Starting a small business can involve a remarkable amount of red tape. Certificate of incorporations, sales tax licenses, publication requirements, annual franchise taxes, the list goes on. Even worse, every state in America has its own unique peculiarities. Failure to follow instructions perfectly can result in fines and possibly expropriation. And all you wanted to do was create a simple passthrough entity to drive for Uber.
Austin-based ZenBusiness is hoping to put the zen back into opening a new business by offering a $10 per month “worry free guarantee” — the company’s platform will tell you every form and annual report you need to file with your state, and if they miss something, they will pay your fines. And they will be paying for those potential fines with a new $4.5 million seed round led by Lerer Hippeau (well, and also product development).
ZenBusiness is the brainchild of Ross Buhrdorf, who joined vacation rental marketplace HomeAway five months after its inception as founding CTO, and stayed for a decade until its acquisition by Expedia in 2015 for $3.9 billion. Buhrdorf intended to take a year off, but “didn’t quite make it a year” he told me.
He explained to me that HomeAway in many ways followed a rollup playbook, “raising $400 million and acquired 26 companies.” Bringing that rollup lens while exploring new spaces, he ran into the corporate legal services market, which offers help to companies to keep them in compliance with the law. Buhrdorf liked what he saw. “It’s different in all 50 states, highly-regulated, which is great for technology, it is overpriced, and they underserve their customers.” He says the space is “completely ripe for disruption.”
ZenBusiness’s goal is to be fast, free, and frictionless. Following a short set of questions to understand the business a user wants to start, the platform offers free filing of incorporation documents, and is fully automated so that filing is as fast as the government can process paperwork. Business owners then pay a $10 a month fee to protect their privacy by allowing ZenBusiness to become the registered agent and shield the owner’s personal information from corporate databases.
Buhrdorf said that “we handle your privacy, annual filings, franchise tax, all of the red tape around an entity, and provide a customer-facing dashboard where everything is there visually.” His focus is on “this niche in the small of the small business market” that “runs the spectrum from pet sitters to freelance gig economy people to plumbers.”
As employees have increasingly become independent entrepreneurs, the need for creating single-member LLCs has increased. The legal entity is required to separate out personal from professional liability, which is critical in modern freelance jobs. Buhrdorf has set a goal for ZenBusiness to initiate one million new small businesses by 2023, an audacious goal he believes can be met by reducing friction and complexity around the incorporation process.
ZenBusiness is not the first entrant in this space. LegalZoom has been processing incorporation forms and many other legal documents for almost two decades, and more recently, Stripe has received a lot of attention for its internet business as a service product known as Atlas.
ZenBusiness is positioned differently from both products. It is an active manager of the entity as opposed to a one-off form filer like LegalZoom, which it hopes lowers the burden of maintaining a company in good standing with the government. Compared to Stripe Atlas, which focuses on scalable startups targeting the web and defaults to a Delaware C Corp, ZenBusiness is focused on local businesses that will incorporate with simple structures in their home jurisdiction.
While today the company is handling the nuts and bolts of incorporation and entity management, it sees itself as a scalable cloud platform that can add more modules over time once it already has a relationship with a business owner. “There is not a limit to what we can do,” Buhdorf said.
One interesting facet that the company is watching out for is how blockchain may change corporate records filings in the future. Buhdorf said that, “blockchain is great for contracts, and it is great for keeping track of stock, and it would be great to store these entity formations.” He caveats that enthusiasm though by saying “it is still evolving, so we aren’t making it mainstream now.”
In addition to Lerer Hippeau, Greycroft, Slow Ventures, Revolution’s Rise of the Rest Seed Fund, and Founders Fund also participated in the round. Beyond institutional capital, Brian Sharples, the former CEO of HomeAway, invested alongside other Austin and Silicon Valley angels.