The US online legal technology company, which helps customers to create documents without a lawyer, plans to use the cash to build out its position in the market by launching new services to small businesses while expanding into new channels and territories. It launched in the UK in 2012 having received approval to set up as an alternative business structure and in 2015 acquired Beaumont Legal. It made a loss in 2015-16 but is understood to have turned that into a profit the following year. In the UK, LegalZoom subscriptions have grown to 50% of US revenue and the overall business was valued at $2bn as part of this latest funding round.
Derek Southall, founder of Hyperscale Group and Gowling WLG’s innovation and digital head said: “This shows the high valuation metrics now being applied to lawtech/alternative legal suppliers. It sets the benchmark. The contrast with recent law firm IPO valuations is interesting too – it seems law tech and alternative suppliers are much more investible.”
Firms that have been valued this year for a float include Knights, which raised around £50m from its float on AIM this year, achieving a market cap of £103m; while Rosenblatt raised £43m in its AIM flotation, giving it a £76m market capitalisation. A report from The Times this year suggested that DWF, which has announced its intention to float, would be valued at £1bn but subsequent reports have argued that figure is inflated.
Valuing a law firm is tough and investors are unsurprisingly put off by the legacy partnership culture and structure, which means that investors are still betting on individuals rather than deal volumes.
In a statement out this week LegalZoom’s CEO John Suh said: “Delivering valuable solutions that naturally evolve into deeper relationships with customers has resulted in a rare combination of healthy profitability and accelerating revenue growth. We’re excited to partner with an impressive set of new growth equity investors that will support our efforts to democratise law.”
The investment follows the acquisition this week by DocuSign of SpringCM for $220m in cash which forms part of its bid to automate and streamline the contracts process.