Electronic signature provider DocuSign is having a bumpy road towards an expected IPO, even as it continues its rapid, global growth. Having raised a $278 million series F funding round a year ago, doubling total funding above the half-billion mark, the company can afford to take its time. But after being forced to abandon a planned change of CEO in March, the company saw the departure last month of several key executives. Last week, I caught up with Neil Hudspith, president of worldwide field operations, to find out what's going on.
DocuSign was in London for its European customer event, and took the opportunity to unveil its Summer 16 release, emphasizing Europe-friendly features such as:
- Native compliance with the new EU-wide eIDAS regulation, which standardizes e-signature laws across the single market.
- The launch later this year of a hybrid cloud offering, which gives customers the option of placing a DocuSign appliance within their own firewall to gain control over the location of authentication and documents.
- A new partner program for trusted certificate authorities and local service providers.
- Plans for two further European data centers, in addition to facilities already open in Amsterdam, Frankfurt and Paris.
- DocuSign has also appointed former Unit4 and SAP executive Helen Sutton to head up enterprise sales in northern Europe.
The event kicked off with a keynote by CEO Keith Krach, who revealed in a leaked internal memo last October that he intends to stand down to allow someone else to take the company public. Hours before his replacement's name was due to be announced in March, that still unnamed person pulled out after being headhunted by another company. While the search for a new replacement continues, several top executives left last month, including COO Gordon Payne, who diginomica interviewed last September.
Change of guard
Hudspith says that Krach, who co-founded Ariba and led the company into acquisition by SAP before coming out of retirement to lead DocuSign, is determined to leave before DocuSign goes public. A replacement will be found sometime this year, he hinted. He puts the change of guard down to the company's evolution, rather than any change of direction.
Three and a half years ago, when I joined, we had a couple hundred people in the company. Last week, we just crossed 2,000 people. We're a different company over the last three years.
The strategy's the same — global footprint, tons of investment. We've made some executive changes. We are on the path from being a private company to be on the public markets.
One new direction in the latest product announcement is the introduction of the hybrid cloud offering, which might be seen as a dilution of DocuSign's previously pureplay cloud-native strategy. But Hudspith says the security appliance solution is merely a pragmatic response to regulated industries.
A few years ago, a 100% cloud company would have had palpitations over thinking it wasn't 100% cloud.
If we're going to continue as regulated compliance changes as fast as it does in certain industries and certain countries, we have to get over ourselves as an industry and move with the needs of the customers. As opposed to 'We're a pure this' or 'We're a pure that,' we're going to have to do what the customers need.
Hudspith does worry that a proliferation of regulation around the world may impact innovation because only larger companies will be able to keep pace.
There's certain table stakes now that, if you really do want to deal in certain industries, forget the technology you're building. You have to comply with certain regulations that are incredibly expensive.
I do have a little bit of a fear that at some time, that's going to curtail some of the innovation we all need to keep us on our toes. We want to partner with those companies, we don't want less of them. I hope the innovation tube doesn't get thinner.
In a country like Brazil, there are new regulations for the insurance and financial services market every single month. To be somebody that deals with the Brazilian marketplace, to keep up with that, takes a whole bunch of effort where actually it would be great to keep building out the platform and providing innovation, but it's a cost clearly of doing business.
DocuSign itself has been no slouch at removing barriers, working to digitize an assortment of previously physical signature processes, from Japan's hanko stamp to the thumbprints and ledgers used by US notaries.
The hanko, that's been with us for thousands of years as a way of completing a transaction. We're actually working with Shachihata, who is the supplier of the chop or the hanko, and we're digitizing that process. We're just seeing some amazing advancements in terms of people willing to transform themselves, and this is the Japanese government wanting to transform the way they transact.
In North Carolina, we're working with Accenture with their mortgage team, where we're actually accelerating the digitalization of notaries, which have been with us for 200 years. The notary still gets paid, and what we have is then their credentials sitting in our platform.
We are seeing such an amazing array of change and requests on us to provide further services within the DocuSign platform, probably at a faster rate than I've ever seen.
Platform for dealmaking
But DocuSign aspires to be more than simply a tool for completing transactions with a digital signature. Its strategy is to also provide the 'transaction rooms' where deals are finalized, making it a platform for dealmaking rather than a more limited, commodity function. Hudspith explains:
If you start looking at transaction rooms and begin to explore doing everything within DocuSign in terms of teaming, in terms of groups working together on complex or easy transactions and document assembly — you think about our advanced editing skills, never leaving DocuSign when you're actually negotiating or building that transaction — I think that to me is where our platform is going to go. We've done that for financial services. We've clearly got it in real estate, that's where the idea came from.
Our investments will continue to be going global with all the things we've talked about with digital signatures, different authentication, different acceptance. We'll build out regulatory standards, but I think the transaction rooms to me are a natural next step in driving beyond the completion. We'll actually build whatever that transaction is within the DocuSign platform. I think that's fascinating where we can take that. I think as a company, there's a ton of value we can bring beyond completing something.
DocuSign is also proving to be a powerful tool for introducing digital transformation into enterprises. Digitizing the signature is the first step away from a paper-based process, which opens up opportunities to digitize and reform other aspects. This is helping to fuel the company's growth, says Hudspith.
We're growing at 60% per annum of much bigger revenues, and I know we can continue that. I think the reason we're growing at that rate is there's more and more companies realizing that they truly do have to transform their businesses.
We've got a bank here [in London] that's over 100 years old, absolutely wanting to do some crazy, exciting things around digitization. Actually, some of their executives themselves say, one of the biggest challenges is, we've been around for these hundreds of years. It's not quite that easy to change, therefore there's a risk profile to that.
The loss of so many of the leadership team at once is curious, and coupled with the uncertainty over Krach's successor, it does raise question marks over what's happening behind the scenes at DocuSign.
Personally, I find DocuSign one of those companies that's always interesting to stay close to, simply because its technology enables organizations to change the way they work and become more digital. But I wonder whether its role is putting some pressures on its business model.
On the one hand it's having to invest significant amounts in staying up-to-date with all the multitude of compliance requirements around the world. It's to its credit that it's invested in doing that across so many jurisdictions, but it must make it quite expensive to maintain and deliver what is nevertheless a point solution with a commodity price point.
On the other hand, for an organization to really make use of digital signatures it has to transform processes that have been in place for decades or centuries. That requires evangelism and consulting that's quite expensive. It's one thing to sign up individual users for the convenience of digital signing, but converting an enterprise is a rather more expensive and long-winded sales process. I suspect those large enterprise sales may be quite a costly challenge.
The final piece of the puzzle is this attempt to build a platform that sucks in much more of the process around getting to the point where the signature completes the deal. To win this ground, DocuSign has to fend off competition from application providers of all types who are equally keen to own those processes.
DocuSign's global infrastructure for trusted electronic signatures remains its most valuable asset. Its challenge is monetizing that in the most effective way, at the same time as continuing to sustain rapid growth as acceptance of digital signatures continues to spread. There may be some bumps along the way, but as challenges go, that's not such a bad one to have.