In business it’s often said that the “riches are in the niches.” DocuSign is proof of this adage.
DocuSign’s shares were made available for public purchase on April 27th, 2018, and it has been one of the more successful tech IPOs so far this year.
Headquartered in San Francisco and founded in 2003, the company had an IPO price of $29 per share, and the stock has risen more than 37% since.
The ambitious aim of DocuSign is to replace paper signatures e-signatures. The actual mechanics of signing a contract has long been an organizational pain point. Handling physical copies of paperwork and getting them to the correct parties can take days or weeks by snail mail. Nonetheless, organizations have been reluctant to change something as crucial as finalizing a contract for fear of making a costly mistake. In the early days, companies had many legal, security, and usability concerns regarding e-signature solutions like DocuSign. With the passage of time though, these concerns have primarily been addressed, and DocuSign has swooped in on this market.
DocuSign says it offers the world’s #1 e-signature platform. Its solutions are so ubiquitous that the company proudly says that its name is becoming a “verb.”
Organizations are adopting DocuSign’s e-signature platform to complete new hire paperwork, sign off on invoices, and approve purchase orders. The company also offers an eNotary solution for paperwork that must be notarized.
Building out the e-signature platform has not been cheap. The company has spent over $300 million in research & development since its inception. However, it’s an investment the company heavily credits for their growth. Uptime is crucial for the business, and to this end, it has had 99.99% service availability for customers worldwide with zero scheduled maintenance downtime over the past 2 years. Clients include enterprise software giant Salesforce, the National Association of Realtors (whose members get a discount), and Bank of America. Many small businesses also use the solutions, making DocuSign unique in servicing enterprises ranging from small to large.
The bulk of DocuSign’s customers are in the U.S., with virtually all of them being in English-speaking countries with common-law legal systems. The company estimates that the total market for its e-signature solution is at 25 billion dollars annually. That gives the company a less than 3% adoption rate, after posting $518M in annual revenues in (fiscal year ended) 2018. Given its leading market status, the company either has plenty of room to grow or is arguably overestimating the size of its total market opportunity (depending on your perspective).
Key to DocuSign’s growth is its API solution, which allows developers to “embed” the DocuSign signature solution into software created by third parties. Almost 60% of all transactions processed on DocuSign are through the API, and 50,000 developer “sandboxes” have been created.
Investors jumped on DocuSign’s IPO very quickly. It raised $542 million on April 27th when the stock went public. Despite its growth and the standard window dressing shoring up of finances before an IPO occurs, the company has not posted a yearly profit. The company had a net loss of $115M in 2017, and since it’s inception an accumulated deficit of $450M. On the bright side, the company saw it’s revenues grow 52% from 2016 to 2017 to a total of 381M. It increased taxes another 35% into fiscal 2018. That appears to be enough for Wall Street, at least for now.
Docusign is a company which as gone after a niche business few people even think about and turned it into a multi-hundred million dollar revenue machine in 15 years. The company’s growth has been impressive, and it’s value proposition straightforward. It is of a rare breed, a tech unicorn six times over. It deserves credit for its accomplishments, chief of all has helped pull us all into a more modern era.