PactSafe

Introduction

The Business Planning class offers a comprehensive understanding of business concepts through multiple case studies. The course is designed to equip students with the knowledge needed to become reliable business advisors. It covers various aspects, including forming, structuring, financing, and selling successful businesses. Guest speakers from diverse backgrounds, such as Legal Tech immigration start-ups [VisaNow and AutoVisa], real estate developers [Re: Land Group and Bloomington Trade District], investment bankers [NorthBorne Partners], and local small business owners [Chocolate Moose], have shared insights.

This case study focuses on a LegalTech startup that revolutionized online contracting. The class for Pactsafe was held on Thursday, October 5, 2023. Our guest speakers were Brian Powers, founder & former CEO of Pactsafe, and Kyle Robbins (IU Law ’17), Pactsafe’s first non-founder employee who became VP of Sales.

What is this case study about?

This case study tells the story of PactSafe, an Indianapolis-based Legal Tech start-up that focused on the problem of creating high-quality, enforceable “click-wrap” agreements that (a) reduced the risk of costly downstream class-action litigation and (b) organize and store contracts in a way that would impress any potential acquiring company during the due diligence process. PactSafe’s adoption by numerous technology clients ultimately led to them being the first (and to date only) acquisition by Ironclad, the legal industry’s leading contract lifecycle management (CLM) company.

Yet, a critical part of the PactSafe story is the pre-law and early legal career of its founder, Brian Powers. Although the sale of PactSafe is one of the most impressive exits to date in the Legal Tech industry, the law students in the Maurer Law Business Planning class may have been equally impressed with the success of his flat-fee corporate law practice. In attempting to solve the recurring problem of his technology clients, Powers relinquished this practice to form PactSafe. Powers’ first non-founder employee was Kyle Robbins (IU Maurer ’17), who is one of the first generation of law students to build their post-law school careers entirely in legal tech.

This case study is organized into the following six sections:

1. Brian Powers’ Early Career. Exploring Brian Powers’ professional journey before PactSafe, highlighting his experiences leading up to the establishment of his tech startup.
2. PactSafe: What It Is and How It Came to Be. An overview of PactSafe, delving into its origins, the problems it aimed to solve, and the unique path it took to become a prominent player in the Legal Tech industry.
3. From a Summer Intern to the Vice-President of Sales – Kyle Robbins.Tracing Kyle Robbins’ career evolution, beginning as a summer intern at PactSafe and culminating in his current role as the Vice-President of Sales at Ironclad, the company that acquired PactSafe.
4. Business Planning Analysis. Examining the strategic aspects of PactSafe’s business planning, including the assessment of product-market fit, financing strategies, Series A financing, and the pivotal role of the sales function.
5. Acquisition by Ironclad. Detailing the acquisition of PactSafe by Ironclad, exploring the circumstances, motivations, and the impact of this significant business move.
6. Running Business Unit Inside PactSafe. Providing insights into the dynamics of running a business unit within PactSafe, shedding light on the challenges, successes, and key considerations in managing this aspect of the organization.

1. Brian Powers’ Early Career 

Several aspects of Brian Powers’ pre-law and early law career are key to understanding how he became a highly successful LegalTech founder.

1.1 Pre-law Career

Although born in South Dakota, Brian Powers has been a resident of Indianapolis virtually his entire life. After graduating from North Central High School, Powers attended Syracuse University, earning a degree in environmental engineering. This resulted in designing wastewater treatment plants as his first job out of college. Unfortunately, Powers absolutely hated the work. Thus, a short time later, he enrolled in a master’s degree program at Ohio State University in remote sensing. Remote sensing involves observing, through satellites or aircraft, the physical attributes of a region by analyzing the radiation it emits and reflects.

In 1998, Powers started assisting his father in the building of a website for his business. Seeing a business opportunity in building websites, Powers dropped out of his master’s program to launch his own start-up. Eventually, Powers built nearly 600 websites, including IndyJobs.com, Driverjobs.com, and similar industry job boards. This startup was the one that introduced him to business and law, as he worked closely with lawyers for his startup. Although this startup failed, it ended up teaching Powers valuable lessons.

1.2 Law School and Early Legal Career

Immersed in interactions with business lawyers while developing his startup, Powers found inspiration to pursue a legal education. Motivated by this newfound interest, he applied for admission to the evening law program at IU McKinney School of Law in Indianapolis. Transitioning from the evening program to the full-time curriculum, Powers successfully completed law school in his third year. Leveraging his solid network in Indianapolis, built through a clerkship at Sommer Barnard, P.C. (“Sommer”), Powers, who ranked in the top 15% of his class, secured a job at Sommer.

At Sommer’s northern Indianapolis satellite office, Powers gained invaluable insights into the entrepreneurial aspects of practicing law for small businesses. Collaborating with four partners, he observed their unique approach to running practices that resembled solo enterprises. Despite this individualized approach, the partners seamlessly tapped into the firm’s resources when dealing with significant deals. Powers admired how these partners, who maintained a diverse book of business, viewed contracts from a practical standpoint, earning the trust of their clients. Notably, their commitment to running their law practices as businesses, as opposed to a job, resonated with Powers, setting them apart from other firms that primarily saw him as a potential patent lawyer due to his engineering background.

In the lead-up to the 2008 financial crisis, Sommer underwent a merger with Taft, marking a pivotal juncture. Following the merger, one of the original four partners departed. However, just ten months after the merger, Taft made the decision to terminate everyone at the satellite office, retaining only the three remaining partners before ultimately closing the satellite office.

1.3 Successful Solo Practice

After his termination, Powers embarked on a unique entrepreneurial path, where he created a highly search-engine-optimized website and started blogging. Initially earning $300 in the first month, his practice gained momentum by the second month.

Distinguishing himself by relying solely on the internet and his laptop, Powers specialized in startup securities work and automation—an intriguing niche often overlooked by larger law firms. While extracting information from larger companies proved challenging, Powers implemented fixed fees for his services, occasionally adjusting for startup clients. It took eight months to match his previous income from Taft, and within eighteen months, he tripled his earnings compared to his time at the larger firm.

At the outset, Powers found immense satisfaction in the work-life balance facilitated by his unique fixed-fee practice model. Operating primarily through his phone, he managed a continuous influx of work by completing assignments for one client and then passing them on to someone else. Notably, Powers intentionally refrained from retaining clients to avoid the necessity of expanding his practice and hiring additional personnel, a decision driven by his preference to maintain a more compact and personally managed operation. 

1.4 Powers’ Productized Law Practice

Operating on a fixed fee basis, Powers charged $1,500 for securities work (e.g., a private placement memorandum, or PPM) on a startup valued at $500,000, a process that typically required a couple of hours of questioning. Although Powers was willing to bill by the hour, most clients preferred the fixed fee arrangement. Still tracking his time, Power reported earning an effective hourly rate of up to $900 in peak year.

Power’s focused, tech-driven, flat-fee practice allowed Powers to avoid overhead charges, such as printing or court fees, and the need for social events with clients, given that many were not based in Indiana.

Brian Powers’ solo legal venture captivated students in the Business Planning class, showcasing a compelling blend of entrepreneurial innovation and legal prowess. Through the strategic use of digital tools and a fixed-fee model, Powers established a thriving practice and piqued interest by maintaining a remarkable work-life balance, highlighting a success story in a niche often overlooked by larger law firms. Powers’ narrative was a powerful illustration of alternative paths and possibilities within the legal profession.

2. PactSafe: What it is and How it Came to Be

Specializing in tech companies, Powers’ client base primarily comprised these entities, with a notable emphasis on privacy policies and terms and conditions. Among all his clients, Powers maintained a select roster of ten recurring clients, focusing on their legal documentation needs.

In a proactive effort to assist his clients, Powers crafted a comprehensive memo elucidating the intricacies of clickwrap agreements, detailing the necessary terms that companies should incorporate. He aimed to illustrate that a clickwrap agreement functioned as a contract, with clicking as the manifestation of accepting its terms. As client needs evolved, the memo expanded over time, reflecting Powers’ commitment to providing detailed guidance on utilizing clickwrap agreements and seamlessly integrating specific terms into these contracts.

Upon revisiting his clients to assess the implementation of his memo, Powers was surprised to discover that a significant number were not adhering to the advice provided. Many failed to incorporate the recommended terms, with one client involved in an M&A deal for a web hosting business exemplifying this trend. Powers found that the client responsible for hosting servers for website owners lacked an inventory of contracts with his 250 customers, making it challenging to track and enforce the terms of the contracts.  

Motivated by a desire to assist his clients in effectively handling their terms and privacy policies, Powers embarked on creating a user-friendly solution. He envisioned a tool that seamlessly integrated into clients’ websites, offering easy management, tracking, and updates as needed. Crucially, Powers aimed to design a system that allowed legal updates to be swiftly implemented with a simple click. Thus, the inception of PactSafe took shape, born out of the need for a streamlined and lawyer-friendly platform.

Before it acquired the name PactSafe, the platform was initially conceived as a simple Application Programming Interface (API)/Cloud-based contracting tool. Designed to revolutionize how companies handled terms and conditions, it empowered customers to recognize their contract acceptance through actions like clicking or texting. Thanks to its modern workflow and inventive signing methods, PactSafe’s capabilities helped facilitate the daily processing of millions of legal agreements.

Powers recalls how there was a time when he used to read 200 pages worth of case law every week just to be aware of all the complications that could arise from clickwrap agreements. He soon realized that he had a product that did not work very well and came with a Pandora’s box worth of complexities. He quit his law practice to perfect his product, eventually hiring Kyle Robbins.  

3. From a Summer Intern to the Vice-President of Sales – Kyle Robbins 

Hailing from Bedford, Indiana, Robbins’ journey began with a sales job at a sports agency for the NFL before joining the Maurer School of Law. Originally envisioning a return to the sports agency post-legal studies, Robbins brought a writing background from journalism and sports broadcasting in his undergraduate years and experience running a sports blog.

Just before embarking on his first summer, Robbins received a pivotal call from his agency mentor advising against returning to the sports agency due to the unfavorable nature of the job. Grateful for the guidance, Robbins was left with the challenge of not having a 1L summer job. Fortunately, David Main from Maurer’s career services office stepped in and helped Robbins secure a position at Morgan County’s Prosecutor’s Office.

Robbins worked for the Prosecutor’s Office for three days and calls those days the “worst three days of his life.” Having heard about Powers’ fledging business through friends, Robbins emailed Powers, who had just opened an office half a mile away from Robbins’ apartment.

In a compelling email, Robbins passionately conveyed his deep interest in Powers’ tech startup, expressing his willingness to undertake any task, even cleaning toilets, for the chance to work at the company. Impressed by Robbins’ enthusiasm, Powers welcomed him for the summer. Leveraging his strong background in writing, Robbins excelled in various tasks during his 1L summer at PactSafe, seamlessly handling legal research, blogging, and creating an infographic.

For Robbins, encountering a business lawyer with an unconventional career path out of law school was an eye-opening experience. It gave him valuable insights into alternative trajectories within the legal field, challenging traditional norms and expanding his perspective on the diverse opportunities beyond conventional legal roles. This exposure likely fuelled Robbins’ own journey and contributed to his ability to navigate a unique career path.

Ascending from a 1L summer intern at PactSafe, Robbins has risen to the role of Vice President of Sales at Ironclad, the company that acquired PactSafe.

4. Business Planning Analysis

Brian Powers attributes a significant portion of PactSafe’s success to a powerful combination of two essential elements: relationships and entrepreneurial innovation.

First and foremost, Powers’ extensive network of former clients from Taft, DashJobs, and Sommer proved invaluable. Leveraging these existing relationships, he gained access to essential resources and successfully raised capital in a distinctive and highly profitable manner.

Additionally, Powers’ entrepreneurial spirit and innovative ideas played a pivotal role. By bringing fresh, forward-thinking concepts to the Legal Tech industry, he positioned PactSafe as a trailblazer in the field. This enabled the company to stand out, attract investors, and ultimately thrive in a competitive market.

4.1 Product-Market Fit

PactSafe, a groundbreaking product specializing in clickwrap agreements, filled a unique niche that required market education. Powers’ cofounder highlighted the potential to sell the product to a wider audience, recognizing its innovation in seamlessly incorporating contracts into transactions without friction.

PactSafe’s most compelling feature was its protection against potential litigation by creating enhanced enforceability compared to sign-in-wrap and browsewrap agreements by necessitating users to actively agree to contract terms through clickwrap agreements. Notably, the incorporation of arbitration clauses within clickwrap agreements addressed the issue of class action litigation, further solidifying PactSafe’s appeal.

The onset of the COVID-19 pandemic prompted a significant shift in how companies handled contracts and agreements, creating a surge in demand for PactSafe. The widespread move to online operations underscored the necessity for digital contracts. This presented Powers with the chance to assist companies in transitioning from traditional contract processes to more efficient and user-friendly methods, such as clickwrap agreements. As PactSafe adapted to these changing circumstances, it reached new markets and secured diverse deals, enhancing its sustainability and attractiveness to investors. 

4.2 Financing the Business

PactSafe’s financing journey reveals Brian Powers’ entrepreneurial acumen, which was pivotal in propelling the company to success. A particularly notable aspect of PactSafe’s financial history is the innovative nature of Powers’ strategies. 

Dwight Drake, as highlighted in his book Business Planning: Closely Held Enterprises, underscores the inherent challenges of securing finance for startups due to the lack of a proven track record by which potential investors or lenders can assess the business. Consequently, founders often need to personally invest in the business. This approach, often called “bootstrap funding,” becomes a tangible testament to the founders’ dedication to their entrepreneurial journey. See Dwight Drake,Business Planning: Closely Held Enterprises (5th ed 2018) at 166.

PactSafe embarked on its journey with a self-financed or bootstrapped phase that lasted 2.5 years. Thereafter, Powers explored external funding opportunities, resulting in a $1.2 million investment through a combination of angel investors and individuals within Powers’ professional network. One noteworthy participant in this funding round was a billionaire family office based in Singapore, a client from Powers’ earlier legal career.

Powers underscores the significance of the relationship with this particular client. He pointed out that the legal work he had done for them in the past played a crucial role in making their collaboration successful. It led the client to support for PactSafe during its fundraising efforts.

During this initial funding round, Brian Powers opted for convertible notes to secure funding.

Convertible notes play an important role in startup financing by offering a flexible and less formalized way for early-stage companies to raise capital. Entrepreneurs favor convertible notes because they provide an opportunity to delay the valuation negotiation until a later, potentially more favorable time. For investors, convertible notes accrue interest over time, ensuring that their investment converts at a higher value, reflecting the increased worth of the startup. The interest accrued during the note’s term contributes to a more favorable conversion for investors.  

Convertible notes played a pivotal role in PactSafe’s journey. The flexibility of convertible notes allowed Powers to postpone the valuation discussion, providing room for PactSafe to demonstrate its value and refine its market fit. By doing so, Powers avoided early equity dilution and retained more control over the company during its formative stages. 

The convertible notes had not only provided essential capital but also allowed PactSafe to fine-tune its business model based on market feedback. The accumulated interest on convertible notes played a role in ensuring a potentially more favorable conversion rate, benefiting both the company and its investors.

One potential disadvantage of funding a business with convertible notes is the eventual shift of control from the owner to shareholders as the notes convert. However, Powers’ strong rapport with investors, particularly one of his early investors, a billionaire family office in Singapore, saved him from this disadvantage. The trust he had built through previous work led to what he terms as “professional network type fundraising.” Because of this robust relationship, these clients invested without requiring a conversion valuation cap, meaning Powers only had to relinquish a small portion (4%) of his company when the investors converted into shareholders. This allowed Powers to retain the majority of the company’s ownership (60%) by the end of the seed round. 

4.3 Series A Financing

Series A financing is usually the second stage financing for a start-up as it enters the venture capital financing stage. This means that a company secures the required capital from investors by selling the company’s shares. The Series A financing marked a significant milestone in PactSafe’s growth journey. Despite being a relatively new idea at the time, PactSafe successfully raised a substantial round of Series A capital, totalling $5.5 million. This funding round was noteworthy, ranking as one of the 9th or 10th largest Series A rounds ever in Indiana during that period. Although the amount might be considered modest by current standards, it reflected the evolving landscape of venture capital in the region.

The Series A round enabled PactSafe to further refine its approach and respond to changing market dynamics. The onset of the pandemic accelerated the company’s recognition of a new use case for its platform. Businesses sought to transform traditional contract processes into a more seamless and efficient experience resembling a click-wrap model. This shift in perspective allowed PactSafe to adapt its strategy, win diverse deals, and increase deal sizes.

During the early days of PactSafe, the venture capital practices that were common on the East and West coasts hadn’t fully penetrated the Indianapolis market. Powers mentions that the concept of convertible notes was foreign in the Indianapolis start-up ecosystem. Powers highlights that one of their first institutional investors in Indiana was Elevate Ventures, and even they, despite being sophisticated investors in the local market, found the concept of convertible notes to be unfamiliar and thus created a lot of confusion. Therefore, Powers had to negotiate in a rather aggressive manner with such investors in order to protect his equity in the company.

The situation described by Powers reflects the evolving landscape of venture capital in Indianapolis. He notes that an investment practice, once unique or unfamiliar in local ventures, has now become more commonplace, aligning with practices seen in established tech hubs like San Francisco. PactSafe contributed to the maturation of the local Venture Capital scenario, evident in the growing familiarity and adoption of once unconventional or foreign investment practices. This evolution is crucial for local startups to access diverse funding sources and draw on the experience and strategies prevalent in established tech hubs.

4.4 Sales Function of PactSafe

PactSafe’s journey to joining forces with Ironclad was marked by a strategic decision-making process and a clear vision for the future. Faced with an acquisition offer from another business, PactSafe turned it down and, within six days, initiated discussions with Ironclad about a potential acquisition.

At that time, Ironclad excelled in automating contract drafting, handling tasks like data ingestion, Word document modification, negotiation management, and contract storage effectively. However, the one capability Ironclad lacked was the ability to actually sign contracts. PactSafe had a distinctive offering in this area. While this specific feature wasn’t the primary reason for Ironclad’s acquisition, it highlighted the broader concept that Brian Powers and Jason Boehmig (CEO of Ironclad) pursued with clickwrap agreements.

Embracing the idea that contracts needed to evolve beyond their traditional inefficiencies, they foresaw a future where commitments would be made outside the confines of documents. This perspective led them to question the value of purchasing a mere signature tool that solely signs documents. This perspective, in contrast to conventional approaches, played a key role in Ironclad’s interest in PactSafe.

PactSafe recognized the value of joining forces with Ironclad, not only for its growth trajectory but also for leveraging Ironclad’s strong brand presence in the Legal Tech world. The acquisition allowed PactSafe to accelerate the introduction of clickwrap agreements to a broader audience, riding on the coattails of Ironclad’s well-established brand.

Despite challenges in aligning different approaches and merging two distinct businesses, the move proved successful, exceeding revenue benchmarks and providing investors with a substantial return on their investment. The decision was further supported by Ironclad’s impressive valuation and track record, reinforcing the belief that the acquisition was a mutually beneficial opportunity.

5. Acquisition by Ironclad 

In 2021, PactSafe found itself amid an active Series B funding stage. Series B rounds are about taking businesses to the next level, past the development stage. Investors help startups get there by expanding market reach. Companies that have gone through seed and Series A funding rounds have already developed substantial user bases and have proven to investors that they are prepared for success on a larger scale. Series B funding is used to grow the company so that it can meet these levels of demand. 

This Legal Tech company had successfully attracted venture capital from various corners of the country, spanning the west and east coasts, as well as the mid-west. The culmination of all these strategic investments had amounted to a substantial $20 million. 

As PactSafe was actively seeking more Series B investors, they were in the process of securing a venture capital firm. However, an interesting and somewhat unusual situation unfolded. Typically, in venture capital deals, standard forms are used, including a table that outlines the valuation of the company and the associated dilution terms. These forms often contain boilerplate terms to ensure that all parties involved are on the same page regarding the deal. It also includes a letter of intent (LOI). An LOI is a document declaring the preliminary commitment of one party to do business with another. The letter outlines the chief terms of a prospective deal.

In this case, the venture capital firm made a critical error in the valuation table, which was a significant issue. Powers was unwilling to sign the deal with these inaccuracies in place, rightfully seeking clarity and accuracy in the terms of the agreement. However, the firm took six days to rectify the error. During these crucial six days, an unexpected event unfolded. The CEO of Ironclad reached out to Powers. This outreach prompted Powers to make a swift and significant decision: he chose not to sign the deal with the venture capital firm. Not surprisingly, this resulted in some heated and unpleasant exchanges with the VC who was losing a potentially lucrative deal. Instead, Powers began pursuing a LOI with Ironclad.

Ironclad is a software service company that makes contract management software. Founded in 2014 and headquartered in San Francisco, California, Ironclad provides a platform for legal and business teams to create, store, and manage contracts online in a process known as contract lifecycle management (CLM). Positioned in the broader realm of technology, Ironclad has achieved “unicorn status,” signifying its valuation surpassing $150 million.

Brian Powers eventually decided to sell PactSafe rather than pursue Series B funding. Powers’ decision was influenced by his significant control over the company as the third-largest shareholder and possessing a controlling vote. This control granted him confidence in shaping the company’s future, navigating investor rights agreements, and making strategic decisions without major resistance. Powers recognized that PactSafe lacked the brand strength of Ironclad, a key player in the Legal Tech world. Selling to Ironclad provided an opportunity to leverage their robust brand and accelerate the growth of PactSafe’s innovative product, click-wrap agreements. The strategic advantages, combined with Powers’ control, drove the decision to opt for acquisition over further funding. 

Notably, Ironclad made a move by acquiring PactSafe, marking it as the first add-on acquisition for Ironclad. Despite Ironclad’s inclination towards building its technology in-house, the leadership recognized the unique value proposition that PactSafe brought to the table, leading to this strategic acquisition. This decision aligns with Ironclad’s philosophy of investing in valuable technology assets that complement and enhance its capabilities. 

There were investors like DocuSign for a potential collaboration of business, but PactSafe was not interested. They were excited about what the infusion of capital with Ironclad would mean for PactSafe. Eventually, PactSafe decided to move forward and signed an LOI with Ironclad. Brian Powers chose to sell PactSafe to Ironclad, prioritizing the alignment of vision between the two companies. The decision was driven by the shared worldview of both CEOs concerning the inefficiencies in contracts and the need for transformative change in contract management.

This shared understanding fostered a deep connection between the companies, making the partnership compelling. The decision to align with Ironclad bore significant advantages for PactSafe, setting it apart from potential partnerships with larger companies like DocuSign. Four months later, in March 2021, they closed the deal and PactSafe was officially acquired by Ironclad.  

The acquisition involved the entire PactSafe team, as they expressed enthusiasm for the shared vision with Ironclad. The integrated team planned to continue its growth in Indianapolis, emphasizing the utilization of local talent and contributions to the Midwest’s tech community. See Ironclad acquires PactSafe.

In the acquisition of PactSafe by Ironclad, the investors received a combination of cash and stock as part of the deal. This mix of consideration allowed them to realize immediate liquidity through the cash component, providing a return on their investment. Simultaneously, they became shareholders in Ironclad, benefiting from the growth potential of the acquiring company.

Given Ironclad’s rapid increase in valuation, from $1 billion to $3 billion within 10 months, the investors witnessed a substantial appreciation in the value of their Ironclad holdings. The acquisition turned them into restricted shareholders in Ironclad, contributing to their overall wealth.

To further capitalize on the financial gains, some of the VC investors in PactSafe opted to fully sell their Ironclad shares in a secondary market. The secondary market, often active in companies of Ironclad’s size, provided a platform for shareholders to sell their stocks to other institutional investors. While this process involves certain procedures and adherence to buy-sell agreements, it facilitated liquidity for investors who chose to exit their positions. The attractiveness of Ironclad as a unicorn likely generated significant interest from buyers in the secondary market.

6. Running Business Unit inside PactSafe

When the two businesses joined forces, they formed an unstoppable amalgamation in the realm of contract management. Ironclad had already demonstrated its excellence in drafting contracts, managing intricate negotiations, and efficiently storing these vital documents. However, there was one piece missing in their contract life management puzzle – facilitating the signing of these contracts. This crucial gap led to the innovative concept of Clickwrap contracts. 

Clickwrap contracts represented a fresh and transformative approach to contract life management, and it was born out of a remarkable synergy between the two companies. Their shared vision and the collaboration between PactSafe and Ironclad were the driving forces behind this groundbreaking development. Without their combined expertise and commitment, such a pioneering solution might not have been possible. This acquisition had made Ironclad the first company in CLM space to cover all contracting use cases, from highly negotiated agreements to click-to-accept.  

Amidst Ironclad’s progress, Brian Powers made critical decisions regarding his involvement with the company. While he held a significant position on the board, the growing number of investor agreements began to pose challenges. Brian Powers, in due course, decided to exit the company, PactSafe. He evaluated several reasons to back up his decision. One significant factor was the realization that PactSafe had reached a point where it had achieved success and growth but needed additional resources and capabilities to reach its full potential. Powers recognized that selling the company to Ironclad, could provide PactSafe with the strategic advantages, brand strength, and resources needed for accelerated growth. 

Furthermore, Powers’ decision to exit was influenced by the changing landscape and challenges associated with managing a growing business. As PactSafe became a part of a larger organization, Powers faced the complexities of dealing with increased capital, more stakeholders, and additional layers of decision-making. The challenges of navigating a larger structure, combined with his limited decision-making authority within the executive team, contributed to the decision to sell. 

While Powers expressed frustration at not being able to run things as he desired within the larger organization, he remained focused on ensuring the happiness and engagement of PactSafe’s employees and achieving the revenue and retention goals set for the business line. Ultimately, the decision to exit was driven by a combination of strategic considerations, the evolving business landscape, and the belief that joining forces with Ironclad would provide the best path forward for PactSafe’s continued success. 

Powers’ exit from Ironclad was driven by his commitment to ensuring that all his investors reaped substantial returns on their investments. Given the significant amount raised by the company, secondary sales became a notable part of this exit strategy. The result was that the majority of Ironclad’s investors saw their initial investments triple in value. In the end, Powers’ exit two years after the acquisition allowed him to generate a financial outcome that exceeded his needs for settling with all the investors.

As for Kyle Robbins, an individual who embarked on his journey with PactSafe right out of law school, has risen to become the Senior Vice-President of Sales at Ironclad. Though Powers decided to exit the business, Robbins decided to stay with Ironclad. He mentions several reasons for doing so.

Robbins mentions that he is the longest-tenured remaining member of the leadership team. The fact that he has stuck around, along with a few others, is seen as an endorsement of Ironclad as a great place to work. The company has received awards for its positive culture, and Robbins expressed his happiness with his role at Ironclad. He also highlighted the concept of the “innovator’s dilemma,” explaining that Ironclad has a market-dominant product.

Despite challenges in integrating a new product acquired by the company, Robbins sees Ironclad as a place where he can progress in his career. The company’s success and its position as a “rocket ship” in the tech industry contribute to his decision to stay. What sets Robbins apart is his unique compensation structure at Ironclad. He is the sole individual within the company who is entirely driven by the outcomes of his efforts, regardless of whether they turn out positively or present challenges. His compensation is intrinsically tied to revenue, and this approach underscores the high-stakes nature of his role. Ironclad’s growth could play a significant role in his compensation, especially in the context of a potential exit, suggests that Robbins’ decision is also inspired by the idea of getting stock poised for a much bigger exit.

Conclusion

The story of PactSafe and Brian Powers is indeed an inspiring one for entrepreneurs and business professionals. It highlights several key lessons: 

• Innovation and Resilience: Brian Powers’ journey demonstrates the importance of innovative thinking and resilience. He was not deterred by the challenges of the Legal Tech industry. Instead, he brought fresh ideas and a determination to make a difference, ultimately leading to the success of PactSafe. 
• Relationship Building: The power of building and maintaining professional relationships is a central theme in this case study. Powers leveraged his network of former clients to raise capital and drive the company’s growth. This underscores the value of connections in the business world. 
• Strategic Exits: Powers’ exit from Ironclad is a lesson in strategic decision-making. He ensured that all investors benefited from their investments, highlighting the importance of ethical and fair business practices. 
• Continuous Innovation: The collaboration between PactSafe and Ironclad resulted in groundbreaking solutions, emphasizing the importance of continuous innovation in staying competitive and driving growth. 

Parallels with other Aspects of the Course 

In our Business Planning class, we had the opportunity to study the experiences of closely held business owners and their journeys towards achieving success and profitability. Notably, three of these case studies revolved around legal technology companies, with PactSafe being one of the prominent subjects, as highlighted in this case study. What’s intriguing is the remarkable resonance and shared themes between PactSafe and the other legal and technology businesses, such as VisaNow and Autovisa.  

VisaNow

The VisaNow case study delves into the journey of Bob Meltzer, where he identified gaps in legal immigration processes and harnessed technological innovation to address critical immigration-related issues. His entrepreneurial venture began with bootstrapping, and he later secured capital through angel investors within his network. His exit strategy involved cashing out his equity for a substantial profit. 

Interestingly, the narrative of VisaNow strongly echoes that of PactSafe. Brian Powers embarked on a mission to tackle challenges in the contract management sphere using technology. Similar to Meltzer, Powers initiated his venture through bootstrapping and self-financed it for an extended period. He also built the foundation of his business by fostering connections within his client network, which ultimately paved the way for the company’s remarkable success. In a striking parallel, Powers also implemented an exit strategy akin to Bob Meltzer’s, exiting the business with significant personal and professional success. These two case studies underscore the power of innovative technology, networking, and strategic exits in the world of Legal Tech startups. 

AutoVisa

The AutoVisa case study explores the journey of Stephan Eggum, who established AutoVisa to address the complexities of immigration forms using technology. Eggum received investment support from former clients to kickstart his entrepreneurial venture.  

A notable similarity between Stephan Eggum’s journey with AutoVisa and Brian Powers’ experience with PactSafe is their shared commitment to leveraging technology to address specific challenges within their respective fields. 

Both entrepreneurs recognized problems in their respective domains – complex immigration forms in the case of AutoVisa and contract management issues in PactSafe’s context. They chose to harness the power of technology to provide innovative solutions, showcasing their visionary approach to business. Furthermore, they both received vital financial support from former clients, underscoring the significance of professional networks and relationships in launching and scaling their startups. 

These stories exemplify the power of entrepreneurship, innovation, and network-building in driving successful businesses. They underscore the transformative role of technology in resolving critical issues across different industries. 

Applicable Forms

1. Convertible Notes
2. Debt Conversion Agreements