LegalZoom Files for IPO | Los Angeles Business Journal


From left to right, LegalZoom co-founders Brian Lee, Robert Shapiro and Brian Liu.

Photo by Ringo Chiu.

Glendale-based Inc., the privately held online legal firm that saw an increase in small business filings during the pandemic, has filed plans to go public.

The company was founded in 2000 by a group of investors that included prominent Los Angeles litigator Robert Shapiro, who helped start LegalZoom after successfully defending OJ Simpson on murder charges.

LegalZoom offers documents and subscription services to make it easier for individuals and businesses to accomplish basic legal tasks.

The prospectus filed with the Securities and Exchange Commission says the company wants to raise $ 100 million, but this is usually a fictitious amount until the number of shares to sell is determined. The company said it will trade on the Nasdaq under the ticker symbol LZ.

LegalZoom wants to use the proceeds of the IPO to expand its marketing to attract new customers and retain existing customers. The company provides services such as tax advice for small businesses, wills and estates, which have become popular during the pandemic.

In 2020, LegalZoom was used to help form 10% of all new limited liability companies and 5% of all new companies in the United States, according to the company’s file with the Securities and Exchange Commission.

In addition, 25,000 trademark applications, or 6% of all registration applications in the United States last year, were filed through LegalZoom in 2020, according to the filing.

As of December 31, LegalZoom had over a million subscriptions to help guide small business owners through the LLC process. The company is one of the largest providers of registered agents for small businesses in the United States

During the pandemic, LegalZoom saw its revenue increase 15.2% to $ 471 million in 2020, from $ 408.4 million in 2019. In the first quarter of this year, the company’s revenue increased to 134, $ 6 million compared to $ 105.8 million in the same period last year.

LegalZoom saw profits rise 33.8% to $ 9.9 million in 2020 from $ 7.4 million in 2019, while losses widened in the first quarter to $ 9.8 million from $ 4 , $ 9 million over the same period in 2020.

The company also has $ 141.2 million in cash on its balance sheet and $ 767.5 million in total liabilities.

Since its creation 21 years ago, LegalZoom has attracted the interest of private investors.

In 2018, LegalZoom closed a $ 500 million funding round with several private investors who valued the company at $ 2 billion.

This investment round was led by San Francisco-based Francisco Partners Management and New York-based GPI Capital, with participation from Menlo Park-based private equity firms, Kleiner Perkins Caulfield and Byers and Institutional Venture Partners; Franklin Templeton Investments, an investment arm of Franklin Resources Inc., based in San Mateo; and Neuberger Berman Group, based in New York.

In 2012, LegalZoom was valued at $ 440 million and had revenues of $ 156 million. The company had to file for an IPO before London-based private equity firm Permira Holdings Ltd. acquired a controlling stake in the company for $ 200 million. The planned offer was withdrawn after the transaction. Permira remains the main shareholder of LegalZoom.

LegalZoom’s board of directors includes company chairman Jeffrey Stibel, a partner of Bryant Stibel & Co., a venture capital firm founded by Lakers star Kobe Bryant. The firm has been an investor in LegalZoom since 2014.

The remaining seats on the board are held by representatives from Francisco Partners, GPI Capital, Permira, the San Jose-based computer software company Adobe Systems Inc. and Menlo Park-based Technology Crossover Ventures.

Executive compensation at LegalZoom is among the highest in the Los Angeles area. LegalZoom CEO Dan Wernikoff Received Total Compensation Of $ 4.5 Million In 2020; CTO Shrisha Radhakrishna won $ 4.2 million; and CFO Noel Watson received $ 5.4 million.

Yet LegalZoom faces a tough competitive market. Rivals who focus on the market for online legal document services or business training include BizFilings Inc., based in Madison, Wisc .; LegalShield Inc., based in Ada, Oklahoma; MyCorporation Business Services Inc., based in Calabasas; and Rocket Lawyer Inc. of San Francisco.

Competitors in the registered agent services sector include Dutch company Wolters Kluwer NV

LegalZoom also competes in the tax advisory services niche against H&R Block Inc. of Kansas City and Jackson Hewitt Tax Service Inc. of Jersey City, NJ.

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