Brian Liu and Brian Lee had quit their jobs as attorneys at top-tier law firms, and Eddie Hartman resigned from his post at a Web site development company. They were seeking money to launch an online legal document company, LegalZoom Inc., but their timing was a bit off.
It was April 14, 2000, and both the Nasdaq and Dow Jones were plummeting at the first sign that the Internet boom would turn into a crash. Liu, Hartman and Lee were meeting with a partner from DynaFund Ventures to discuss an investment by the Torrance firm.
"He said, 'Forget it, the meeting is over and dot-coms are over,' " Liu recalls. "We went to (the restaurant) Benihana and said, 'What are we going to do?' It wasn't too late to ask for our jobs back."
When it became apparent that investment firms weren't going to put a dime into another dot-com, the founders turned to their families and friends for $250,000 in seed money and launched LegalZoom out of Lee's condo in 2001.
Seven years later, LegalZoom has become a 350-employee operation, selling legal documents that help consumers form businesses, establish wills or trusts, get divorces, or file for trademarks or patents.
High-profile criminal defense attorney Robert Shapiro is another co-founder and majority shareholder of LegalZoom. He said the company's growth has been driven by consumers who want an alternative to high-price lawyers.
"We are providing legal services for people who wouldn't be able to get them," said Shapiro, who is best known for defending O.J. Simpson in his 1995 murder trial. "We are filling the gap."
The company charges flat fees, and depending on the type of legal documents requested, the prices range from $100 to $1,500. For example, to incorporate a business through LegalZoom, consumers can choose from three different packages that start at $139 and go up to $369.
But some aren't completely sold on the idea of online legal documents.
Eric Grodan, a Los Angeles will and estate attorney, said LegalZoom's will and trust documents do not allow consumers to personalize their estate plan based on their family and economic situation.
"I have never met a cookie-cutter client," Grodan said. "Everyone has a particular situation, desires and objectives, and that calls for customization. And you just don't get that with a LegalZoom kind of document."
But Liu said the company offers its customers a lawyer referral program, allowing them to seek out extensive legal advice if and when it's needed. The customers decide if they need the referral.
"We refer people to lawyers all the time," Liu said.
At the outset, the partners weren't sure if things were going to work out.
"We didn't take any salaries for the first year," Liu said. "We were eating Top Ramen. Ordering from Domino's was a big treat."
Lee and Liu met while studying at UCLA School of Law, and they met Hartman through a friend.
A cold call during the money-raising phase brought Shapiro into the mix. Lee and Liu called the attorney's law office after hours expecting voice-mail. But Shapiro answered and Lee pitched him the concept. Shapiro met with them and then signed on as the fourth co-founder. Chief Executive John Suh joined the company in 2007. Suh previously worked at Studio Direct, a San Francisco-based retail supply company.
As LegalZoom grew, the company moved from Lee's condo into a 900-square-foot office on Larchmont Boulevard. Now, LegalZoom's office is in a building on the western edge of the Hollywood Walk of Fame at Hollywood Boulevard and La Brea Avenue.
LegalZoom employees customer service, marketing and tech are spread throughout five floors of the building. Last year, the company's blue logo was placed on the top of the building.
But LegalZoom hasn't lost its small-business feel. Employees work out of cubicles, except for the chief financial officer and human resources director, who need offices with doors. Liu and Lee said they hoped to create an atmosphere where everyone feels part of the team by having executives work alongside their employees in cubicles instead of offices.
Conference rooms are called think tanks, and employees wear business casual, and not just on Fridays.
Shapiro visits the LegalZoom office once a week, when he meets with the other co-founders and executives to review the company's health. But his biggest role is the face of LegalZoom.
The energetic lawyer can often be found pitching LegalZoom in television commercials and print ads. Liu and Lee said Shapiro's high-profile status gives LegalZoom legitimacy in addition to attracting customers.
LegalZoom commercials also feature real customers who where hand-selected by the management team based on their LegalZoom experience. One of those customers is Janet Long, co-owner of Elaine's Toffee Co. Long, who co-owns the business with her two sisters and father, used LegalZoom to incorporate the Northern California company.
"I was in my car and heard about LegalZoom on the radio," Long said.
After doing some research and getting advice from a family member who is an attorney, Long decided that LegalZoom was a cheaper and viable alternative to hiring a lawyer.
"When you are starting up a business, you want to keep costs low," Long said. "It was very inexpensive, and I went for one of the more expensive packages."
Like other customers, Long filled out her documents online, which were then reviewed by a LegalZoom employee for errors, including typos.
LegalZoom guides each customer through the process. The service helps a customer get a tax ID or contract with a third party for patent drawings.
Once the review is completed, the documents are sent to customers in customized packaging.
In Long's case, her documents arrived in a customized crimson leather binder, with the company's name embossed in gold. Those personalized touches, such as customized binders, helped the company grow because they impress customers.
The employees aren't attorneys, but are trained on the documents that customers need. Each employee's compensation is based on the results of what the company calls a "willingness-to-refer" survey. The company tries to survey each customer, questioning whether they would recommend that family and friends use LegalZoom.
"From the beginning, we have had an eagle-eye focus on treating customers well," Liu said. "We want to demystify the process as much as possible and explain things in common English so people can understand."
LegalZoom does face competition from other companies that have cropped up in the legal document industry. We the People LLC is a nationwide chain of legal document offices, which offer consumers a variety of common documents, including wills and trusts, name-change papers and partnership agreements. But We the People runs out of storefronts and doesn't operate online.
Web sites such as LawDepot.com and LegalHelpMate.com also offer online legal documents. But the majority of the Internet sites only carry wills, trusts, divorce papers and business formation documents.
Shapiro said LegalZoom offers a broader range of services. "We are the only company online that offers virtually every type of legal document."
Chief Executive: John Suh
Year Founded: 2001
Core Business: Online legal documents
Employees in 2008: 350 (300 in 2007)
Goal: Continue expansion and grow the attorney referral service
Driving Force: The desire for low-cost legal services
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