This is a story of the last 3 years and my personal & business struggle to make online notarization legal with SignNow.  It includes death threats, cease and desist letters, and even our Hacker News thread being killed (I like to think it is too disruptive).

It all started about 3 years ago.  I had just left West Point, then the Army, and was trying to figure out what I wanted to be when I grew up.  I was something of a hacker in High School, and a tech geek, so I ended up helping companies set up their document management platforms.  Technically the implementations were straightforward, but it allowed me to work firsthand with a variety of people managing contracts and contract signings on a daily basis.

One on my clients (I’ll leave their name out of this) ended up getting hit by notary fraud…badly.  Of a $300M fund, they lost $5M in write offs due to fraudulent notarizations.  These came in all shapes and sizes, but generally were because a party was trying to avoid having someone see a document.

I was stunned at the effect, and went out to dinner with a colleague and friend to talk it over.  This was our spark of an idea: Notarization is really painful and it is really almost laughable as a fraud prevention tool today, but what if it were online?  We knew we could leverage technology to more accurately identify people, record video of them signing, and use all of this to create a “near bulletproof” contract in a court of law.  At least very accurately answer the question “Who signed this?”

It was Feb 2010, and we sought out to solve this problem.  We built a prototype.  I read every state law in detail, and created a huge matrix to analyze the state laws to see if it were even permissible.  To our elation, it seemed that it wasn’t illegal in about 10 states.  There was no reason whatsoever in the law that you couldn’t do it this way, it just had never been done before.  So we took 3 of the states, took them to a top attorney in the digital signature space and said “Do you agree it’s legal in these states?  If so, which one do you think is the best target?”  They agreed that it appeared legal in all states, and they selected New Jersey as the most viable option.

It was 1 year in.  We launched a pilot program.  The notary community exploded.  Now if you are a notary, don’t take offense, but I have yet to meet a notary who is really well versed in notary and electronic signature law.  Most of the time they didn’t bother to look at what we are doing anyway.  This didn’t stop them from making every claim in the book, and reporting us to every state office.  Many of them lied.  We got a cease and desist letter from the State Of California, which said that we were to stop telling California notaries that they could notarize online.  California notaries notarize online?  We never said that.  We called the state and asked how they heard about this.  They said “from notaries”.  We explained the situation, told them what we are doing, and they withdrew their complaint, making it clear that we were not violating any known law at the time.  It’s interesting how easy it was for competitors to get the state to issue a cease and desist without any evidence.

We started getting some people testing out our pilot program, it went well.  By luck & timing, there was a group in Virginia simultaneously trying to get online notarization passed there.  We started discussing things with their group, and by the spring online notarization was made legal in the state of Virginia.  The notary associations violently opposed the bill.  They tended to use the argument that “Online notarization is not perfect, so we shouldn’t allow it”, or the so called Nirvana Fallacy.  They disregarded the terrible track record of paper notarizations, including the Robosigning scandal of 2010.  Most are for-profit entities with a non-profit shell.  They make their money from training, equipment, and insurance, so it’s no surprise they want the most complicated legal/regulatory notary structure imaginable and millions of notaries.  The only concession the associations got was to delay the enactment of the bill until July 1, 2012.

The State of Virginia knew that this would be a economic driver for the state, and sought to be to notarization what Delaware is to corporations.  They built a solid framework to support this.  Even the National Association of Secretaries of State admits freely that electronic and out-of-state notarizations are legal in all 50 states.  So here it was, exactly what we wanted to achieve.  Completely legal online notarization throughout the country.  Sure, people could modify their laws to disallow it, but why would they?  Banks and consumer groups both supported the bill.  Nobody wins in the existing system except for notaries.

Here is the text of the law.  While it is not bulletproof, it is massively better at preventing fraud than the existing system.

Getting what we sought (explicit legal permission), we shut down the pilot and waited.  We were surprised when a few other states, including New Jersey, issued “warnings” against online notarization.  Whenever we talked with the state, the story was the same.  They got complaints from notaries (our competition), so they put up something.  No consumer was negatively affected.  Sometimes when we pointed out there was no evidence to support the warning, they took them down, but sometimes they didn’t.  California is an interesting case study.  They agreed it was likely inaccurate, but stated that it was not their policy to take down consumer notices once issued.  So it stays.

My co-founder even got a death threat from a notary, and we had to begin carefully screening calls and making sure that our notaries were safe from harm.

We achieved a remarkable amount in that first year, and began focusing on building a company that would match our huge vision.  We looked at the signature market and saw a few trends.  One, the money didn’t seem to be as good there as the things surrounding it.  Two, nobody had made a serious go at an entirely free signing product, mobile focused, and designed for simplicity.  We started SignNow with the vision to make it easy to make and enforce agreements.

We raised money from amazing investors, Khosla Ventures, built the team and launched mobile signing apps in early 2012.  They instantly rose to the top of the mobile signing apps.  We began work on a new version of the notary product to be ready for the July 1 launch.

As we worked our way through the technical milestones, we began communicating with the state.  The state of Virginia was fantastic, enthusiastic, and supportive.  They feel like they are in startup mode too, which is fun.  They threw a few curve balls at us, but we were able to make it through.

July 2, 2012.  Over 2.5 years since we first came up with the idea we quietly launched the service.  The first, fully legal, online notary service.  Notary associations immediately attempted to defraud the system and trip up our notaries.  The notary community exploded again.  No surprise there, just business as usual.  I always thought we would have the support of the tech community.

Someone submitted us to Hacker News, YCombinator’s news aggregator, while we got some good comments and some concerns about the legality.  No surprise there.  Some people thought it didn’t seem worth the price, but they probably weren’t thinking about the anti-fraud protection (not just the convenience).  Then, the link went dead and we got a message from Paul Graham himself.

“I killed your post, which appears to be a false claim as far as I can tell:
http://www.sos.ca.gov/business/notary/customer-alert.htm”

My jaw dropped.  This seems like a weird reaction.  Airbnb and Uber have faced similar legal challenges and the tech community rallied around them.  This notice also happens to be very out of date.  All it really says, in a very poorly written way, is that California notaries cannot notarize online, which is true, but it shouldn’t affect us.  I’m sure Paul just saw the link and killed it without much thought (he is a busy guy), and we’ll get him on board :)

True disruption is not just hard, it’s long and lonely.  We have been determinedly attempting to end notary fraud.  It has been a crazy uphill battle run by very few people.  In a few years we’ve managed to change the landscape forever, but we are in a delicate spot.  If the tech community cannot back innovation, then this is doomed to fail.  So help us out, tell your friends, let’s make going to find a notary a thing of the past.

CEO & Co-Founder, SignNow