How HelloFax, FreshBooks, and Expensify Map the Hidden Networks of Small Businesses

By Farhad Manjoo , written on April 28, 2012

From The News Desk

About a year ago, I stumbled upon a tiny new Web app that changed my life. It wasn’t Instagram. It wasn’t Pinterest. Unlike so many hot apps these days, this one didn’t have anything to do with local commerce, it wasn’t mobile, and while it was “social,” it was only surreptitiously so. Over time, the app might help me uncover the invisible social network that surrounds much of my work life—but I’m getting ahead of the story. What attracted me to this app a year ago didn’t have anything to do with social networking. Instead, I was looking for relief from the most mundane, hellish of all office tasks: Faxing.

The app is called HelloFax. If you’ve used it, you’ll understand why I was so deeply smitten that I had to immediately sing its praises in a column. If you haven’t used it—and if you regularly find yourself on the receiving end of requests to “please sign and fax” documents to certain bankers, lawyers, insurance agents, people in real estate, and others stuck in Reagan era—then you’ll do yourself a favor and sign up. HelloFax is the best, easiest way to sign and fax—or sign and email—documents without having to bother with a printer or a fax machine.

HelloFax performs a few crucial functions extremely well. To begin, you sign a blank piece of paper, take a picture, and upload it to the site. Now, whenever you get a digital document that you need to sign, just upload it to HelloFax. Add your signature and fill in any other fields. (HelloFax accepts nearly any document type, including PDFs, Word files, Excel files, pictures, and plain text.) Now fax or email it to your intended recipient. Under HelloFax’s free account, you can sign and send out five free faxes each month, and there’s no limit on the number of times you can email a signed document. This week HelloFax became a launch partner with Google Drive, and as part of the integration, it began offering 50 free faxes each month. To receive faxes, you’ll need to pay for one of the site’s premium tiers, which begin at $4.99 per month.

HelloFax has received a bit of buzz over the last year, and while CEO Joseph Walla declined to tell me any metrics, he did say that its userbase is growing steadily. About 6 percent of free users choose to upgrade to a paid plan, a relatively healthy conversion rate. Because the company solves a problem that plagues a lot of businesspeople, it has found fans in high places. The Google Drive launch partnership came about because many Googlers loved using the service (HelloFax also integrates with DropBox and Box).

While Walla doesn’t want to announce his funding on the record, the tiny Y Combinator company—it’s got fewer than 10 full-time employees—has also drawn the attention many investors. (I met Walla and Joel Andren, HelloFax’s new head of marketing, at the offices of a Sand Hill Road venture firm). This makes sense: VCs and their assistants, of course, need to do a lot of faxing. And while HelloFax’s immediate features looks short-lived (faxing will die one day, thankfully), the company is well-positioned for a lucrative long-term opportunity—to solve all the problems involved in helping small businesses go completely paperless.

But because of the way it enters and becomes central to small businesses, there’s something even more groundbreaking about HelloFax’s potential. Each time you sign and send a document through the site, you’re giving it important information about your business life. I use HelloFax about once or twice a week, and most of the time it’s for sending documents to people with whom I have some important contractual agreement in place—magazines I write for, my agent, book publisher, my bank, my insurance company, etc. As a result, HelloFax has become my digital filing cabinet, the main repository for some of the most consequential legal paperwork in my life.

Walla points out that in any organization larger than a few people, tracking these documents can become a big headache. “We talked with Square, and they’re growing really fast, and they told us they’re at a point where any employee can sign a contract with someone else and they might not know it,” Walla says. “If one of your guys in the field signs a three-year contract with someone, you need to know that. If your firm has signed NDAs with other people, you need to know who with and whether they’re expiring.”

HelloFax hasn’t added features to keep track of these relationships yet, but Walla sees doing so as a major opportunity. If every employee in a firm uses his app to sign all their stuff, HelloFax “would be able to track at a company level all your legal liabilities,” Walla says. “What is your legal relationship with everyone? What does that picture look like?”

In other words, it would be something like Mark Zuckerberg’s social graph—but potentially more important, because it would track flows of money instead of friendships. Even small firms pay legal departments hundreds of thousands of dollars to maintain an accurate picture of their liabilities, so by building such a graph, HelloFax would be entering a lucrative field.

HelloFax isn’t the only start-up with such an opportunity. Expensify and FreshBooks, two other small-business-focused start-ups that I use all the time, also occupy a central place in their customers’ business relationships. Like HelloFax, Expensify, which lets me submit expense reports to people I do work for, and FreshBooks, which tracks my invoices, initially enter businesses by offering to eliminate small, painful processes. But that’s just their early promise.

Because they all handle important transactions—between people within a single business or between different businesses—what they’re really doing is charting a previously unseen transactional network.

It’s hard to know, at this point, what the long-term value of such a network might be. But if Facebook can make billions by mapping a network between people who aren’t doing business, imagine what you could do with a sprawling network built from everyday transactions? It could be a big deal—bigger, even, than killing the fax machine.