The pandemic has accelerated the demise of pen-and-paper signatures — transforming once-boring DocuSign into a $37 billion tech darling suddenly worth more than Ford Motor, eBay or Best Buy.
Just as Zoom (ZM) is cashing in on the need to meet virtually, DocuSign’s eSignature business is thriving because it makes it easy to do paperwork remotely. Shares have skyrocketed more than 170% this year.
DocuSign Is On A Winning Streak
Organizations that never imagined a world without physical signatures have been forced to embrace it. Paperwork now being done with DocuSign (DOCU) includes everything from safely enrolling Covid patients into clinical trials and filling out welfare paperwork in New York State, to remotely onboarding new hires and signing sensitive bank documents.
“You don’t want to think of yourself as benefiting from something so tremendously terrible for the world.”
DocuSign added more customers during the first half of this year than all of 2019. And Dan Springer, DocuSign’s CEO, is supremely confident those new customers won’t fade away after the pandemic ends.
“They’re never going back,” Springer told CNN Business. “We’re going to be growing at a high rate for so many years to come.”
In fact, San Francisco-based DocuSign is growing so rapidly that it has gone on a massive hiring spree. The company expanded its workforce by 25%, or roughly 1,000 people, since the pandemic erupted.
“It’s a crazy world. How can you have that many employees who have not actually met any other employees in person?” said Springer.
Some DocuSign Customers Are Struggling
DocuSign’s billings spiked 61% during the second quarter, and the company upgraded its guidance for the rest of the year. But the debate is over how sustainable its growth will be in the long run. Even Springer cautioned that business eventually may cool off from these brisk levels.
“My view is the new normal will be somewhere between the old normal and today,” he said.
Still, much like Zoom, Peloton (PTON) and Amazon (AMZN), DocuSign is being viewed on Wall Street as a clear beneficiary of the pandemic — a description that Springer is clearly uncomfortable with.
“It makes you feel, quite frankly, awkward,” he said. “You don’t want to think of yourself as benefiting from something so tremendously terrible for the world.”
Springer noted that many of DocuSign’s employees and customers, especially small businesses, are struggling because of the pandemic.
In some cases, DocuSign has told customers it won’t send unpaid bills to collections.
“The risk is it does increase the probability we never get paid. It’s something we can afford to do,” Springer said.
Dismissing Adobe As A Threat
Beyond the troubles facing small businesses, DocuSign’s success risks luring competitors to the $25 billion market for electronic signatures.
“Adobe represents a deep-pocketed competitor that appears increasingly interested in taking share in the market,” RBC analyst Alex Zukin wrote in a recent note to clients.
Although Springer expressed admiration for Adobe (ADBE) and CEO Shantanu Narayen, he dismissed the company as a true threat.
“We love each other, and he kind of hates me right now because we’re making him look bad,” Springer said. “We are so far ahead of them. We are six or seven times their size in this business and growing twice as fast. I don’t have any concerns.”
The bigger threat, according to the DocuSign CEO, is from a sneak attack by a company with a totally different business model.
“I’m sort of paranoid about competition,” Springer said.
‘Don’t Look At The Stock Price’
The dizzying rise of DocuSign — and tech stocks broadly — has even surprised Springer, a 25-year veteran of Silicon Valley. The company traded at $203 on Monday, up a whopping 600% from its April 2018 IPO price of $29.
Springer was startled to have recently discovered that his personal stake in DocuSign, including options and performance bonuses, climbed to approximately $1 billion.
“What kind of world…? What has happened?” Springer recalled of his reaction.
DocuSign’s stock surge has made countless employees very wealthy, but Springer doesn’t want them to become preoccupied with the whims of the market.
“I try to tell everyone, ‘Don’t look at the stock price,'” Springer said. “Don’t focus on Wall Street. It doesn’t help you run a business better.”
The DocuSign CEO pledged last year to donate any new stock awards to charities including the Boys & Girls Clubs of America.
“It’s not real. It’s not what’s important,” Springer said of the paper value of his DocuSign stake. “I’m a simple person. I don’t want boats and airplanes. I’m going to give most of it away, much to the chagrin of my children.”
But there’s nothing simple about the insane moves in tech stocks these days.
Unprecedented levels of stimulus from the Federal Reserve, combined with the disruption of the pandemic, have caused investors to pile into tech stocks. Those bets have sent market valuations to levels unseen since the dotcom bubble, or in some cases even above that.
“It is a little bit mind-blowing,” said Springer.
But he dismissed bubble concerns.
“I do think there is substance behind the valuations in terms of strong businesses with strong market positions,” Springer said.
DocuSign Is Overhyped?
Yet even some DocuSign bulls on Wall Street are warning the company’s meteoric rise might be overdone.
Although DocuSign has “established itself as the de-facto eSignature standard,” the company’s long-term growth prospects are “largely priced in,” Morgan Stanley analyst Stan Ziotsky told clients in a note on September 4.
DocuSign trades at a stunning 242 times projected earnings, well above the industry median of 21, according to Refinitiv.
“I understand people look at the valuation and say, ‘How did this happen?'” Springer said, adding he “never” expected the stock to hit $200 this year.
Still, Springer is confident DocuSign will get more profitable and grow into its lofty valuation, pointing to the fact that his net worth remains largely tied to the fortunes of the company.
“I am incredibly undiversified,” Springer said. “If I thought it was incredibly overvalued, the rational thing to do would be to sell some shares. I haven’t sold a share yet.”
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