling individuals and businesses, but I wasn’t doing that much. Tax law was certainly challenging and rewarding intellectually, but the real-world aspect of working in a large accounting firm wasn’t something I was okay with. A large portion of my client base wound up being venture funds, and I loved working with them. They were great people, doing incredibly interesting things, investing in some of the most amazing companies in the world. It looked like something I really wanted to do. I left being an international tax lawyer and started at Cooley in 1999. I stayed there for 25 years until three months ago when I left to become the head of the Venture Funds practice at Sidley Austin. That’s where I am today. It took me a while to find my passion in the law, but I absolutely love what I do. It’s the bee's knees in terms of corporate law. You work with so many incredible people—Snoop Dogg being one example of someone I’ve had the privilege of working with along the way. It’s been a wonderful career, doing a lot of things with a lot of interesting people, and I’ve found something I’m truly passionate about.

Sophie: I love the twists and turns. I think it’s something everyone needs to do in their career to find where they actually want to land. You ended up staying at Cooley for over two decades. What was it like when you first joined Cooley, and how did you evolve during your time there? I imagine everything would have changed—the firm would have grown.

Shane: Oh yeah. It’s a great question. When I started, it was 1999, and that was the very height of the internet boom. Law firms were hiring like crazy, and venture funds were popping up everywhere. I remember as a young associate, I was working 300 billable hours a month. It was bananas, but in a wonderful way, because business couldn’t have been better. The internet and venture capital communities were in their infancy, and it was incredible to be a part of it. I was running on coffee and not much else, but it was a super busy time. Then in 2001, the bubble burst, and a whole bunch of venture funds and portfolio companies folded. It was terrible. You’re so busy building so many businesses, and then you see the whole thing collapse. Being involved in the creation of a lot of it, that becomes personal. When businesses you helped create collapse, it’s painful. You take it with you. People who became dear friends saw their businesses fail. When you go from the absolute height of the internet economy to the lowest valley in such a short time, you experience stress and anxiety. It was a difficult time for a lot of people, law firms included. Cooley let go of associates, like many law firms in the Valley. It was a tough time, but you learn lessons. You learn how to counsel differently. Instead of building new venture funds, you’re helping people through the economic downturn and the dismantling of businesses. It becomes a different kind of day. But a couple of years later, things start to pick up again, and you rise with it. You take the lessons learned from that period and keep them in the back of your mind. So, when 2008 and other economic downturns hit, you’re better prepared. The first time I went through it, I had no idea what I was doing. It was trial by fire, and you just survived a lot of it. But I came out of that a much better counselor, and more humanistic in the way I dealt with transactions. These aren’t just transactions—there are people behind them. As a young lawyer, those were incredibly valuable lessons. Now, with more experience and some gray hairs, I approach each day with perspective. Yes, the economy is difficult, but this too shall pass. You learn how to survive, succeed, and manage your portfolio companies, investors, and clients. You learn that your legal acumen needs to be matched with business acumen. Cooley changed too. It was primarily focused on the internet economy, venture capital, and emerging companies, but management learned lessons and expanded into new practices like banking and antitrust. The firm grew and diversified, which made it more resilient. The recipe for success was there, and we just had to hold our breath during the tough times.

Sophie: It’s stories like that you only hear from someone who’s had over two decades of experience in a firm. It’s fascinating to hear about the people element as well. You might hear about these times in books or movies about the Valley, but to hear from someone who was in the middle of it, you realize it’s not just a movie—it was real life.

Shane: Well, you’re making me feel old now, Sophie! But yes, I tell our young associates that this is their first tough economy, and I remind them it’s not as bad as 2008 or 2001. It’s tough, but the industry has changed, and it will come out of it. You just have to bear with it and know that everything will be okay. It’s a perspective I’ve gained from going through tough economies, and that’s what I offer to clients—counsel that’s not just legal, but also practical and human.

Sophie: And on the topic of young associates, as a leader at Cooley and now at Sidley, what do you see in those who progress the fastest and provide the most value to their clients early on in their careers?

Shane: The biggest thing is a hunger to learn. I always tell young lawyers that they are the masters of their own future. You can be assigned work and cases that aren’t of your choosing, but you can make the most out of each experience by really engaging with the client—not just about their business, but on a personal level too. Build relationships, seek active mentorship, and don’t be afraid to speak up about the work you enjoy and what you’re struggling with. I think young lawyers are often afraid to admit they’re struggling, but that’s how you improve. Find mentors who are invested in your success. I want my associates to succeed, not just because it reflects well on the firm, but because I care about them as people. You have to immerse yourself in what you’re doing, even when it’s hard. Being timid won’t get you far. The more senior you get, the more you can design your own career. But early on, you have to be vocal and take ownership of your path.

Sophie: I love that—great advice. Throughout your career, you’ve spent most of your time in Silicon Valley, which is such an innovative and competitive environment. How do you go about finding clients in that space?

Shane: Gosh, it’s a great question. Having switched firms recently, I’m now in a position where business development is a big part of what I do. At Cooley, the clients were already there, but now at Sidley, I have to be scrappier. I rely heavily on my network—people I’ve known for 25 years in venture capital, lawyers, service providers. I take people out to lunch, get to know what they’re working on, and show a vested interest in their success. Conferences are also great for building relationships. I recently attended a conference for venture capital general counsels, and it was like shooting fish in a barrel—three days of networking with the people I need to connect with. I’m also working on building Sidley’s venture fund practice from scratch, which is exciting. I’ve never had the chance to build something like this before, and it’s a new challenge every day. It’s a mix of networking, conferences, speaking opportunities, and writing. Social media, like LinkedIn, is huge for getting your message out there too. When I started as a lawyer, all we had were conferences. Now there are so many ways to succeed in business development, and you have to take advantage of all of them.

Sophie: With such a big change in your career, what surprised you the most?

Shane: After 25 years of doing what I do, I thought the transition would be easy—just a straight transposition of my experience. But that notion was dispelled very quickly. I had to find new ways of doing things from day one. I had to introduce my clients to new people and make sure everyone in the firm knew about our new venture fund practice. Sidley has done a magnificent job of integrating me, but it’s been a steep learning curve

. I’ve probably met 300-400 people in my first three months here, and that’s just a drop in the bucket of the number of lawyers at the firm. I’m doing a world tour of the Sidley offices, meeting people who have a nexus with the venture funds practice. After 25 years, you get used to sitting on the same nest every day, and here everything is new. It’s terrifying at times, but also incredibly exciting. I made this move because I wanted the next 15 years of my career to be about something I could really get excited about every day, and this is it.

Sophie: I love how you said it’s terrifying because I think that’s something important for younger attorneys to know. It’s okay to be terrified, especially when you’re starting something new.

Shane: Oh my God, if fear wasn’t a part of our professional lives, what would happen to us all? It’s normal to be scared out of your pants half the time.

Sophie: I’d love to learn more about the work you do. Can you share with me what type of entities you work with when creating these different funds?

Shane: Typically, venture funds. My job is to help venture capital firms form investment funds where different investors invest. A fund is an actual entity—usually a limited partnership or limited liability company. Most of the time, these are formed in Delaware because that’s the corporate site of most businesses in the U.S. But we also work with international clients, forming limited partnerships in places like the Cayman Islands, especially when non-U.S. investors are involved. There’s a lot of tax planning involved to ensure these funds are structured in a tax-efficient way. For example, when a U.S. fund invests in a portfolio company and liquidates that investment, the partnership entity isn’t taxed, but the money is distributed to the investors and taxed only once. That’s why we structure these funds as flow-through vehicles for tax purposes. There’s a lot of tax sensitivity, especially when foreign investors are involved, and structuring is a huge part of the success of these transactions. We also create general partner entities, which are the fund managers' flow-through vehicles that earn carried interest, management fees, and other economic benefits.

Sophie: When guiding your clients through fund formation, what are some of the most important things they need to consider? Or common mistakes you see?

Shane: One of the biggest mistakes is thinking of it as just an economic transaction, rather than a partnership between investors and fund managers. This truly is a partnership in every sense—economically, yes, but also in terms of trust. Investors are giving managers large amounts of capital and trusting their judgment to invest in successful portfolio companies. Some managers lose sight of that and focus too much on haggling over terms. The way you conduct yourself in those negotiations says a lot about the success of the partnership. It’s also important for lawyers to understand the client’s needs and tailor the transaction accordingly. You don’t need to give a brand-new fund manager the same terms as someone with 20 years of experience. You need to style the transaction to fit the client and the situation.

Sophie: What trends have you seen in fund terms over the years?

Shane: The biggest change has been in carried interest and management fees. It used to be a flat 2% management fee and 20% carried interest, but now we see tiered carry structures where, if a fund performs at a certain level, the carried interest increases. There’s also more protection for investors now, with European-style waterfalls becoming more common, where all contributed capital has to be returned to investors before the fund managers can earn carried interest.

Sophie: Has succession planning become more important for these funds? What makes a successful plan?

Shane: Oh, absolutely. When I started in 1999, no one thought about succession planning. It wasn’t until those funds matured and reached their 11th or 12th fund that they started thinking about it. It’s a lesson learned the hard way. Now, succession planning is a key focus, and investors demand it. They want to know there’s a plan for leadership transitions. The key person provision in partnership agreements identifies specific individuals on the investment team, and if they leave, there are consequences like stopping the investment period or even liquidating the fund. It’s about being prescient and planning for the next generation. You need to trust the people you bring in, but once you know they’re going to be part of the firm’s future, you can’t start planning too early.

Sophie: Do you get involved in attracting investors for these funds? What works best?

Shane: Yes, especially for new fund managers. Emerging managers usually start with high-net-worth individuals and family offices because institutional investors often aren’t ready to invest in first-time funds. Once they’re on their third or fourth fund, institutional investors like pension plans and university endowments start to come in. Placement agents can help raise capital, but at the end of the day, it’s about building relationships. Your network is your best resource, and successful venture capitalists should be willing to share their LPs with others. It helps solidify their own relationship with their LPs and builds goodwill within the community.

Sophie: After hearing all this, I’m sure some listeners might be interested in pursuing venture law. What advice would you give them? What skills should they start developing now?

Shane: The biggest thing is understanding what venture funds and early-stage companies are. If you’re in law school, take corporate law, tax law, and partnership law classes. Get involved with the business law journal if your school has one. Real-world experience is also incredibly valuable. Whether you’re working in-house at a company or interning at a law firm, that hands-on experience will set you apart when you sit down for an interview.

Sophie: I love it—so much wisdom to draw upon. To wrap up the episode, I have some quick-fire questions. First thing that comes to your mind, in a sentence or a word. If you weren’t an attorney, what would be your dream job?

Shane: I would be a professional sports broadcaster. Sports are near and dear to my heart. I think traveling the world, covering sports, and being paid for it would be the best gig ever. Or maybe a photographer—I have a passion for photography too. But probably sportscasting. That would be awesome.

Sophie: Love it. What’s one movie or book that has had the biggest impact on you?

Shane: *Field of Dreams* is a movie that has had a huge personal impact on me. It’s about fathers and sons, belief, hope, and taking risks. Every time I watch it, I cry like a baby. It resonates with me deeply—baseball, fathers and sons, and making decisions that seem crazy but end up being the best decisions of your life. It’s an amazing movie with wonderful performances by Kevin Costner and James Earl Jones. Even if you’re not a baseball fan, you should watch it. It’s fantastic.

Sophie: A very wholesome answer! Finally, if you could go back and give your younger self one piece of advice before starting your career, what would it be?

Shane: Trust yourself. Trust your instincts because they’ll never steer you wrong. There were times when I went left when my gut said to go right, and the left never worked out. You have to trust your gut. You only get to live this life once, and the truest North Star is yourself and your own guiding principles. Go with your gut—always.

Sophie: I love it. Thank you so much, Shane. I’ve loved our conversation. If people want to follow along with your new journey at Sidley and see what you’re up to, how can they connect with you?

Shane: You can email me anytime at sgowdy@sidley.com. Feel free to give me a call too—my number is 650-565-7705. Or find me on LinkedIn—I’m very active there. Just search for Sidley or Shane Gowdy, and you’ll find me.

Sophie: I love it. Thanks, Shane.

Shane: You bet, Sophie. This has been a delight. I really appreciate the time.

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