LegalZoom became a listed company on the Nasdaq on Wednesday, as investors seized shares in Glendale, founded in 1999, to shake up the legal world.
The stock reached a price of over $ 38 a share just after its 9 a.m. Pacific debut – well above the asking price of $ 28, pushing the valuation up to over $ 7 billion in its first moments as a public company – and ended the day just slightly below $ 37.85.
LegalZoom has 1 million small businesses as customers for its subscription services, as well as millions of users who come to the site for help with estate planning, divorce documents and intellectual property filings, among other legal services.
But the company’s stated mission to “democratize the law” has often brought it into conflict with groups of lawyers across the country since its founding, and its future success depends in part on the disruption of the legal profession. stilted.
In the United States in 2020, 10% of new limited liability companies and 5% of new companies were formed using LegalZoom services, according to documents filed by the company in preparation for its IPO. The company’s business model relies on returning these founders for more business services as their business grows, instead of hiring lawyers to provide those services.
In a conversation with The Times minutes after the stock began trading, LegalZoom chief executive Dan Wernikoff explained why the company has gone public now, which it plans to do with its new stack of money and why he thinks online legal services and lawyers can work together. make the law more accessible to everyone. This interview has been edited for brevity and clarity.
Congratulations on the IPO and this opening price.
Yeah, good open fort. Our initial range was $ 24 to $ 27, and we raised the target, and, yes, the opening trade I believe was just over $ 36, and it went up from there.
What are you going to do with the money you just raised?
I joined the relaunch growth strategy two years ago, and it’s recognition of what we’re trying to do: raise cash, pay down debt, have cash on the balance sheet and really think of that as a tool to accelerate our growth.
Also, this is a 20 year old company, so we have to make sure that we reward our existing shareholders, but also think about how to attract more employees. We really want to be competitive and we’re hiring a ton.
The plan is therefore to continue to grow. After 20 years, is there still market share to take?
Oh, yes, we estimate the addressable market served – the people who consume legal services today in the areas we offer – is close to $ 49 billion. If you do the math here, we have less than one [percentage] point of penetration.
Almost all legal services – 92% of them – are provided offline, which is really unlike any other industry. If you think of financial services or healthcare, it’s strange that there haven’t been more people embracing legal services rather than technology.
Is the goal to automate the legal profession and disrupt the way lawyers do business?
It’s not really about automating legal services. In many ways, for the self-employed, we help them complete their transactions with more confidence. They can do a lot of things that we offer today directly with government agencies.
The real opportunity is not to disrupt lawyers, it is much more to make lawyers more efficient. We have our own network of independent lawyers who provide legal advice through our platform, and they can do so more cheaply and more effectively than if they were working in their own law firm.
You have faced opposition from groups of lawyers and a number of lawsuits over the years for allegations that online legal services are an unauthorized practice of law. Do you think this will continue?
The unauthorized practice of law has been dealt with fairly well at this point through the court system, so we are very happy that our service is not running into any issues. If anything, I think [state attorneys general] and different lawmakers are now looking at the legal system and feeling like it’s just not accessible to most people, too expensive, so a lot of people are avoiding it.
Several states are now trying to change the rules so that a company can own a law firm and share the fees with lawyers, very precisely because they believe the costs will go down. This has happened in Arizona before, there is a five-year sandbox in Utah, and 15 states are currently considering the same legislation. I think we’re on the right side of this debate because we’re just trying to give people access to legal services that today really don’t feel like they can afford it.
Why would allowing businesses to own a law firm reduce costs and improve access?
The idea is that if you allow a company to own [a law firm], they’ll be able to hire some really solid talent who can actually build the tech platform itself. And if you turn on revenue sharing, you’re actually pushing people to cut prices as much as possible – and confusing lawyers who decide not to adopt the technology.
You know, you asked me if we were in partnership with lawyers or not. I think we don’t partner with lawyers who don’t believe in technology, and we partner with lawyers who believe technology can improve their service.
So what’s the plan for next year? Attract more subscribers to small businesses?
We focus on everything related to small businesses. Specifically, we focus on when people are forming. At this point in time, you are not just creating an entity. You also think about things like tax implications, what insurance do I need, what business license do I need?
There is a whole series of barriers in front of small businesses; our goal is to remove all of them at that time.
How has the pandemic affected the small business clients you work with?
It is the story of two cities. If you think of the businesses that were in existence when the pandemic hit, we’ve seen many businesses pause and fail.
But what’s really inspiring about small businesses is that you’ve also seen a pretty significant acceleration in training itself. As people were in refuge at home, I think there was an important discovery of the digital tools that exist and which allow from an operational point of view very simple to launch an e-commerce business, or to sell its crafts. in line. , or participate in some sort of concert platform. It used to be that you had to go out and get a loan and think about real estate. Now you can start a business in a matter of weeks with almost no money up front; he leveled the playing field
You said you were planning to hire with the new money on hand. Is the Glendale office still the heart of the business?
We’re hiring more at Glendale than anywhere else – we also have a contact center in Austin, TX, and a product center we’ve opened in Silicon Valley, and we plan to open more locations over time.
But our team at Glendale is the lifeblood of the business. We have people who really understand the legal field, we have a great team of engineers, we really have the basics there. But one of the things as we continue to grow is that we will be hiring in all locations as we become more familiar with remote working and the concept of online collaboration.
One last thought on the day of the IPO?
On a day like this, you think a bit. This company has a long history, and I would say an incredibly innovative one. It is a crazy idea to put legal forms online; people don’t think about that. Back in 2000? It was a truly disruptive idea that became the foundation for what could be a world class small business supplier.
So I thank these guys, the original founders. We just want to continue with this legacy and continue to grow this business.