Wall Street responded favorably on Friday as the 15-year-old San Francisco e-signature company DocuSign made its debut on the public markets.
DocuSign shares closed at $39.73, about 37% above the company’s opening price of $29 a share, proving that the markets still have a zeal for enterprise software — piling on the trend after Dropbox’s blockbuster IPO at the end of March.
Once the confetti settled and the pop was well underway, DocuSign CEO Dan Springer and CFO Mike Sheridan hopped on the phone with Business Insider from a conference room at the Nasdaq in New York City.
Both Springer and Sheridan have taken companies public before — Responsys in 2011 for Springer, and SonicWALL in 1999 and FireEye in 2013 for Sheridan.
Now, the pair say that they’re ready to take DocuSign on to its next chapter, as a public company.
Here’s what they had to say about the future of DocuSign.
This interview has been edited and condensed for clarity.
Becky Peterson: The stock is up 37% from your opening price. Is this good news to you, or are you concerned you priced too low?
Springer: We think of it as a strong reception. If you look at the whole process, we came out with a range of $24 to $26, which we thought was reasonable compared to other multiples that companies like ours has had. We saw strength on the roadshow, so we raised that to the $26 to $28 range. And as we got to the final steps, there was so much investor demand, we decided to price above that raised range at $29.
We could have probably priced at a higher point but we really take a long-term approach here, and our focus isn’t about the day one price or pop. It’s focused on making sure that the right long-term shareholders have the opportunity to participate at an attractive rate. We want to be a great long-term partner to them, and we hope they’ll be the same to us.
So my view on it is that it turned out exactly how we wanted.
Sheridan: I would say that $29 a share is a very very strong valuation at this point.
First day trading is not a perfect science, and I don’t think we should over-interpret exactly where it falls today. But it is nice to have it show some growth in that first day because it means that it is well-received and there is a lot of interest in our story.
I’m much more focused on, what do we look like 90 days from now.
Peterson: DocuSign still isn’t profitable, right?
Springer: That depends on the metric. We’re cash flow positive, but from a net-income perspective, we still have a small loss.
Sheridan: To put some numbers around that — our fiscal 2018 ended in January. In fiscal 2016, our operating loss was -32% and in fiscal 2018 it was -2%. For free cash flow, in 2016 it was 38%, and in fiscal 2018 is was 7%. So, in all our metrics we see very solid progress toward profitability.
Peterson: What does your growth plan look like? What are your focus areas?
Springer: We have a lot of opportunity to expand internationally; Right now, 17% of our revenue comes from out of the US. A few years ago it was just a couple percent, so we’ve already had a lot of growth there. It’s now about a $90 million business, just what we have outside of the US. But we see significant opportunity to grow that.
Our second area is that we have a lot of customers, and we think we can expand what we already do with those customers. To give you the magnitude, we have some customers that have up to 300 different ways that they utilize DocuSign. But the vast majority of our customers have just five use cases turned on already. At this point, we think there is a huge expansion opportunity.
Third thing is that we’re going to make significant investments in our product, and continue to innovate so that customers get more value and success from using DocuSign, and that in turn hopefully will be a huge impetus for them to spend more and grow our business.
Peterson: DocuSign was founded in 2003 — 15 years ago. That’s a long time to be private. How are people responding internally?
Springer: I’ve only been here 15 months, but Mike’s been here a little longer so I’ll let him take that question.
Sheridan: It’s been very well received. Of course it’s a moment of liquidity, and that’s important, but I don’t think that’s the primary driver of the excitement. What we’re hearing and seeing from the offices around the world is that it’s a real pride moment for people — they’re very proud to be with the company.
We had the scale in past years and were big enough to go public. We waited for this time for the right reasons: to move our international expansion, our enterprise expansion, and our profitability from aspirations to proof points. So now is the right time to go.
Our employees have been patient with that, and now that we’re here at the right time, there is a lot of excitement around the company.
Peterson: Is there anything about the process that’s surprised you?
Springer: This is sort of a weird, non-answer to your question, but the surprising thing to me is how there is nothing surprising. It was so straightforward.
It’s a testament to the fact that, as Mike said, we waited until we had all of our ducks in a row. It was incredibly well orchestrated.
If there’s one thing, it’s an odd sort of surprise — I thought there would be a larger number of investors that would say to us that they cannot understand the story and would not invest. But virtually every firm that we saw came in and placed an order on the IPO. So that was somewhat surprising to me.
Leave a Reply
Leave a Reply
This site uses Akismet to reduce spam. Learn how your comment data is processed.
