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Like many dot-com entrepreneurs, Wade Bennett and Robb Ohnesorge sought funding from friends, family and acquaintances after they quit their jobs as associates at Locke Liddell & Sapp in Houston to develop and sell a Web-based software system for lawyers. As it turns out, about half the angel investors in PowerBrief Inc., their 16-month-old startup, are lawyers, some of them well known in the Texas legal community. Their investments provide PowerBrief not only with money, but also with an important entree to the firms where those lawyers work. And with PowerBrief expected to go public in early 2001 through a merger with a public company in Houston, the lawyers who put their money at risk with Bennett and Ohnesorge may soon see their small investments in the startup pump up their portfolios. The transaction announced in September calls for PowerBrief to merge with Integrated Orthopaedics Inc., a one-time physician practice-management firm that’s backed by entities related to Oak Hill Capital Management Inc. and Robert M. Bass of Fort Worth, Texas. PowerBrief shareholders will receive shares of IOI common stock and warrants to buy more. “This is an opportunity for capitalizing their stock,” Ernie Rapp, PowerBrief’s chief executive officer, says in describing how the merger will impact investors in PowerBrief. The merger is providing an immediate benefit to PowerBrief — IOI also is extending it an immediate $3 million line of credit. “I look at this as a financing. It happens to be a public one,” says Rapp, a veteran technology company executive who joined PowerBrief in March. Meanwhile, PowerBrief’s product, an Internet-based software system that not only helps lawyers manage documents and litigation, but also manage their workload, is being tested by 13 in-house legal departments, most of them based in Texas. While no firms are among the beta testers, lawyers working as outside counsel for some of the corporations involved in the testing are hooked up and using it. The beta testing began in September, and the product is expected to launch in January. FRUSTRATED YOUNG LAWYERS Bennett and Ohnesorge met at Locke Liddell, where they were litigation associates working down the hall from each other. They found out they had something in common: a frustration with the need to lug hefty stacks of documents when going to depositions or hearings, or taking work home. “I was a frustrated young lawyer working in a big law firm. I couldn’t buy a big enough briefcase,” Bennett says. “What we thought was an inconvenience was a huge cost to clients,” Ohnesorge notes. After talking for months about how to solve the problem, Bennett and Ohnesorge left the firm in July 1999 to start the company to develop and sell software that will help lawyers manage their paperwork and their jobs. They started meeting with lawyers to pick their brains about what would help them do their jobs more efficiently. They also were looking for seed money, and some of those lawyers decided to invest in the fledgling company. “It seemed to me they were on to something … that could be used by lawyers, both outside counsel and inside corporate counsel. It could be used both as a tool with respect to actual handling of litigation, particularly large cases, as well as the supervision, if you were a general counsel or assistant general counsel in charge of litigation,” says Evans Attwell, a former managing partner in Vinson & Elkins. Attwell, who is retired, says he invested $10,000 in PowerBrief because he was impressed by Bennett and Ohnesorge and by their ideas. “I’ve invested in some biotech companies and some things of that nature and DSL companies and things I call in the tech area, but nothing like this where they are trying to apply, to bring technology to the practice of law,” he says. Like Attwell, Jess Hall, a partner in Liddell Sapp, says he also invested in PowerBrief because he liked the idea and the “moxie” of Bennett and Ohnesorge. “I saw two young men whom I believe to be very smart and very capable who had come up with an idea frankly whose time had come,” Hall says. “The legal profession has been one of the slowest to increase productivity through the use of electronics, particularly through computers.” PowerBrief cuts the paperwork in big litigation because documents are stored on the Web, simplifying access to in-house lawyers and outside counsel and their staffs. The software also provides other features, including the ability to put links to caselaw, video depositions and exhibits directly into briefs, and do research online. PowerBrief software automatically converts WordPerfect or Microsoft Word documents to hypertext markup files that can be displayed by common Web browsers. Those documents then are stored on secure servers hosted by Intel Corp. “The end goal of this product is to put all attorneys on a single platform,” Bennett says. Another lawyer/investor, Houston’s Scott Clearman, used a beta version of PowerBrief for a brief he filed in December 1999 in Sandwich Chef of Texas Inc., et al. v. Reliance National Indemnity Insurance Co., et al., which is pending in federal court in Houston. The brief filed by Clearman, a partner in McClanahan & Clearman, was in response to a defense motion for summary judgment. “Our brief used PowerBrief technology to display what evidence we put into the brief in what I thought was the most effective [way] possible, [and] testimony I thought was enlightening in real-time video,” he says. “It has several thousand exhibits. You can go to the footnote of the exhibit, either to the first page or the exact page cited in the brief.” Clearman says he filed the brief using PowerBrief, as well as on paper. While he does not know if U.S. District Judge David Hittner looked at the Web-based copy of the pleading before denying the motion for summary judgment, he knows many of the defense counsel in the litigation and their clients did. Hittner declined comment. “It’s going to be extremely efficient for groups to use it instead of paper,” Clearman says. “I’d be delighted if an opponent suggests [using] it.” The ability to reduce paper-shuffling is a feature that Merrick “Rick” Walton, general solicitor for Union Pacific Railroad Co. in Houston, likes. But Walton also is attracted to the collaborative nature of the software. Walton is using a test version of PowerBrief on a group of 26 class-action suits arising out of a train derailment in Louisiana in May. He says he and lawyers from Union Pacific’s home office in Omaha, along with outside counsel in four offices in three cities in Louisiana, are working together on the same documents. “The outside counsel, they were very receptive. One of my lawyers who is a sole practitioner, she sees this as a way that enables her to participate,” Walton says. ANGEL MONEY The success of Bennett and Ohnesorge in getting lawyers to invest money in PowerBrief may be the key to the young company’s success in a time when many other high-tech startups are floundering for lack of cash. Ohnesorge says he wasn’t surprised lawyers were enthusiastic about their plans for the product but was surprised to find out so many made it a practice to invest in dot-coms. “It was really lawyers looking at this [the product] and saying, ‘Great. Now tell me about your company,’ ” he says. Once angel money gets a startup off the ground, the next step is usually venture capital money, and serendipity played a role in PowerBrief’s deal with Integrated Orthopaedics. Rapp says he and others at PowerBrief met Scott Hancock, a director of IOI and a partner in Oak Hill Capital, when the startup was negotiating to sublease IOI’s office space in February. IOI was getting out of the physician practice-management business and changing its business model at that time. Rapp, the former chief operating officer of Internet America Inc., says Hancock began pursuing a possible investment in PowerBrief after he saw a copy of the startup’s business plan in May. “It was just immediately apparent to me they had something powerful,” says Hancock, a venture capitalist based in Oak Hill Capital’s Silicon Valley office. “When we saw people who really knew this market were investing in PowerBrief, I knew the product was likely to fill a genuine need,” he says. PowerBrief’s merger with IOI is a twist on the traditional first-round venture capital financing. “We are merging with a company that has cash. There it is, secret revealed,” says Rapp. Rapp says the IOI money won’t take PowerBrief “to the end of the rainbow,” and it’s seeking other VC money. But the merger will allow the company to go public, and once the product goes on the market in January, the company will start pulling in revenue. Lawyers can pay a monthly fee to use the software on a project basis, or pay for a license to use it more broadly, Rapp says. Rates start at $10 per month for a single, simple matter and can escalate, depending on the amount of server storage space used. Because the merger with IOI is pending, he says he cannot say when the company’s business plan calls for PowerBrief to operate in the black, but he says the deal with IOI should help the company go profitable sooner.

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