Guest Kathy Tsitovich and show host Avanish Sahai discuss some of the key factors that led to LegalZoom’s successful platform journey and how LegalZoom made the hard but necessary moves to get to where it is today. Listen in to hear about the importance of quality over quantity, internal alignment, and more.
In this week’s episode, Kathy Tsitovich discusses LegalZoom’s transformation into a platform, with all of the challenges and successes that have occurred along the way. See key topics from her discussion with Avanish below:
Guest: Kathy Tsitovich
Kathy Tsitovich is the Chief Corporate Development & Partnerships Officer at LegalZoom – the industry leader in online small business formations and a leading online platform for legal, compliance and tax solutions. Within this role, Kathy is responsible for driving company growth through inorganic efforts, a robust integrated partner ecosystem created for LegalZoom’s newly formed small businesses and opening new channels for new user growth via strategic partners.
Prior to joining LegalZoom in 2020, Kathy spent more than 20 years at Intuit, where she held multiple leadership roles, including Vice President of Business Development & Partnerships for the consumer group, leading the Global Partnerships team focused on delivering small business partner solutions and integrations via the Intuit Developer Platform. She was also a key member of Intuit’s Corporate Strategy & Development. Kathy holds a patent for algorithms and models for creditworthiness based on financial management data and is a 2014 winner of the Scott Cook Innovation Award for her contributions to QuickBooks Capital.
Kathy graduated from the University of Missouri with a B.S. in Business Administration and Finance and is currently the Executive Sponsor of the LegalZoom Women’s Network.
Kathy lives in Chicago with her husband, two kids and dog, Bear. When she’s not catching up on email or writing a “to do” list, she enjoys spending time with family and friends, reading and playing golf as much as possible during the super short Chicago summer!
Host: Avanish Sahai
Avanish Sahai is a Tidemark Fellow and has served as a Board Member of Hubspot since April 2018. Previously, Avanish served as the vice president, ISV and Apps partner ecosystem of Google from 2019 until 2021. From 2016 to 2019, he served as the global vice president, ISV and Technology alliances at ServiceNow. From 2014 to 2015, he was the senior vice president and chief product officer at Demandbase. Prior to Demandbase, Avanish built and led the Appexchange platform ecosystem team at Salesforce, and was an executive at Oracle and McKinsey & Company, as well as various early-to-mid stage startups in Silicon Valley.
Tidemark is a venture capital firm, foundation, and community built to serve category-leading technology companies as they scale. Tidemark was founded in 2021 by David Yuan, who has been investing, advising, and building technology companies for over 20 years. Learn more at www.tidemarkcap.com.
You can find the full transcript here.
Avanish Sahai: Hello everybody! Welcome to one of our interviews with leaders in partnerships, ecosystems, and platforms. Today we have a fantastic guest, Kathy Tsitovitch, who has amazing experience and I think will provide a perspective that maybe our other partners have not yet provided. She has an amazing title as well, which I'm envious of: Chief Corporate Development and Partnerships Officer at LegalZoom. Kathy, welcome to our podcast. We’re delighted to have you! I know you've got a pretty extensive background in this realm, so I'd love to hear a bit of your background first.
Kathy Tsitovich: Oh sure, and thank you so much. I'm excited to talk with you and everyone today. I am currently, as you said, with LegalZoom. I joined in the middle of 2020 after over 20 years with Intuit. I spent a lot of time within that 20 years really learning about and working on the platform side of the business for Intuit; both the small business side and the consumer side. I’m very passionate about what an ecosystem – what partners – can really do as you expand how you serve your customers.
Avanish: That's great, maybe we start there. We have a lot of talk about ecosystems and partnerships now; it’s become an in-vogue topic. But I think some of us have seen it for longer, and you're certainly one of those people. Give us a bit of color from those early years at Intuit. How did you come across this? What was the role of a partnership model there? What were some of the lessons in those early days?
Kathy: Yeah. This is going way, way back into the early 2000s, before we really talked about platform – that wasn't really a word yet. Intuit had most of their customers using a desktop product called Quickbooks, and we started working with a partner on payments – helping you accept payments from your customers. Then we automatically brought the data in, so you didn't have to enter all that data manually. That was one of our very early partnerships with the desktop ecosystem. It really just took off, because customers were so happy that they didn't have to do all this data entry. You look back and it seems very simple, like that's an obvious thing to do, but at the time it wasn't. We had a couple different partnerships with some big brands, we were getting paid a very small bounty per customer acquisition, and we quickly realized that the integration is what made this so powerful. It's what solved the customer problem of spending a lot of time entering data, and it also solved the partner problem of acquiring small business customers, which was very expensive and hard to do. That was my first foray into what partnerships could look like when you really thought about how they integrated into the experiences that you were already delivering.
Avanish: I think that was one of the key things you wanted to tee off here, right? Intuit has always been known as a leader from the early founding days. It is about the customer, it is about the experience.
You already started discussing it, but what are some of the lessons you took from that experience, and how do you apply that knowledge now that you’re at LegalZoom? What's been the platform thinking and platform strategy that you've brought to the table, and how are you evolving that?
Kathy: I’ll start by just sharing a little context of who LegalZoom is, because even before I joined, I thought it was more of a consumer brand. I thought it was about helping people with their wills and things like that – which we do, absolutely, but our primary customer is the small business customer, and our goal is to help them take care of all the legal and compliance stuff so they don't have to worry about it. We do that by using technology to make it simple and much more affordable than going, for example, to a lawyer, which is what you would have had to do in the past if you wanted help.
Our customers at LegalZoom are small businesses. They're coming to us because they want to start their own business, and they need some help forming it. We are with the customer at the very beginning of their journey of becoming a small business. About one in ten small businesses form with LegalZoom today.
I think early days in LegalZoom – again, this is prior to my getting there – saw the power of the channel that we have. Customers are coming to us before anyone would know they’re small businesses looking for advice or help on starting their business. We were quickly looked at as the trusted advisor. I've had some stories told to me by long-time Zoomers (what we call employees here) that people were calling the sales reps and asking things like, “What checking account do I get?” or, “Now I need to get insurance, and I don't know where to go.” That really started the wheels turning. It was about the customers asking for help as they continue the journey of forming their business. It started around the customers’ questions more than anything else.
Avanish: And you know full disclosure, I am a LegalZoom customer as well.
Kathy: We love that.
Avanish: For some, that [process] can be very complex and very daunting, that element of the experience, and there are so many moving parts. I think the notion of asking how to serve the needs of those customers, with a common perspective and workflow, makes tons of sense. Thanks for sharing the LegalZoom overview, which I think is super important. We all hear about the brand and we hear the ads but I think it's good to know that the focus really is the small business.
Can you talk a bit about how you see a platform strategy for LegalZoom? How does the customer experience mindset translate into what it means to be a platform for the small businesses’ legal and compliance functions?
Kathy: Whenever you say platform, I always want to start by asking, “Who are the stakeholders of that platform?” It's obviously our company, LegalZoom. It’s the customer and it's LegalZoom, and then its partners or third parties that would add value to or extract value from that platform. I have to admit, we're in kind of the middle of a rebuild of our platform strategy right now. But we center it around the question, “What are the problems that we are solving today and that we're solving well, and what are the complementary problems that we can solve better with partners?” That's how we're looking at what partners we bring onto our platform.
On the flip side, we also have partners coming to us that are maybe limited by what they can do, or by the fact that they can’t sell their offering until someone has an EIN number. To get a small business checking account, you must have an EIN number, and to do that, you have to legally form a business. If you’re Bank of America or Brex, you cannot onboard a small business customer until they actually have an EIN. We're solving this problem from a platform perspective, which is making sure that our partners – who might have a barrier to acquiring a customer because they haven't formed yet – make that really easy for them to form within their own experiences.
Avanish: That's fascinating. You've got the customer experience to start with, but you also are focusing on the partner experience and providing them with a framework and infrastructure, even some vetting, before they may engage with a joint customer from then on.
Avanish: Fantastic. You mentioned some examples, but how have you thought about prioritization, the framing, who the partners are, etc.? How do you build that story, and how do you engage the rest of your organization in helping you know define categories (priority partners, strategic partners, etc.)? Talk to us about that framing.
Kathy: I love that you started with engaging the rest of the organization, because that is so critical. This is so fresh, for me, since we're kind of in the middle of really rebuilding our ecosystem. We're a 20-year-old company, so a lot of what was built was not built to be a platform. We really had to step back and assess how we're doing, look at whether we were really solving customer problems and partner problems. We had to do homework to figure that out. We did a ton of customer interviews and market research, we did partner interviews, and we reached out to other potential SMB platforms and talked to them about what problems they're solving for and what problems they have that we could potentially solve for them. And then – this, I think, is really critical, and it seems simple but it takes some time to do it right, and it took us a few months – we actually defined who and what we wanted to be.
We stepped back and we created five principles for determining who the partners are that we want to engage with, and that we think will be successful on our platform and drive success for our customers. We defined these as the following: 1) they need to be customer-first, as we were. Really obsessed with the customer. The number one thing that they need to do is solve big customer problems that we don't solve today. 2) They need to be a big brand and a big business, because we're looking at bidirectional opportunities for LegalZoom and for the partner. 3) We need companies that are open and transparent, and not afraid to share data or build product together. Obviously, everything with customer consent on the data part. 4) They need to lean into technology – using APIs, being able to integrate in a seamless way. And 5) they need to value partnerships as part of their overall value proposition. If you are missing any of those, we feel it wouldn't be worth either of our time to do the deep investment needed.
The last thing that we did, after we did all that, was really prune our partnerships. We had over 90 partnerships (probably close to 100) and we ended up culling about 75, maybe even 80 of those, to get down to a smaller number that we wanted to cultivate, and work together to plan for the future. Now we're at the point where we've done the culling and the pruning. Now we're starting to plant, grow, and figure out how we scale with the current partners that we've chosen to work with.
Avanish: Wow. First off, I don't want to put words in your mouth, but I think what I heard was quality over quantity as an outcome or a design principle. The whole process of off boarding partners – many of us unfortunately have had to do that and it's not an easy process. Would you mind sharing, without going into anything too sensitive or confidential, how you went about doing that? I mean, those are not easy conversations. There's relationships, there’s legacy, and so on. Can you share some of the principles and approaches you took in having those conversations?
Kathy: I think the very first principle is just to be very honest and direct, and share with the partner why this is the step that we feel like we need to take. When you start with really calling out what typically is an elephant in a room, that things aren't working, it tends to go pretty smoothly after that (versus taking the approach of trying to use your contract to kill the relationship). And I think if you take the people-first approach – because ultimately you're working with people – then it becomes a partnership to really offload the… partnership, versus a legal battle, for example, that you don't want.
Avanish: I think underlying that also is the notion of empathy. You have to empathize with them, and they have to empathize with you, on what the joint goals and business opportunities are. And perhaps if it's not working, you're also saying, look, don't waste cycles, time, resources, etc., on something that's probably not going to generate the kind of engagement outcomes that you might be expecting.
Kathy: And I have to say, out of all the ones we off boarded we only had real difficulties with two, out of all of those partners, because we did approach it people-first and with empathy. And we were honest and direct on why we didn't think the partnership made sense anymore.
Avanish: I think a lot of organizations have embarked on different forms of partnerships and alliances and ecosystem journeys. What I love about the way you've approached this at LegalZoom is really putting a more common and strategic framework that aligns with product, with what you are trying to deliver to the customer. That may result in a different outcome because sometimes – and I can say this with personal experience – these partnership functions and teams were set up in something of a silo, and then the metrics and the success definition criteria are somewhat insulated. That doesn't kind of drive the greater good. The approach you've taken is something that some of our viewers or listeners will probably also have to consider as they think in a more strategic way about their ecosystem going forward.
Let's actually take that and talk a bit about how, as you've narrowed things and become more focused, you define different success criteria? How do you think about success now, as you look forward, and as you work with this perhaps smaller set of partners?
Kathy: I love that you call that out, because I think there are two things that we've thought about. We're not perfect yet, and that's okay – we've made a start. One of these things is, what does success look like for our ecosystem? That's a hard thing to answer because it's going to look different for everyone, but this is not only coming down to the direct revenue that you're getting from partners. If you look at it that way, you probably wouldn't focus on the right stuff as your ecosystem. It's looking at engagement, and, for example, how we can improve conversion rate for our partners. How do we get more customers raising their hand that they're interested in an offer, which means that we're offering them the right stuff? How do we measure the impact of our brand when we're working with other brands?
We have an executive-level dashboard that we're continuing to modify that we can look at internally. I would say, though, from a partner perspective, probably one of the most important things to do with the partner early on – this is like, the LOI stage – is come up with your key success metrics for either side. What are those? There shouldn't be 20 things; it should be the top two to three things. Make sure you get alignment on that. It will also drive a different conversation when you're having negotiations or when you're thinking about the important terms, because you'll understand what's important to your partner in a much better way.
Avanish: Putting myself in the shoes of the partner, do they get surprised that you walk in with that point of view? It’s probably not something they have seen in other, similar conversations. Is it like, “Whoa, you folks are really thinking about this in a different and a more thoughtful way!”
Kathy: Yeah you would think they’d be surprised, but instantly it's like, “Well, this totally makes sense, yes. This is what's important to us.” Then we set up a shared doc and we just start outlining what we need to measure. We had to get some metrics we were launching with one of our earlier partnerships and they were actually not right: “We’re measuring the wrong stuff, so let's change it.” That's okay. It keeps the dialogue open so that you know if you're being successful. If you're launching a product, you're gonna have a dashboard that you look at every single day for data on engagement and retention and what people are doing inside the product. A lot of times with partnerships, people just launch and think they'll be successful, but nothing's gonna be successful unless you nurture it.
Avanish: “Hope is not a strategy,” right?
Kathy: That's right.
Avanish: So, I mentioned your title earlier. I truly do believe that there will be more and more people with this type of title going forward. Is it also an implication that by having the Chief Partnership Officer title along with corporate development that it elevates the profile of what you're doing? That your colleagues in C-suite are equally aligned and on board with the motions and changes to strategy and so on? How important is that from your point of view?
Kathy: It's massive, because if we do not have executive or company level support of the platform and ecosystem, it will not be successful. A successful platform, and then a successful partner, is not dependent on a BD team. It really is dependent on the engineering team, the product managers, the marketing team, the data team, the finance and legal teams. Everyone that would be part of a product is involved, and when you have visibility across at the executive level and you have the support of your peers and the executive team, it makes the job to make the ecosystem successful that much more probable.
Avanish: Thank you for framing it that way, because I think that is certainly one of the lessons I've learned along the way. It's no longer the old channels and resellers and so on – an ecosystem is actually the orchestration of all those different functions, and for it to be effective, those leaders and teams all have to be aligned. If everyone is operating in a silo, then you can pretty much call that the platform is unlikely to achieve its potential. It'll have some success, but probably won't achieve its full potential. Kudos to you and the team there for thinking of this in a much more strategic way.
We've talked about all the positives, a lot of good stuff. You've talked about strategic alignment and so on. What were the biggest challenges as you've been on this journey for a bit over a year and a half, more or less?
Kathy: Well, there have been a lot of ups and downs. I think I mentioned this earlier, but we do have a 20-year-old product. Our CTO and I work hand in hand, because you have to when you're building a platform. Shrisha Radhakrishna and I have definitely been aligned from the start that if we don't fix the foundation, we're not going to be able to create the platform experiences that we want to. The biggest challenge is that that's been a ton of work and it's taken a long time. We've got partners where we want to start integrating more from a data perspective, and we just have to wait a little bit. We've had some really foundational work to do to make sure that the platform is set up for us to effectively serve the customers that we're bringing on, and make the customer experience, when we're talking about conversion and integration, really really seamless. We're building it to be expansive and to scale, not to have a one-to-one integration that will only work for a specific partner. You have to slow down to go fast, and I’m not a very patient person, so that's probably been the biggest challenge. [There has been] lots of progress and I see the light at the end of the tunnel, but we're not there yet.
Avanish: I think in one answer you synthesized so many key factors. It's got to be strategic. You’ve got to align with your peers in the technology organization because there are dependencies and sequencing and things that have to wait. It doesn't all happen with the flip of a switch. I think that is a terrific lesson for many of those who are either embarking on this journey, thinking about it, or embarking on a re-journey, if you would.
We talked a lot about the value to the customer, but I have one more topic we haven't covered yet: have you had to do any alignment internally? You talked about the product team, you talked about finance, and so on. How about on the sales side? Are there incentives or things that you have to have to think about or put in place to help align with the field? Or because of your business model that may not be as critical?
Kathy: No, we definitely have. We actually just launched our first test in Q4 being able to incent our sales reps, and a lot of this was also building out some technology to be able to track and pay the comp. We had a great strategy, but realized that we can't execute it yet; we've got to do some build. We found that that is driving the right conversations now. Before, if a customer would ask for a specific partner or product, then the sales rep would bring it up. Now, we've gotten the sales reps to really understand the customer and the industry, and the rep knows what they need. They are able to create opportunities for introducing partners. I would say that it is still low-hanging fruit. In my opinion, our sales reps are very high quality. They have some great conversations and they're looked at as trusted advisors, but we didn't have the systems in place until last quarter to really test that out.
Avanish: It seems like another set of common lessons, but the systems piece is critical. You cannot, I don't think, manage these things for too long on spreadsheets, which is where it used to be. Incorporating the systems, tracking, compensation, etc., has become a much more critical issue, and it has to get in the backlog of the respective team that's going to put that in place.
Kathy: And what we have noticed is that when you mention this to partners and you ask them to work with you on it, they know best how to sell their product. They've been very helpful in doing that. Then, when we've gotten some success, as our test showed, they'll actually fund some of the incentives as well. We don't have to fund them all. But the partners needed some data to get that. It was a little bit of the chicken or the egg. We need to launch something and now they're excited about the quality that's coming through. They're there to have happy customers, to acquire customers that stay around for a long time. They want to have the quality that's there, and if we can make it really targeted and have the right conversations, they are getting really high-quality leads.
Avanish: Love it. This has been terrific, the journey and the transformation you're driving. I think we've been getting a huge amount of very valuable insights throughout, but let's step back a bit. Say you're having a drink or coffee with a peer and they're thinking about this journey, and thinking about building out their ecosystem. What are some of the lessons that you would say are the most critical for them, that they can leverage to maybe accelerate their journey? How would you advise them?
Kathy: I think there's two things, on top of all the stuff we already talked about. First, it's hiring the right people. The team that you bring on to start this journey, or to continue the journey, or wherever you are in the journey, is the most important thing. And this isn't people that all directly report to me; we've got a very broad team. It's not siloed at all, and it includes every aspect of the end-to-end journey around a platform. A lot of them dotted-line into me, not direct-line. Once you get the right people in place and you set the vision, they really can move fast.
Then the second thing is – we did talk about this one a little bit – what does success look like? Define what your goals are and what your vision is of your ecosystem, and make sure you can measure it. If you can't measure it, you can't manage it, you can't improve it, you can't do anything. You'll have a lot of people supporting you, until you can't say why it's important to the company. It's going to look different at every company, why it's important, but you must have that to make it mean something.
Avanish: I love that. I think being data driven and analytical, in the past, was not typically associated with this kind of function but I'm completely with you on that. Some dependency on systems becomes critical, but having the data to have those conversations internally and externally is fundamental.
You've been in this business for a long time and you've been at some amazing companies. When you look around, which peers or even competitors do you look at and say, “they've been doing this well, they’re folks that I look to and even maybe emulate and hire people away from?”
Kathy: I mean there are plenty of companies out there and I've talked to a lot of them. Even back in my Intuit days, when we were really on the early journey of Quickbooks, we reached out to anyone that had a platform. One company that I think is newer and has had a slightly different approach – they were just acquired by Next Insurance – is AP Intego. It’s a small business workers’ comp insurance product, and they really went to market as a platform. Looking at how they could embed their solutions into other core workflows has been super interesting. They are actually embedded within Gusto, within Intuit, within payroll solutions. It was such a problem for the payroll providers to make sure that the customers, the small businesses, had workers’ comp, and it was such a pain for employers to actually buy workers’ comp. It was really complex and difficult, and I think it's just been magical, how they've really transformed the small business workers’ comp space. I love watching what they've done from a developer perspective: how they work with developers and strategic partners, the business model perspective. They've been pretty creative in a new space.
Avanish: That's a fascinating example. It's a narrowly defined but highly complex process, to build a platform. That's a great example of someone really bringing expertise and thinking platform-first. Kathy, any final thoughts?
Kathy: I'm always thinking about how we scale and how we make it better. and I think. I mentioned this earlier, but you can't just launch a platform or a partnership and expect it to be successful unless you really invest in it. Getting your company and your partners that you work with to think of this as an ongoing learning product launch, versus a partner launch, I think really transforms how you manage and run the business. You don't just launch a product and never look at it again; if you're going to launch a partnership, really invest in it. And again quality over quantity on that side.
Avanish: Fantastic. Kathy, I can't thank you enough. This was really, really insightful and it was just a real pleasure to see you again. Thanks for making the time.
Kathy: Thank you so much.
The views presented here are those of the individual speakers and not necessarily those of Tidemark Management Company or its affiliates. The content is provided for informational purposes only and is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by Tidemark or any of the securities of any company discussed. Companies discussed in these posts may include current Tidemark portfolio companies and/or prior investments made by Tidemark employees while at other investment firms. These companies identified above are not necessarily representative of all Tidemark investments, and no assumption should be made that the investments identified were or will be profitable. The information in this post is not presented with a view to providing investment advice with respect to any security, or making any claim as to the past, current or future performance thereof.