Photo by Ringo Chiu.
Glendale-based LegalZoom.com Inc., the private-equity backed online legal company that saw a surge 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 launch LegalZoom after successfully defending O.J. 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 indicates that the company wants to raise $100 million, but that is typically a placeholder amount until after the number of shares to be sold is determined. The company said it will trade on the Nasdaq under the ticker symbol LZ.
LegalZoom wants to use proceeds from the IPO to expand its marketing to attract new customers and retain existing customers. The company provides services such as tax advisory help for small businesses, wills and estates, which became popular during the pandemic.
In 2020, LegalZoom was used to help form 10% of all new limited liability companies and 5% of all new corporations in the United States, according to the company’s filing with the Securities and Exchange Commission.
In addition, 25,000 trademark applications, or 6% of all registration applications in the U.S. last year, were made through LegalZoom in 2020, the filing said.
As of Dec 31, LegalZoom had more than 1 million subscriptions to help guide small business owners through the LLC process. The company is one of the largest registered agent providers for small businesses in the U.S.
During the pandemic, LegalZoom saw revenue grow 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 versus $105.8 million in the same year-ago period.
LegalZoom saw profit grow 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 in 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 founding 21 years ago, LegalZoom has attracted interest from private equity investors.
In 2018, LegalZoom completed a $500 million financing round from several private equity investors that valued the company was at $2 billion.
That investment round was led by San Francisco-based Francisco Partners Management and New York’s 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 San Mateo-based Franklin Resources Inc.; and New York-based Neuberger Berman Group.
In 2012, LegalZoom was valued at $440 million and had $156 million in revenue. The company was set to file for an IPO before London-based private equity outfit Permira Holdings Ltd. acquired a controlling stake in the company for $200 million. The planned offering was withdrawn after the deal. Permira remains LegalZoom’s largest shareholder.
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 a LegalZoom investor since 2014.
Other board seats are held by representatives from Francisco Partners, GPI Capital, Permira, San Jose-based computer software firm Adobe Systems Inc., and Menlo Park-based Technology Crossover Ventures.
Executive compensation at LegalZoom is among the highest in the L.A. area. LegalZoom CEO Dan Wernikoff received total compensation of $4.5 million in 2020; Chief Technology Officer Shrisha Radhakrishna earned $4.2 million; and Chief Financial Officer Noel Watson was paid $5.4 million.
Still, LegalZoom faces a tough competitive market. Rivals that focus on the online legal document services market or business formations include Madison, Wisc.-based BizFilingsInc.; Ada, Okla.-based LegalShield Inc.; Calabasas-based MyCorporation Business Services Inc.; and San Francisco-based Rocket Lawyer Inc.
Competitors in the registered agent services business include Dutch-based Wolters Kluwer N.V.
LegalZoom also competes in the tax advisory service niche against Kansas City-based H&R Block Inc. and Jersey City, N.J.-based Jackson Hewitt Tax Service Inc.
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