What to Learn from a Business That 10x'd in 5 Quarters

What's up, everyone. This is Alex Lieberman, co-founder and Executive Chairman of Morning Brew. Welcome back to Founder’s Journal, my personal audio diary, where I give you the business builder, the tools you need to think better in order to build better, whether that's building a business, a team, or a new product. Back by popular demand, it's time for another business case study. What I decided to do though, is rather than profile a public business that is in the Fortune 500, that's already so distant from the early days of building, I wanted to talk to the founder of a hyper-growth, late-stage startup so that you can get a behind the scenes look at how the sausage is made.

Origins of Notorize.com

And when I say hyper-growth, I mean hyper-growth. This company has grown revenue by 10X, since 2020. Let's hop into it. It's 2013 and Pat Kinsel just sold his company, Spindle, to Twitter. It was an acquihire. And as part of the deal, Kinsel got Twitter stock, and so he had to go through what any founder has to go through at the end of a transaction, which is a painstaking process of signing documents and just other annoying hoops to actually get paid your money or your stock in the new company.

Unfortunately, for Pat something went wrong in the process as things typically do when you're selling a business. Pat had signed the papers and then he got them notarized. For those of you that don't know what getting notarized is, it basically means when you have a certified person who, in-person, witnesses you signing your legal doc. And the whole point is to deter fraud of important documents like selling a company, opening a bank account, buying a house, etcetera. Issue was, the person who notarized Pat's docs, and these docs were literally for him to claim shares in Twitter, the company that bought him, the notary made a mistake and it ended up delaying the entire process of receiving his shares for weeks.

It ended up working out, but it got Pat Kinsel thinking about why the notary process was so fricking archaic. And the answer is because it is a process that is so wildly fragmented across the US. Every state, every county, every industry has a different protocol about how you can get a doc notarized and who can Notarize your docs. So, as Pat Kinsel told me, it's something that everyone has wanted to change and has known needs to go digital at some point, but no one wanted to put in the ridiculous amount of work to make it happen.

Pat decided to be that person. He started Notarize dot com in April of 2015. He was the only employee of the business for the first nine months. And interestingly, he was also the seed and series A lead investor in Notarize dot com. Yeah, that's right. He was the founder of the business, but he also funded the business because he was a venture partner at the venture capital firm that funded the company in the early days. To get the company off the ground Pat actually did things that I would argue were pretty different from most startup founders. Rather than raise money and make hires, bring on full-time employees, he started by hiring an agency that would build the product, the kind of MVP Notarize dot com product, which was the digital notary.

Crystal-clear focus

And then once the product hit certain milestones, he ended up hiring full-time people to replace the agency folks that had been working on it in the beginning. And I think this is just a really good reminder that there isn't one right way to launch a business, but instead what's most important is to have a crystal clear focus and to put blinders on and make decisions that give you the fastest clearest path to accomplish your goal. For Pat, his goal was get a working digital notary product into the world as fast as possible. On top of that. So much of business building and frankly, career building, is getting punched in the gut over and over and over, yet you keep going. 

When Pat first looked at this business, he saw that most states in the U S other than Virginia didn't allow for digital notary and they required an in-person witness. Obviously, this was pretty defeating to him, since the whole premise of his business was taking the act of in-person notary, someone watching you sign a really important doc, and bringing it into a digital environment. But Pat didn't think about stopping running the business. That's what most people would do. For Pat, the goal was getting a good digital notary product off the ground as quickly as possible. And that's what he did. In February of 2016, with just three employees, including himself, he launched the product. And how Pat defined this stage of the business for me was, this was the will people do this phase? Simply put, will people change their behavior from getting documents notarized physically to getting documents notarized digitally?

And the answer was a resounding yes. The next phase was, “will people accept this” phase? And that was very much the phase that immediately preceded the pandemic. Let's call it 2018 and 2019. At the end of the day, this is such a difficult, and I would argue defensible business, because as I mentioned, regulation around notarization is not standardized. If you want to be compliant across the entire U.S., you literally need to pass legislation in thousands of counties and hundreds of industries. Once the product was in place, and it was usable, everything for Pat and his team was about getting to a regulatory environment that worked for the business.

Do the work others are unwilling to do

Remember, Virginia was literally the only state that allowed for a digital notary when Notarize launched. So what that meant was there are 10,000 notaries in Virginia, but if Notarize wanted access to the 4 million plus notaries across the U.S., they had to get legislation passed in every state and many counties. It's been an uphill battle, but Pat has met with 16 secretaries of state. He's visited basically every state in the U.S., and since the company launched 34 states have made digital notary legal, and he's currently working with the government at the federal level to pass legislation about remote online notary.

Can you imagine just how much of a fucking headache it is to go state-to-state and county-to -county to make your platform scalable? It sounds like a nightmare. I'm sure it was a nightmare, but there is such an incredible competitive advantage awarded to businesses that basically end up doing the shitty work to digitize a highly fragmented physical environment that no one else wants to spend the time doing. What I've just talked about was that setup that led to Notarize his breakout success over the last two years, and especially since the pandemic started, Notarize has blown up recently. The company has raised $213 million to date with a $130 million series D in March that valued the company at $760 million.

The company grew 600% in 2020, and it has 10X’ed in the last five quarters. It is one of the fastest growing startups I've ever seen, period. So how did Pat and his team do it? I'll discuss it after the break. 

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Make your own luck 

Obviously COVID sped things up as digital notarizing went from being an option to being an imperative, but the real answer to the question of how did they 10X the company in five quarters comes down to Pat's ability to lay groundwork in the first two phases of the business, like I mentioned, but also his ability to be nimble as the world was changing rapidly beginning in March of 2020. Notarize wouldn't have been able to grow even close to this fast if Pat and his team hadn't spent the last five years grinding to make digital notary legal and compliant across the U.S. and also getting enterprises and their customers comfortable with the notion that if they use a digital notary, there wouldn't be any legal risk. 

That's a huge thing that I consider. You know, Pat got states to change their laws, but there were huge real estate companies, there were huge trade associations, even with the new law, they didn't want to do digital notary because they had been doing physical notarization of documents for the last ever and they worried that potentially there would be a risk if they started notarizing all of their docs in a digital format, and they didn't want to risk their business on the chance that that was the case. Enacting regulatory change and educating this whole market was obviously a huge time- and money suck that paid off.

Be nimble with your business model

Second thing that enabled growth of the business was Pat and his team doing an extraordinary job at being nimble and adjusting to the business based on what the market was giving to them. Basically COVID accelerated demand for Notarize’s services to the point where he couldn't hire fast enough to service that demand. At one point in COVID, 3,000 customers were reaching out inbound every week to use Notarize dot com. And so Pat made a really hard decision with this influx of demand. What he did was he completely changed the business model of the company. Notarize went from an employee-managed service to a marketplace.

Meaning if you needed to get a document notarized, originally Notarize’s employees internally would fulfill it, like full-time payrolled employees at Notarize were the notaries. Pat ended up opening up the platform where anyone in the U.S., any one of the 4.4 million notaries could be onboarded and notarize documents on behalf of Notarize. Actually, know what, it's not exactly 4 million again, because it's state-by-state and county-by-county legislation, but it went from just the people working at the company to millions of notaries that could now have access to the platform and notarize documents for people who needed their documents to be certified.

This opened up way more supply for the business, given it went from employees to anyone who was a notary, but it also forced Notarize to put quality measures in place to make sure notary was being done in a quality and standardized way. I mean, you know, you think about it like the, the shift, basically what he did is he shifted from taxi business to Uber. Taxi business you just have the people who have medallions that can service people who need rides. You switch to the Uber model, the marketplace model, where you have people who need rides and people who can give rides, and anyone can give a ride because Uber opened up to any person who would do a background check and had a car they could drive. That was the shift that Notarize made during the pandemic.

Pursue meaningful partnerships

The third thing that Pat and Notarize did to grow the business so rapidly were partnerships. And this was such an interesting one for me, because I traditionally have been so skeptical of partnerships because I found that they are a huge time suck and very few of them are actually fruitful. But what my conversation with Pat made me appreciate is there are so many different types of partnerships and the value of partnerships differs based on the industry and the type of business. Partnerships have been a great way for Notarize to access customers without spending a ton on marketing, and it's also been a great way for the company to hold off competition. What Pat said was at the outset of the pandemic, companies started realizing the necessity of having digital notary because people no longer wanted to go into a physical space and risk harming themselves.

And one of two things was either going to happen. Either competitors were going to get involved, or companies like Adobe, we're going to start building a digital notary product internally. Pat made sure that Notarize stepped up to the challenge by partnering with companies like Adobe and Snapdocs and Dropbox to get access to more customers at-scale and make it easy for these enterprise partners to just plug into Notarize’s system via API. So they wouldn't have a reason to build the offering themselves. And that's what makes Notarize one of the fastest growing, late-stage startups in the country right now. 

Hustle day-to-day but know the longer vision

I asked Pat, how big can this thing get? And he answered in two ways. One, he said the notary market itself is huge. There are 1.25 billion notarizations every year, and you can be a multibillion dollar business just serving this market. But then he answered in a second way, I would say the most visionary and ambitious way. There's an even bigger ambition for Notarize. They want to be the trust layer of the internet. They want to be the company that people call when they want to digitize something and they can't figure it out. Notarize is growing into the platform that handles things that have high-regulatory complexity, like county, industry, and state laws. And they bring it digital in a way that customers can accept.

That's what excites me about this business. What Plaid has done for finance, going through the technological headache of allowing people to make their financial applications speak to each other, like Robinhood speaking to your Chase savings or checking account, Notarize has the opportunity to do that for important transactions, like buying a home, buying a car, or opening up a bank account. There's one more lesson to learn from this story, and that's what makes Pat a great entrepreneur. I finished our conversation by having Pat tell me a moment in the business where he looks back and smiles. His answer:

[START INTERVIEW]

Pat Kinsel: I love Proving people wrong. So I've had so many people that have told me I'll never fucking pull this off, or we won't do this, or we won't do that. And all these investors say, you'll never get your margins to X or Y. And every time we do one of those things, I just, I just smirk to myself. 

Alex Lieberman: This is a trait I've found in some of the highest performing individuals I've ever worked with. They have a chip on their shoulder that pushes them to go deeper and work harder than 99% of people.

[END INTERVIEW]

And that's the story of Notarize dot com. A business that has 10X’ed since 2020, and is becoming the trust layer of the internet. What did you learn from this story that you can apply as a founder or a professional in the work that you do?

Shoot me an email to alex@morningbrew.com or DM me on Twitter @businessbarista. And finally, if you enjoy the episode, please hit the subscribe button. It is the number one way to grow downloads on a podcast. So if you enjoy Founder’s Journal, please subscribe. Thanks so much for listening and I'll catch you next episode.