Editor's blog | Breaking the waves

On the eve of its planned flotation on the New York stock exchange last week legal document provider LegalZoom got cold feet, citing unfavourable market conditions to defer its going public. Put another way, investors did not share the company’s confidence in its own valuation and prospects. The fact that more than half of the 8 million shares offered for sale were held by some of the business’s original and main backers, including tech seed investor Polaris Venture Partners, must have raised further questions about the asking price of $10-$12 per share.

This is America, but it might be the dress rehearsal for what could be happening over here in Britain. Not just in terms of events that are happening and are witnessed passively by other operators in the sector, but events in which law firms take an active part and start shaping the direction in which the sector is going.

Because behind the ‘market conditions’ explanation are two critical strands which demonstrate that a united legal profession has the collective power to break the wave building up following the disruption created by the new entrants.

Around the US, lawyers have lobbied their local bars to start proceedings against LegalZoom for unauthorised practice of law. At the beginning of this year the company settled a class action in California and there are others pending in a number of states, including Missouri. For any investor, the risk of protracted trials questioning the very premise of your business model is not an attractive proposition.

These are guerrilla tactics with limited long-term effectiveness. But something else seems to be happening and it is coming from individual firms. According to US commentators, many have started offering their own affordable online forms. For a profession feverishly watching out for Co-op’s next move, this is even more promising. LegalZoom and other tech companies have the software but not the knowledge. Lawyers have the knowledge but not the software. If you look at both as components, software must be by far the more widely available and cheaper one to buy. Knowledge, which we can define as a combination of skills and experience, takes longer to acquire and cannot always be broken down into a series of processes. Software can play an important role in making knowledge accessible but it is limited to that: delivery.

The premise on which LegalZoom and the Co-op have based their business models is that there is an untapped market for consumer legal services. If this is correct and they unlock it, they will probably have first-mover advantage. But the profession hold a key strategic card: together, Britain’s 115,000 solicitors have unrivalled knowledge. All they need to do is start taking a leaf out of LegalZoom’s technology book and start delivering services differently. It’s not about dumbing down the profession, it’s about making it better and making sure law firms continue to be the legal advisers of choice as the market opens up.