The road to an IPO can be a long, tumultuous one, but DocuSign may be poised to go public sooner rather than later.
Founded by serial entrepreneur Tom Gonser in 2003, DocuSign has successfully evolved from a business focused on eliminating the pen and ink signature into a network that handles digital workflows and processes documents for well over 100 million people and 250,000 businesses, including Comcast (CMCSA), LinkedIn (LNKD) and Salesforce (CRM).
Over the last three years, DocuSign has made several strategic moves — in addition to deepening partnerships with enterprise software providers like Oracle (ORCL) and Microsoft (MSFT) — indicating the business is slowly gearing up for an IPO, if not later this year, then potentially next year.
Part of the reason the startup may be taking its time may have to do with 2015 being the worst year IPOs since 2008-2009 financial crisis. Now more than ever, investors are scrutinizing companies that go public for more bottom-line profits than simply revenue growth. But two venture capitalists Yahoo Finance recently spoke to indicated IPOs are poised to make a comeback over the next 18 months.
Here are three reasons DocuSign may be headed for an IPO in the short-term:
It’s basically the only way for it to raise even more money
In May 2015, DocuSign raised a whopping $233 million reportedly valuing the company at $3 billion. That particular round of fundraising was a “Series F” — venture capital terminology frequently corresponding to a very, very late stage of fundraising for a startup — bringing the total amount of fundraising to over $525 million.
It’s virtually unheard for a company to go beyond a Series F, with one exception being Uber, which raised $2.1 billion in a Series G late last year.
“DocuSign is a force to be reckoned with, and for years remained largely unchecked, in its dominance of the electronic signature market; however, some of DocuSign’s competitors have gotten their acts together and are going after it in a meaningful way — the most notable being Adobe Sign,” explained Gartner senior research analyst Neil Wynne to Yahoo Finance.
DocuSign is at the end of the line if wants to continue raising more money to fuel further expansion and hold onto its 70% market share. On simple principle, raising cash as a privately-held company becomes harder if there’s increased competition or competition is fierce.
It recently released new growth metrics
In late August, DocuSign released a slew of new metrics pointing to rapid user growth: 300% year-over-year growth. Indeed, 100 million users across 188 countries now sign and manage digital documents via DocuSign, and the company says 130,000 new users join DocuSign every day.
“On average, 84% of transactions are completed via DocuSign in less than one day; 62% in less than one hour; and 51% in 15 minutes or less — dramatically faster than the days or weeks typically required with paper,” the company stated in the press release.
In publicly releasing those growth stats, DocuSign is sending a signal to investors about the company’s current, thriving state. This may be part of DocuSign’s larger attempt to update its financial metrics — a move typically performed by companies in the walk-up to an IPO in order to focus attention on the factors driving business.
Docusign recently hired execs with IPO experience
Equally as telling, perhaps, are DocuSign’s management changes.
DocuSign has also added top executives over the last 3 years with experience in taking a company public. DocuSign chief financial officer Michael Sheridan, for example, was CFO at FireEye (FEYE), a network security company, for over four years and played an instrumental role in its successful IPO in September 2013. Meanwhile, DocuSign general counsel Reggie Davis served as General Counsel for gaming company Zynga (ZNGA)’s stock market debut in December 2011. And while Zynga’s stock eventually crashed due to a lack of innovation and a slow transition to mobile devices, there’s no denying the gaming company had a strong debut on Wall Street.
The only thing standing in the way of DocuSign going public? A new CEO. The hunt continues for someone to replace longtime chief executive Keith Krach, who initially announced he would step down in October 2015 for unspecified reasons. (Krach added he would stay for an additional three years as chairman after a replacement CEO has been brought on.)
Finding a new CEO pre-IPO isn’t commonplace, but it can happen when say, the company’s board of directors or management feels a new, more experienced leader is needed once a company has achieved a certain level of maturity and scale. Names like former Symantec CEO Enrique Salem were bandied about over the summer, but DocuSign has yet to name an actual replacement for Krach. Once that happens, expect DocuSign’s Wall Street debut to happen not long after.
With that pace of growth and revenue Forbes estimates in the hundreds of millions, DocuSign may just be one CEO away from having a compelling story to tell Wall Street.
Correction: The original version of this article noted that DocuSign raised over $700 million. The article has been corrected to indicate it has raised over $525 million.
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JP Mangalindan is a senior correspondent for Yahoo Finance covering the intersection of tech and business. Follow him on Twitter or Facebook.
