By Sean Wolfe

The venture capital universe has changed dramatically since Hank Barry—former partner at San Francisco-based venture capital firm Hummer Winblad—last practiced law.

Mr. Barry recently announced he was leaving Humwin to join the San Francisco-based law firm Howard Rice Nemerovski Canady Falk & Rabkin, where he plans to drum up new business for the firm, serve as outside legal counsel to technology companies, and offer operational expertise to clients (see Second Life for Napster Execs).

Second Life for Napster Execs

Mr. Barry became widely known to many in the technology community as the acting CEO of Napster during the bubble years, at a time when the file-sharing startup was plagued by lawsuits from music-publishing companies Bertelsmann and Universal Music Group, among others.

Clearly, that was a trying time for Mr. Barry, who said his experiences helped him develop a thick hide for criticism, as well as learning who his friends were, and who weren’t.

Red Herring asked him in a phone interview for his thoughts on his move, his past with Napster, and the hard-won lessons he learned, as well as his views on the change in the venture climate.

Q:What was your takeaway from the Napster period?A: First, I think Shawn Fanning did an amazing thing. He looked at the architecture of the web and came up with something original, and you have to give him credit for that.

I would say I also learned that putting more developers in engineering is not necessarily a good thing. Napster tried to implement filtering technology, and put a lot of development into that, but I learned you can often do more with three developers than 30.

I also think you learn who your friends are. If there’s a great lesson for me from Napster—and it’s trite—it’s that your family really matters. Getting their support, and the support of friends—that’s really important. It sounds like every greeting card, but it’s true. Q:This will be the first time you’ve gone back to practice law since 1999, when you were a lawyer at Wilson Sonsini Goodrich & Rosati. Why choose Howard Rice as the next step in your career? A: There is a trend to two types of law firms: big and small. Howard Rice is different. It is large enough to have the resources required for complex matters, and small enough to have a human scale, which is very attractive to me.

Q:A:

There are people here I’ve known since law school, and there’s a tremendous bench in terms of depth of knowledge about various legal issues. It’s a very good group of people with a very good history. Q:It’s pretty clear you’ve been bitten by the entrepreneurial bug. How does that get expressed in going back to practicing law? A: I wanted to do something where I felt I could have an impact, maybe not immediately but over time. I figured out that at heart I’m an operational guy. I like doing deals and moving the ball forward.

Q:A:

From a venture perspective, I still have a bunch of angel investments, which is fine. But the role of a lawyer is one where you’re involved on a day-to-day basis. It’s a different sort of relationship.

Q:Could you expand on that a moment? Give us a preview of what kinds of things you’ll be doing with tech firms?A: My law practice has focused really on two roles: Outside general counsel working with technology companies, and second, because I have an IP background, doing complex licensing transactions where there are lots of different parts moving around, complicated payment structures, etc. I think that’s where I have something to offer and I expect to be fully engaged.Q:What will your relationship be like with Hummer Winblad moving forward?A: I’ll continue to be a huge fan and supporter. Technically, I’m a retired partner in the funds. I’ll continue to make my capital calls and have an economic interest. Q:Back to Napster a moment. You have an affinity for operations, and with Napster, you were both a VC as well as taking the helm of a portfolio company for a time, which created some issues down the road for you. Would you do that again if you were still a VC?A: I certainly wouldn’t do it for a very long period of time. I thought I would be at Napster for four to six weeks at most. I ended up being there 14 months, and that was really too long, for a lot of reasons that happened to coincide with the downturn in the economy. I personally would not advise investors to take long-term operational roles in portfolio companies. Q:The venture climate has changed radically since 1999. Do you agree with Steve Dow at Sevin Rosen that the venture model is fundamentally broken?

Q:Back to Napster a moment. You have an affinity for operations, and with Napster, you were both a VC as well as taking the helm of a portfolio company for a time, which created some issues down the road for you. Would you do that again if you were still a VC? I certainly wouldn’t do it for a very long period of time. I thought I would be at Napster for four to six weeks at most. I ended up being there 14 months, and that was really too long, for a lot of reasons that happened to coincide with the downturn in the economy. I personally would not advise investors to take long-term operational roles in portfolio companies. The venture climate has changed radically since 1999. Do you agree with Steve Dow at Sevin Rosen that the venture model is fundamentally broken?

A: No. There are still great opportunities. Having said that, the thing about venture, fundamentally, is that it does not exhibit returns to scale. You can get a 4x return on a $10 million investment, and in the abstract that is a very good return.

In a small fund it is a huge return.But in a very large fund it doesn’t really move the needle. The other thing is that—generally—institutions like to see returns in this asset class that over time exceed the S&P 500 by 400 basis points. If the S&P is suffering, then it’s easier. If it’s doing well, then your job is harder.

Q:What are your ambitions for the next chapter in your legal career?

A: I’m just trying to be a good director at the Howard Rice firm. That means trying to be a good team member; and it means trying to help people to the extent that my experience can help them, both internally and externally.

It’s an interesting role, because fundamentally, I’m trying to be a resource for other people—clients as well as other lawyers—and if I do that well, the firm will be even more successful.