Just a few months ago, companies like RightPro Inc. were frantically turning to their attorneys for counsel on the intricacies of going public.

But with the meltdown of the IPO market, especially for Internet plays, West Los Angeles-based RightPro and other firms now need legal advice of a different kind: How to attract venture capital just to stay afloat.

"We're in the middle of (raising) a $3 million round of venture capital, but we've been careful not to approach venture capitalists too soon," said Norbert Tan, vice president of business development for RightPro, which hopes to launch an Internet database this summer that connects attorneys, accountants and other professionals with clients.

"We're taking all the right steps and getting the right legal advice," he said.

In the course of a few short months, L.A. law has seen a significant shift in direction. The IPO market has tanked, and venture capital deals have slowed, as investors become more discerning about companies they want to fund.

You would think deal-oriented law firms would be feeling the pinch. Not so, according to local attorneys. Most say business is booming thanks to an increase in merger-and-acquisition work and growing trade in financial restructuring.

"We're representing a lot of companies out there that are hitting the wall," said Jeff Hermann, a partner in the commerce and finance group of Brobeck, Phelger & Harrison LLP. "Mostly they're companies with high cash-burn rates, but their plans to go public have been soured by the recent market downturn."

One client of the firm was just weeks away from a planned $1 billion IPO. When the market tanked, the company dropped its public offering and was left scrambling for venture backers.

"They were still burning cash at a rate of many millions a month, but the appetite of venture capitalists had decreased," Hermann said.

When the client, which Hermann declined to name, couldn't find backing, it ended up being acquired by a larger player. Hermann's firm oversaw the legalities.

'Fever' has chilled

Just a few months ago, venture capitalists were falling all over themselves to fund startups, many of which were unproven Internet commerce companies that were spending furiously to gain market share.

"Capital sources were almost unlimited. You could call it a fever. People were afraid to miss the deal," said Ken Baronsky, who heads the corporate department for Milbank, Tweed, Hadley & McCloy LLP in Los Angeles.


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