Avvo, New $10M in Hand, Tears a Page from Expedia, Amazon Playbooks

3/19/10Follow @gthuang

Anytime a consumer Internet startup raises $10 million, it’s big news, especially around Seattle these days. So you’d think Avvo would want to tell the world about what it’s doing with all that money, which it just raised in a Series C investment round from DAG Ventures, Benchmark Capital, and Ignition Partners.

But founder and CEO Mark Britton is staying mum about how the $10 million will be used, other than to say it will “expand and enhance” the company’s products. I tried to get him to say what that means. Maybe Avvo will buy each of its two million unique monthly visitors a drink (joking)? Or pick up Cliff Lee’s 2010 pitching contract for the Mariners? No dice. OK, so Avvo, which runs a free legal services website with lawyer ratings, profiles, and a legal advice forum, is trying to maintain a low profile to keep its competitors in the dark.

Is this one of the best funded, but most boring startups in Seattle? No way. Just when I’m about to give up on learning anything revealing about the company and just ask him for a good lawyer joke, Britton launches into a very interesting historical narrative about where Avvo really comes from; the challenges of making consumer ratings work; and his lessons learned from working at Bellevue, WA-based travel site Expedia and observing Seattle-based Amazon from across town.

First, an update on how Avvo is doing, and why it chose to raise money now. Britton says the company is “approaching cash-flow positive quite quickly,” and that he and the company’s board discussed whether to use sales to fund its new initiatives (which shall remain a secret). “We think we have some really big ideas about how we can continue to expand on our success. One of our big initiatives has been sitting on the shelf for a year. We could not help but feel now is the time to pursue these initiatives. We could have financed them with excess cash flow, but as the Web proliferates, there is tremendous opportunity cost” in not expanding with a large new investment, he says. “We’ll meet in the next week, and we’ll put a stake in the ground for when we roll out these different elements.”

Britton has some unique perspective on how the Web has affected the legal industry and consumer behavior. Before founding Avvo, he was senior vice president and general counsel with Expedia—he was there from the early days—and prior to that, he was an attorney with Preston Gates & Ellis (now K&L Gates) when he first moved to Seattle from Washington DC in 1997 (he’s from Montana). Back then, lawyers didn’t even e-mail documents to clients or to each other; today they use document sharing sites on the Web. Due diligence used to be done by calling people on the phone; now it’s done using search engines and Web documents. “While I think the legal profession still has long way to go, the Web has fundamentally changed how lawyers practice law,” Britton says.

The genesis of Avvo came in early 2006. “I saw a very big need for the legal industry to take a significant step into Web 2.0,” he says. “Public records were being digitized, and with that comes lots of transparency. There is an increasing appetite for people to see advertising [online] backed up by objective information. Lawyers are about full disclosure, it’s part of the culture.”

Britton hadn’t really practiced law since 2003, yet he found himself still helping friends and family with their legal issues—in particular, evaluating lawyers. So he had the idea to create an attorney directory complete with consumer and expert ratings, including information from state public records, complaints of lawyer misconduct, and so forth. And here was the business opportunity: lawyers and law firms, even today, spend a whopping $1 billion a year on advertising in the Yellow Pages, where essentially the biggest ad wins. “Anywhere the Yellow Pages is a leading marketing [tool] is probably an opportunity,” Britton says.

Avvo rolled out its site in 2007, to some mixed reviews. Most consumers and lawyers seemed to find the site useful, but there was a vocal minority who complained. “One thing that really caught me off guard was the visceral reaction that some lawyers had to our products,” Britton says. He’s referring in part to the company getting sued nine days after going live by two attorneys who objected to the information posted about them on the site. (The suit was dismissed.)

“I was surprised how much misinformation was propagated out there about what we were doing,” Britton says. “If you’re pushing the envelope, you will take some lumps. However, if you are legitimate, it’ll all be worth it.”

Culturally, Britton says, Avvo is “largely cut from the Expedia cloth.” That comes from his original hiring of chief technology officer Sendi Widjaja, a former senior developer at Expedia, to build the product and development team.

Expedia, of course, was a pioneer in making information about airline travel and fares available to the masses. Before that class of websites, you had to call a travel agent. “It became clear, in Version One of the Web, that we could develop a system to democratize data” and help consumers make important, emotional decisions, Britton says. Now at Avvo, he says, “We’re taking data…and layering an editorial rating on top of that. People can look at the comparative data, and we’re giving consumers control over it. We’ve torn a big page out of the Expedia playbook.”

I also asked Britton about parallels with Amazon’s ratings and user-generated content. “I’m a huge Amazon fan,” he says. “It was fundamental on moving the ball forward in reviews for businesses and individuals. EBay lit the match…It was very interesting to watch Amazon take that idea and move it into a five-star system with almost a dialogue regarding products and services. As the Web evolves, my belief is, ‘If it can be measured, it will be rated.’”

In other words, it doesn’t matter whether a website rates books, movies, music, consumer electronics, or lawyers—certain principles hold. “The most successful Web 2.0 sites are going to have to have an editorial overlay. Amazon nails that,” Britton says. “The ability for them to give you the various elements, to have the editorial and the [user generated content] side by side—they get it, and I believe it. If you play with Avvo, this is core to everything that we do.”

It remains to be seen, of course, how much Avvo’s impending growth initiatives will pay off in terms of profits. Investors have poured $23 million into Avvo to date, so they will be expecting some big returns. The company currently has 38 employees and has been hiring for open positions, mostly in sales.

Britton says he is often asked about prospects for pursuing a similar website in other professional sectors—rating accountants, say, or dentists. He points out that the advertising market for the legal industry is especially big—$4.5 billion (with $1 billion of that still in the old-fashioned printed Yellow Pages). Still, he won’t rule out other niche markets. “We’re open to whatever opportunities come our way,” he says. “But we have a very big opportunity in front of us just in legal.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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