Legal Zoom: An exciting legal tech business

At Profeta Investments, we have a long history of investing in legal software businesses. Providing my legal background, the firm gains a deeper understanding of the industry’s opportunities and how, with technology, this sector can grow incredulously. Profeta Investments is one of the first investors in Smarter Drafter, an unlisted legal software company in Australia, now selling into the UK. Currently, Profeta Investments is a substantial shareholder in this business.

We began tracking LegalZoom (NYSE: LZ) at its IPO in 2021 and took advantage of what we saw as an attractive entry point last year. We accumulated shares over the past year at an average stock price of USD 6.95 in 2024. While the stock has recently rebounded to $11, following a strong 2Q25 result, it is still well below its $28 IPO price. We still think the shares are significantly undervalued.

LegalZoom was founded in 2001 and was the first company to bring basic legal services (like LLC formation and wills) online. Through the 2000s, it steadily expanded into areas like intellectual property, nonprofit formation, and real estate legal services. By 2010, it launched an independent attorney network to provide personalised legal advice.

In 2021, LegalZoom became the first publicly traded company in the U.S. to own and operate a law firm (LZ Legal Services). Today, it continues to innovate with new tools, subscription-based services, and partnerships with platforms like ChatGPT and Perplexity, offering personalised legal care and transforming how people navigate the legal system.

LegalZoom is an owner-managed company, with CEO Jeff Stibel joining the board in 2014 and having chaired it since 2018. When Stibel stepped into the chief executive role in 2024, he already had a comprehensive knowledge of LegalZoom’s products, technology infrastructure and attorney network, as well as the competitive landscape and customer segment.

Before his journey with LegalZoom, Stibel had been an executive officer at tech services companies, where he increased profitability through tech subscription offerings. This pivoted to become LegalZoom’s main profit driver, where subscription services were an increasingly strategic focus area for the company. Additionally, Stibel was President and CEO of Web.com, where he grew the business into one of the largest web services providers in the world, resulting in a roughly 200% increase in shareholder value during its sale. As one of the largest individual investors (5%) for LegalZoom, Stibel’s step into the executive role indicates ownership-centred leadership and strong alignment with shareholders.

The main customers that LegalZoom serves are individuals and small businesses where LegalZoom combines self-service technology with professional legal expertise. For the individual customer sector, LegalZoom targets customers who need support with wills, trusts and personal legal matters. And for small businesses, LegalZoom helps business owners with business formations, intellectual property protection and ongoing legal advice.