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The Startup Story of LegalZoom.com – Scaling Legal Services

by Vincent Chan on Jul 10, 2009

legalzoomDoctors, lawyers and consultants are widely considered as non-scalable professionals. Yet the founders of LegalZoom.com have successfully combined legal services and the Internet into one business model. Below is an inspiring story about their startup story which I believe all entrepreneurs would love to hear about.

In February 2008, the founders of LegalZoom.com, Brian Liu and Brian Lee, were invited to speak at the UCLA Entrepreneurship Week. I was so excited about this because I’ve heard about their success multiple times in the past. Did you see their TV commercials on CNBC? What’s better than listening to the founders talking about their own founding story?

Currently, LegalZoom is the nation’s leading online legal document preparation service. They started the company with five UCLA interns in 2000 and quickly grow the business into a company with revenue more than $6.5 million and around 350 employees.

Very Early Stage

Brian Liu and Brian Lee knew each other when they attended the UCLA School of Law. Although both of them have worked as attorneys at some of the most prestigious law firms after graduation, they believed that there should be something better than a 90 hours job.

So they quitted their high-paying jobs and tried to raise fund from Venture Capital for their online legal document service startup. Unfortunately, the whole stock market crashed on the day they went to the Venture Capital office. The VC simply asked them to come again in the future.

Usually people will just give up in this situation, right? But these two founders decided to continue their venture because they believed in their idea so much. Eventually, they got the business off the ground using their own money and funding from family and friends. (Site note: their first office is actually in one of the founders’ condo and they didn’t pay any salaries to themselves for one and a half year. Talk about bootstrapping your startup.)

Credibility

For an online legal related company, they understood that TRUST is the most important part for their business. If the customers didn’t trust your site, no one is willing to give his/her personal information to you.

Therefore, Liu and Lee tried to find a high-profile attorney to be their partner so people will recognize and trust their company right from the start. Not surpisingly, they aimed for the best possible target they could find: Robert Shapiro, who is most notable for being part of the defense team which successfully defended O.J. Simpson from his murder charges. Everyone in the US knew about Robert at that time. However, how can they connect with such a famous person?

They thought calling 411 is the best way to do that. So they called 411, got the home phone number of Robert Shapiro and called him at night. For some reasons, Robert really picked up the phone himself. Amazing! After Brian told Robert that they was planning to pitch him a business idea, the famous attorney planned to hang up immediately. But they asked him to give them 2 more minutes. Robert agreed. And Two minutes later, he likes their business ideas so much and finally becomes their business partner and co-founder of LegalZoom.

Keep the Customers Happy

So what’s the reasons for LegalZoom’s success? I believe it’s because both founders always focus on what make the customers happy. Lawyers in general have earned a bad reputation for their ambiguous charges. Customers often have to pay for a ridiculous amount of money for simple legal document preparation services. Liu and Lee saw this huge opportunity of providing low-fare online services which are fast and affordable. They thought that some legal services can actually be processed automatically online with much lower costs.

Since they understood that lawyers are bad at customer services, they knew LegalZoom had to change that perception and to take customer services very seriously. That’s why more than half of their 350 employees are dedicated customer service representatives. They believe entrepreneurs should always think in the customers’ standpoint because that’s the key to customer satisfaction.

Start Small

Many entrepreneurs consider VC funding as the only way to get funding, yet Brian reminds us that we shouldn’t be scared to start small and make the business pay as it goes. It doesn’t take that much money to start a web business nowadays. Because they didn’t get any VC money, they could slowly build their business for long term and didn’t have to worry about when the VC will cash out.

Although LegalZoom is in a very competitive industry now, they aren’t afraid of startups with a lot of funding from VC as they tend to overspend, especially on marketing, and can’t stay small in the early period. This kind of startups usually won’t stay long. The competitors that they are afraid of are the ones that are similar to LegalZoom: start slow and smart.

Build the Right Team

LegalZoom only hired when they need. They never overhire. When doing business with wrong people, nothing can get done. Therefore, they like to pick business partners who are different from themselves. They look for people who have different personalities but still can work together.

Originally, they didn’t want middle managers but when LegalZoom became bigger and bigger, they realized that they need to hire professional managers to help them manage a large group of employees. When the office has more than 20-25 people, they just can’t do everything on their own. At the same time, they don’t want to micromanage their employees. They want to find ways to empower people so that they can do things independently.

Competitive Advantage

Liu and Lee believe competitor advantages are more important than barrier to entry in their business. Their competitors are lawyers and most of them are not good business people. They don’t know how to provide good services. As a result, their superior customer services set them apart from competition.

Also, they have built a strong local relationship as they are so close to customers. A lot of their customers are entrepreneurs who need legal services. They are entrepreneur themselves so they fully understand what their customers want. They are honestly trying to help their customers. Meanwhile, they believe LegalZoom is able to do better in every services they come out so they are not scare of big players in the industry.

The goal of LegalZoom is to become a brand name of law. And it seems they are not that far away from that goal. 🙂

(Note: This is a re-print of my post in 5/5/2008 in my personal blog. )


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  • http://twitter.com/vpsingh Praveen @ startups

    Interesting model of a service business that can scale. It was about time some one noticed the huge fees and services provided in legal. Which other professionals can be disrupted with this model of better services? your thoughts.

  • http://twitter.com/vpsingh Praveen @ startups

    Interesting model of a service business that can scale. It was about time some one noticed the huge fees and services provided in legal. Which other professionals can be disrupted with this model of better services? your thoughts.

  • http://twitter.com/vpsingh Praveen @ startups

    Interesting model of a service business that can scale. It was about time some one noticed the huge fees and services provided in legal. Which other professionals can be disrupted with this model of better services? your thoughts.

  • http://Scale.cc Vincent Chan

    Thanks so much for your comment. The founders of LegalZoom saw that parts of legal services can be automated by web technologies so they think the huge fees lawyers are charging are ridiculous.

    The key questions is which part of professional service can scale? Tax filing services and accounting services have already done something similar. Are there any more professional services require a lot of paper works? How about medical services?

  • http://Scale.cc Vincent Chan

    Thanks so much for your comment. The founders of LegalZoom saw that parts of legal services can be automated by web technologies so they think the huge fees lawyers are charging are ridiculous.

    The key questions is which part of professional service can scale? Tax filing services and accounting services have already done something similar. Are there any more professional services require a lot of paper works? How about medical services?

  • http://Scale.cc Vincent Chan

    Thanks so much for your comment. The founders of LegalZoom saw that parts of legal services can be automated by web technologies so they think the huge fees lawyers are charging are ridiculous.

    The key questions is which part of professional service can scale? Tax filing services and accounting services have already done something similar. Are there any more professional services require a lot of paper works? How about medical services?

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