THE BLOG
11/20/2014 09:54 am ET Updated Jan 20, 2015

Demystifying Law: How LegalZoom Uses Technology to Make Law Affordable

"In this world nothing can be said to be certain, except death and taxes," Benjamin Franklin once wrote. As a small business owner, independent filmmaker and single mother, I would add legal fees to this list. For centuries, the chances of getting professional legal help at an affordable price have been slim to none - whether it's distribution agreements, wills, a divorce, starting a company or trademarks. With 15 million civil suits filed in the US each year, it's more important than ever to have proper legal protection. Yet, any attempts by well-intentioned counselors to provide cheaper alternatives have been met with ferocious opposition from the established legal community in order to keep rates high and their wallets fat. If any industry was ripe for disruption, this was it.

In our latest episode for A TOTAL DISRUPTION we speak with all four founders of LegalZoom to learn how they were able to succeed against all odds. This episode is a fantastic example of perseverance, grit and the dedication required to build a company from nothing.

The founders of LegalZoom could not have picked a worse time to found their company. In 2000, right as Brian Lee, Brian Liu & Eddie Hartman decided to quit their jobs to work on LegalZoom full-time, the dot-com bubble burst. Their first venture capital meeting was set with Liu's uncle, but that morning the NASDAQ crashed. He said straight away, "The Internet...it's over. No one will ever give you money for your dot-com idea." He told them to run and try and get their jobs back, but they weren't about to give up. These were men who were willing to take chances - like the time Brian Lee tried to recruit one the country's most famous lawyers, Robert Shapiro. "Brian, one night, cold-called him," remembers Liu, and "he got the meeting." After a tense silence, where the founders were most certainly expecting a "No," Shapiro replied, "I think this idea is so good, but I don't want to just be a figurehead. I want to be deeply involved."

The crash in 2000 turned out to be a blessing in disguise. Had they received investment, they would have been carrying an insurmountable load of debt after the crash. Instead they were forced to build their business "the old fashioned way" - by earning revenue. The road was long, and not without uncomfortable moments. After having hit up every family member for money and being turned down by so many, they were all disinvited from their respective family's Thanksgiving dinners because they were told, "it would be too awkward."

When they launched the site, "nothing happened," recalls co-founder Eddie Hartman. During that Thanksgiving break, they stuck together and drove up to Liu's old college campus at UC Berkeley. While checking email at the school's library, they saw an order from a name they didn't recognize. It was their first real order! They jumped for joy. "It was the best 90 bucks I've ever made in my life," says Lee. Soon, orders began to pick up quickly. "About every month the orders would double," remembers Hartman.

At A TOTAL DISRUPTION we're always exploring the new economy and the technology which allows us to make our dreams a reality. With nearly 40% of office workers projected to lose their jobs to automation in the coming decades, it will be crucial for more and more of us to become entrepreneurs. Lucky for us, companies like LegalZoom are taking on the ivory tower of law and throwing open the doors to anyone with a goal of going into business for themselves.

With the advent of the Internet and the democratization of information LegalZoom has been able to reach millions of consumers and force the legal profession to re-examine its position. With every true case of disruption comes messiness, conflict and tension. As a truly radical idea begins to take form and become real, staid institutions come under attack from upstart firms often leading to litigation. So what happens when the disruption occurs in the legal profession? Lawsuits abound.

The charge against companies and aide offices that provide DIY legal documents has always been the unauthorized practice of law (UPL). For nearly four decades, Deborah Rhode, Stanford Law professor and director of the Stanford Center on the Legal Profession, has dedicated herself to this issue. In the mid-1970's, a routine divorce case cost $2,500 in today's dollars for a lawyer to fill out a few forms and attend a hearing that lasted an average of 4 minutes. (Today, the average cost of divorce ranges from $15,000 - $20,000). The New Haven legal aid office where she was an intern at the time created a DIY kit for divorce cases which gave low income clients access to an affordable option. The local bar association threatened to file charges of unauthorized practice and effectively killed the endeavor.

LegalZoom has been formally accused of the unauthorized practice of law, with the main assertion being that as part of LegalZoom's process they go beyond providing legal documents and enter the role of legal adviser. But this hasn't deterred them. They've survived two financial crashes and aren't about to let aggrieved members of the industry scare them away from their mission of providing affordable law to the masses. In order to help customers more fully with their legal needs, they have launched an attorney network which "matches customers with third-party independent lawyers that can give customers specific advice." Today, LegalZoom is responsible for helping people start over 1 million businesses.