215. 3 Entrepreneurial Lessons That Change Everything from the Co-Founder of LegalZoom

0:00At 12 years old, while most kids dreamed about superpowers, Eddie was rolling dice in Dungeons and Dragons, choosing the character who could be everything at once. Not just a warrior, not just a wizard. Every skill, every path. Fast forward to college, everyone else just wanted a pass. Eddie wanted to take every class, learn every instrument. Not because he had a plan, because he had an appetite for possibility. Then two frustrated lawyers came to him with an idea. And Eddie saw what others missed. Legal documents aren't paper, they're information. And information belongs online. While the dot-com world chased growth at any cost, Eddie built LegalZoom on fundamentals, control, and stamina.

0:39No hypes, no shortcuts, just not stopping. I'm Ryan Atkinson, and this is the UpFoot Podcast, where we uncover the secrets of building and running successful businesses. I am so excited to welcome Eddie Hartman to today's show. He's the co-founder of LegalZoom. I know all of our audience has heard about that. So, Eddie, thank you so, so much for being here today. Hey, Ryan, thank you so much. That was a hell of an intro. I don't think anyone's ever given me an intro quite like that before. I really appreciate Eddie, excited to have you here today. We're going to talk about LegalZoom. We're going to talk about the psychology of mindset.

1:10But before we do that, take us back. I mean, what was young Eddie like? What is appetite for learning and trying everything to begin with? I just feel like there's so much going on in the world. I don't know if you felt this way, Ryan, but it almost feels like there's too much possibility for any one person to try to tackle. And I hate that. Like, I wish I could do it all. And you're right. I took classes in college and so many different subjects. You know, I managed to get two degrees while I was there. I also took classes in, you know, one of my grandfathers was a photographer. Actually, both were photographers for a period of time.

1:45I took classes in that. I took a class in black magic that they offered. It was a survey of magic in different cultures, but there's so many interesting things in the world. My dad was a physicist, and I think from him, what I learned was that if you really apply yourself to something, if you really throw yourself into something, you can do incredible things. I mean, could people from even two generations ago have imagined the technology that we have? I think we all say, no, there's no way. The thing is, Ryan, unfortunately, my dad was a genius and I'm not. I'm not at all. Ask my wife, ask my kids.

2:29I try and I love getting out there and mixing it up, but I'm nobody's genius. I think you said, you know, not stopping. I think if I'm an expert at anything, I'm an expert at not stopping ever, you know, and I never do. I think that led me to entrepreneurship because if there is a home for people with ADHD, if there is a home with people who understand that they are maybe not the person who's going to get a hundred on every test, but they can break down doors, they can take a risk, they can put themselves out there. It's people who start things. And so I started something or got on the starting team of a company and sold that.

3:09And then I did meet my two buddies, Brian and Brian. And later, our dear friend, Robert Shapiro, the lawyer. And we started LegalZoom. And I helped get a company called Iron Cloud off the ground, not on the founding team, but helping that founding team to realize their vision and get that, if you know Iron Cloud, incredible organization out there. And now I am with Simon Kuchar and I help businesses to figure out how much to charge for things, how much to present value against cost in order to get to yes. And we do this for businesses from Uber and Airbnb to, oh man, you name it. According to the Economist magazine, we inform about half of all the prices in North America.

3:50You may be asking yourself, yeah, it's fun. That's insane. When we go on vacation and people are like, the prices at Disneyland are insane. I'm like, yeah, that's that's Demi out of our London office. He's the one who does that, you know. Yeah. So it's we really do. But I think, you know, where's the through line in this? Eddie, you know, there's a whole bunch of nonsense. I think at the fundamental core, what we do when we start things, I don't like the term entrepreneur because it's so fancy. When we start things, people who start things, people who hustle, what we do is, if we're good, we first ask ourselves, you know, what do people want to pay for?

4:28And Sam Altman, formerly Y Combinator, and now he's got this little startup called OpenAI, he says, build things people want. And I like that as a start of a sentence. But if you want to finish that sentence, build things people want to pay for. What was the secret of LegalZoom? And like, had people never thought of the idea of applying technology to law? No, of course they had. I think if we did something that was kind of amazing, we put it in a way that people were willing to pay for it. Come, log in, get your will done today. Come, if you've got an amazing idea, get it protected, get a trademark, get a copyright.

5:05If you want to start something, yes, if you have a friend from college who knows a guy who's a lawyer, definitely, if that's what you want to do, go to their office, pay, I I don't know what per hour and I don't know how many hours. But if you want to know what you're going to pay up front and if you like the certainty of getting it done under your own power, LegalZoom was a great solution. And I don't know if you know this, Ryan, for a period of time in a place like California, LegalZoom was helping founders to get one out of four businesses started. One out of four. You know, I eventually met Matt Mullenweg from Automatic, that's WordPress, and he had used LegalZoom to get his thing off the ground.

5:41And we're constantly meeting people who started things back in the day through LegalZoom. And I'm super thrilled. I'm not there anymore. You should know. I'm at Simon Kuchar. My new discipline is finding that connection. How do people want to pay for things? How do you present it in a way that gets to yes? Because fundamentally, when you're starting a business, that's what you have to do. I want to talk about LegalZoom as well, because everyone knows LegalZoom. I really want to go back to there and go to that founding moment that when you were approached, what was the moment that made you realize okay like this needs to be a company or like talk just about that moment because that's such a significant moment like in history and you're found in one out of four businesses or helping them in california talk just about that moment yeah and i'll tell you what happened um i knew brian and brian socially and you may have gone through a period of life like this ryan where where are you based i'm based in austin texas love austin we had a huge campus 600 people in austin well i was in la at the time i would go to parties, you know, guy in my 20s.

6:40And of course, you try to flirt, you try to mangle. Every night around 11 o 'clock at one of these parties, I'd see the same two guys come in, and they would not try to flirt, and they would not try to mangle. They were too beat down. They both had jobs at big, what we call white shoe law firms. These are the most prestigious law firms in the country. And they were abjectly miserable. This is right around the time that I I was on that other founding team. We'd managed to sell our business. So they knew that, hey, that's Eddie. He'd start a company and it sold. And we got to talking and they had ideas for what they might be able to do as lawyers who wanted to start something.

7:17And every one of their ideas sucked. I mean, they were just ridiculously bad. You know how they used to be those old sex lines, 900 numbers? Yeah. Yeah, like a 900 number for lawyers. It was just like, Like it was, you know, they were just throwing stuff at the wall. And had I known then what I know now, I would have said, let's take a step back and say, what do people want to pay for? Because that's the best indication of value. I didn't have that discipline at that time. So I just listened to their ideas and listened to their ideas. And then one day, Brian and Lou said, what if we took things like wills and divorces and put them online?

7:57And I was just like, I bet that would work. I bet people would pay for that. Are you ready to launch, grow, and scale a business? Inside the Upflip Academy, you'll get a complete roadmap to shortcut your success with 25 plus step-by-step programs taught by active business owners, not gurus, who share their step-by-step blueprints, plus ongoing live workshops, skills training, a business idea database, and community to share resources and celebrate your wins. Click the link in the description below to join the Elphap Academy today and start surrounding yourself with the people and tools that can change everything for your business.

8:37Speaking of getting started, so Brian and Brian come to you with this idea, like how'd you guys get this off the ground and like get this running? And then we're gonna talk a little bit more about mindset and getting people for what you pay for, but talk about like the early days of LegalZoom and getting this off the ground. Yeah, yeah, yeah. Well, let's start talking about mindset right now. We weren't too proud to beg. I think that's the first and most important thing. We needed money. It was the middle of the dot-com crash. Nobody was funding anything. You'd have a better luck at a bar saying you were a serial killer than a dot-com startup guy, right?

9:07I mean, everything had crashed. The money was all gone. And we asked our relatives, our friends, acquaintances, our college buddies, anyone for money. It got so bad, all three of us were asked by our families not to come to Thanksgiving that year because it was too uncomfortable. Too many people had said no, and they knew that we would be pushing the limit, and of course we would have. So we spent that Thanksgiving together, and it was during that Thanksgiving that we got our first sale. A guy named Sasan Dostardi bought a legal process from us, and then we got two a few days later, and it kept doubling.

9:51It was crazy. It just kept getting bigger and bigger. Our mindset, though, we just didn't know at any point if it was going to work. We did not know if we were going to be able to make payroll, if the people that trusted us were crazy to do so, if we were ever going to be able to give the money back to the relatives we borrowed it from. and this actually, Ryan, brings me to something so important. If you are an entrepreneur, you need to be insane in a specific way. You need to know that the odds are so low that you're gonna succeed because otherwise you don't have the fear. You need that fear, right?

10:26You need to know that the odds are way against you but part of your brain at the same time needs to be saying, yeah, but not me. I am going to succeed because otherwise you won't stick it out. So you need to simultaneously have that fear of the terror, right, of knowing that you are more than likely going to crash and also knowing, no, I'm not. No, I'm not. But this is what that can lead to. It can lead you to lean into your strength so hard that you don't think about other things you need to do for your business. And this is what we talk about in the book. People lean into what comes natural to them, into their strength, and that helps them to start a business and get it off the block and actually make it, you know, take flight.

11:11The problem is if you're great at selling, you lead into selling. If you're great at product, you lead into product. If you're great at nurturing the community, you're up all night answering, you know, every comment, every NPS question, right? People who do that, we call it the single engine trap. They organize the business around what they do best. Again, we've all seen like that sales disruptor, super aggressive personality. The sales team is the hero. And what happens? Retention is terrible. Customer support is terrible. Discounting is out of control. People say it's the Wild West. The problem is that what people ought to do is think about market share and wallet share at the same time.

11:52We looked at hundreds of companies, the ones that actually succeed and become something. They think about wallet share and they think about market share together. We call that being a profitable growth architect. And it is how you radically de-risk. It's how you make sure that all the money, the sweat, the time that you put in actually pays off. I was in that same category. I don't think I ever got a hundred percent on a test as you were saying earlier, like that's just not me. I am ADHD to the core here. I have one of my friends that one of my very good friends was the valedictorian engineering school at iowa phenomenal guy but like the difference with me like starting a company is like i'm a little insane that i think i can actually do this but like him is like so calculated being that smart is like kind of like is a con when you're starting your own company as you're talking about but like as you said if you're going to start a company you have to be a little bit insane to think that this thing's going to actually succeed totally and you can be made to feel a little bit not great for that for a period of time I was a computer science major and the kids who were really, really at the top of their class, one of them is now a professor.

12:57He's amazing. One of them got his PhD at MIT and then worked on braking systems for Ford. And that's great, you know, and I'm sure they're happy. The kids who were like more toward the lower end of the class, one was employee number nine at Google, you know, two other than myself started, you know, companies that went places. I think you need to find your strengths and it may not be perfection in taking tests or it may not be that kind of like amazingly disciplined academic performance that you need to succeed in certain walks of life. And by the way, for those people, you know, God bless them.

13:32That's fantastic. But you need to know who you are. unfortunately as the book lays out you can take that too far you can take too far the well you know i do you know how i do it i do it by knocking doors down taking no prisoners asking no questions moving fast and breaking things fine do that but get balanced too or your company will suffer and you won't know it until that problem has really turned intractable talk to us more about like knowing and like leaning into your strengths versus like having it be too much? Because like, I know my strengths in my own company is selling. Like I know I'm pretty good at selling metrics, like back that up as well.

14:09How do I know if I'm leaning into that like too much compared to like not leaning into like enough? Talk to us about that balance. I'm curious there. And I want entrepreneurs to take something away from that. As a person with your personality, and there's basically three types we found. There's the person who, like you, is a disruptor. You're going to go out there, you've got a great idea and you're talking about it constantly, right there's a person who says no i want to run things like a business usually it's a person who's done it once before they saw the problems and they said this time around i'm going to create a premium product i'm going to charge full freight i'm going to make it you know expensive and people who can afford it will buy it the problem with them is they get the full wallet share but not the market share and i've honestly seen that a lot and then you've got people who are really really focused on building a community they say my company's the best kept secret but i've got this fanatical following.

15:00People love me. People love what I do. Great, but it's not going to turn into a business. Your craft beer or your amazing hair salon or whatever it is, it's amazing that people would live and die by your brand. Unfortunately, you need to think about market share and wallet share at the same time. In the book, we outlined there are two traps for each personality type. The two traps for you are, one, mistaking a sale for a customer. You know, you gave somebody a big discount. You sort of sweet talk them into buying. Ryan, you know you do, right? Your personality, you, you know, convince them. But that doesn't mean they're going to be a long-term customer.

15:37That doesn't mean that they're going to stick with you, right? The second thing is people give away too much on the entry level. They have an entry level product and it gives away 80 % of the value. And then they turn to their sales team. They say, now we want you to upsell these people into the higher tier packages. There's only 20 % more value remaining, but you're probably asking for twice the price. How are you gonna make that happen? You loved your customers so much. You wanted to hear yes, you wanted to hear the sale, you wanted to hear the cash register ring, and you gave away too much, right?

16:06Or the other trap. You didn't think about turning that sale into a customer. How do you get them to retain? What are their long-term plans? How are you gonna get them to stick with the business? By the way, the person who nurtures their community, that best guest secret, they are fantastic at making sure that a sale turns into a customer, but they can't do what you do, right? They can't accelerate the growth. They can't think about new kinds of customers that they may not be talking to yet. So, you know, one thing that you can do, of course, is find a great partner. Another thing you can do is read the book and ask yourself, do I like a self-diagnosis?

16:40Do I fall into these traps? And if so, can I follow these steps to course correct? So we talked a little bit more about like finding your strengths, Let's talk about failure as well, because failure to you is a prerequisite for success. Can you give us an example of failure and why failure is so important to building something as large as a legal Zoom, for example? Oh, man, of course. One of the first things that I started, it was so sexy. It was an online game. And there was a spy plot to it. We would email people who had been sort of virally brought into the game. so you'd sort of talk about you'd name friends that you thought would love the game and then we would email them but it wasn't it wasn't obvious that it was a game at first it looked like the you'd accidentally been sent an email that was meant for somebody else and you were exposed to this assassination plot and one woman hid under her bed because she thought it was like a legit thing and we had to find her and calm her down but the thing is this is cool and all super duper cool we got in the you know new york times my mom showed all of our friends but what it was not was something people were willing to pay for.

17:48It was the coolest thing, but it just wasn't anything people were willing to pay for. What that failure taught me, because there is that stomach dropping moment when you turn off the lights and lock the door on what was once your office and is now real estate for lease. You know in your heart, if you're the sort of person who doesn't give up, you know that you're never going to want to be in that situation again. It's incredibly motivating. Remember I talked about the fear. That fear is your friend. That fear is your soulmate. Give that fear a name. Put that fear in a hoodie and make sure that they come to all your meetings and they sit with you at every product design session because that fear is going to make you a better, stronger founder.

18:38It's going to make you work harder. It's going to make you do things you didn't think you were capable of. Failure is critical, absolutely critical. Yes, you learn specific lessons as well. You learn, for example, in my case, build things people want to pay for, the lesson that's guided the rest of my life. But just failure itself is helpful if it makes you more motivated the next time. I think the fear of failure is great and like actually experiencing failure. For me, last Q4 2024, one of the hardest times like ever for my own business, like, oh my gosh, like there were literally times where I was just like, I'm going to need to like start applying to jobs.

19:17Like I'm not going to make it through like the rest of the year. That's where now we're going to be over 100 % growth compared to last year. So like it all worked out. But like those lessons I learned, like in that valley of failure, I'm so happy I had that experience now. Like I would trade it for the world. I had sucked. Like I hated it, but like I wouldn't trade it. Like it was so valuable to actually go through that. Here's the secret. Every entrepreneur who's worth anything has been there. All of us. All of us. And the ones who seem brash and incredibly self-confident, they are trying to hide from themselves the reality of how close we all come to failure.

20:00There's a proverb, we are the man on the tiger's back. Everyone is saying, check out that guy riding the tiger. Wow, that is so cool. We understand we are one mistake away from being swallowed alive. And I've had good friends who were successful entrepreneurs face really dark moments of the soul and even one death. It's a tough road that we walk. And I'll say, we need to support each other. if you are part of a community of other founders, embrace that, like support other people who are starting things. It is vital. It supports the economy. It creates jobs. It's one of the most romantic things you can do with your life.

20:41It is also not easy. Let us all support each other. I'll tell you right now, you want my book, send me a note. I will try to find a way to get it to you. Maybe not for free, but for free if I can. I just really want people to succeed at what they're doing. And there are some things you can do that are going to radically, radically diminish your odds of failure. Of course, I have to ask that. Like, what are, like, give us, like, two things you can do to help diminish those odds of failure. I will give you three. The first is in the book Monetizing Innovation, which is the prequel to this. Ask people if they are willing to pay for the thing that you're planning on offering and make sure that you're describing it the way that unlocks greatest value.

21:24There's a big difference between, hey, would you like this muffin? And would you like this muffin for$5? And would you like this organically sourced gluten-free muffin from a James Beard winning recipe that's been handed down since 1814 for$5, right? Just asking people if they want something not enough, asking if they were willing to pay for it helps fully expressing the value and asking if they're willing to pay that amount. Now you know whether or not to open up a bakery. Second thing, you don't just have one kind of customer. People who say, my customer wants this, my customer wants that. You have multiple kinds of customers.

22:01The next big unlock for growth, we talk about in the book, think about who you're trying to reach. If you started with one product and you're only reaching a certain group of people, but now you have multiple products and you're reaching multiple people, blow up your packaging. We have a chapter on that. Just get in there, rethink, who are you trying to reach? How can you unlock value for them? I just said, Bill, things people want to pay for, right? Who? Because there may be something that some people aren't willing to pay for and other people can't live without and they'll pay you handsomely.

22:31Third thing is to get where you are, you had to lean into your strengths, but that can go too far. Ask yourself, am I going for market share and wallet share at the same time? Or do I just have one engine on this plane, which when it inevitably sputters, I will come crashing down. So again, ask yourself, am I fully expressing the value and do people want to pay for that value? Again, people don't pay for intrinsic value, they pay for perceived value, right? Second thing, is my packaging fitting the people, the multiple customer types that I have, multiple segments? Am I packaged for them? Am I speaking to them?

23:10Am I priced for them? And the third thing is, you of course had to be an independent thinker, believe in yourself, it can go too far. Are you only looking at either market share or wallet share? Or do you have a plan to bring those together and become the profitable growth architect that your company deserves? So those are the three things. So, so good there. And like so many different takeaways. Listen, I would encourage you to rewind what Eddie just shared with you right there because that is a lot of experience there in two minutes. Let's close this segment out and we're gonna jump to fan bullets here.

23:40But just last question, for someone that is listening right now, like Eddie, you're the absolute man. They may be feeling pulled towards entrepreneurship, but they may be scared of failing. How do you build that talent of like not stopping, like always going through, as you alluded to earlier, that you said that was one of probably your best talents is not stopping. I would say don't reject the idea that you're gonna fail. The idea that you're gonna fail will help you to not fail. If you have imposter syndrome, oh, lean into it. Lean into it, brother. Really, if there's something niggling in the back of your mind saying, I'm not good enough, oh, that is your best friend.

24:15It will make you work harder, right? And know at the same time that because you've taken the time to listen to the Uplip podcast, read a few books, like take your head and shoulders above other people and you know in your heart you probably have something that you can do to create greatness. So embrace the idea that you're going to fail unless you work as hard as you possibly can. And also, yes, but you're destined to do something great. Hold on to that too. If you can have both of those warring things in your brain at the same time, Congratulations. You've got a really good shot at starting something that lasts.

24:52Eddie, this has been phenomenal. I want to jump to our fan blitz questions here. These are questions submitted from our community. Listeners, if you want to join in our world-class entrepreneurs, go to www.youtube.com slash upflip. Eddie, ready for our last five questions here? I love it. Let's do it. Cool. When you were starting LegalZoom, what was one belief you held that everyone else thought was crazy? That... we didn't need to worry about the fact that every lawyer in the country wanted to sue us out of existence. The fact that people thought that was so insane and that we were absolutely going to get sued out of existence meant we had fewer competitors.

25:31It was our shield, just how insane the idea was. If you had to teach one skill to a new entrepreneur in under 15 seconds, what would it be? Lose your urge for comfort, sleep, friendship, and family and devote yourself wholly to your dream. What's one failure you look back on now and think, thank God that happened? We talked about my first company. Thank God that happened. Also, my dad was a genius, but I also saw him fail to understand whether people were willing to pay for something that he was at Bell Laboratories, the Bell Laboratories had produced. I saw 12 geniuses suddenly out of work with no jobs.

26:10And it was the beginnings of this philosophy for me, always build things people want to pay for. That's really good. Fill in the blank here. The biggest myth about entrepreneurship is it's all about the idea. My brother from another mother, Brian Lee, started like 12 companies in almost no time at all. And I always love to list them for people, people who think it's all about the idea. And I asked them, spot the one that worked because one of them turned into a$100 million company. Can you spot the one? Was it? And I'll give them that. No one has ever picked the one, ever. It's not the idea. It's what are you willing to do?