Nameof the Article: Why This $3 Billion Dollar Tech Startup is stillsearching for a CEO
Authors:Lizette Chapman, Eric Newcomer and Jordan Robertson
Dateof Article: June 26, 2016
Publication Bloomberg Technology
of the Article
Thearticle endeavors to proffer reasons on why DocuSign Inc. has not yetreplaced its current CEO for several months. DocuSign Inc. is amongthe most prominent unicorns in the Silicon Valley. Chapman, NewComer,& Robertson (2016) posit that the company has not found asuitable person to fill the position of the CEO although the currentCEO has promised to step down. The company gained widespreadrecognition in 2003 when it introduced a service that facilitatedelectronic authorization of documents. Later on, the company startedengaging in other business operations within the real estatecorporate world. Since 2011, the company’s CEO, Keith Krach hasbeen running the company with great financial success. Particularly,the company’s valuation has exceeded $1 billion, but investors havenot realized any returns from the valuation. As such, the board ofdirectors has been pressurizing the company to either sell or gopublic. However, the current CEO is adamant to conform to either ofthe demands and hence he has offered to step down. Additionally,efforts to hire another CEO have been futile given the anticipatedsuccessor to Keith Krach declined the offer and instead chose Google.
Ananalysis of the article reveals that DocuSign Inc. has not found asuitable successor of its current CEO. First of all, it was notedthat the CEO had offered to resign because he could not conform tothe board of directors’ demand to make the company go public. Theimplication of this is that he is perhaps not capable of running apublic company but rather a private one and that is the reason as towhy he does not want to make it go public. While the company tried tohire another CEO, he declined the offer and instead joined Google. Italso seems that there are internal disagreements among the company’stop executives and such disagreement has derailed the process ofrecruiting a new CEO.
Chapman,L., NewComer, E., & Robertson, J. (2016). Why This $3 BillionDollar Tech Startup is still searching for a CEO. Bloomberg.Retrieved 2 July 2016 fromhttp://www.bloomberg.com/news/articles/2016-06-27/docusign-struggles-to-find-ceo-to-lead-the-3-billion-startup
Copyof the Article
DocuSignInc. is one of Silicon Valley’s most prominent unicorns. But it’staking an unusually long time to fill a key position: chief executiveofficer.
Inan e-mail to DocuSign staff last October, Keith Krach said he wantedto step down as CEO and that a search for his successor was underway. But almost nine months and one major public setback later, thehunt continues. And Krach remains in the job.
DocuSignrose to prominence starting in 2003 with a service that lets peopleelectronically authorize documents they otherwise might have to printout and sign. The San Francisco company quickly spread in the realestate world for leases and other contracts. It has since addeddocument management and archival software that’s been embraced byvarious industries as a quick and secure way to sign using a fingeron a mobile device.
Krachhas been running DocuSign since 2011 when he replaced founding CEOTom Gonser. Under Krach, DocuSign has kicked its fundraising effortsinto high gear. The company has raised more than $500 million intotal. A financing round last year valued DocuSign at $3 billion.
Withcoveted “unicorn” startup status, having reached a valuationexceeding $1 billion, came new investors expecting to see results.The company’s board of directors has increased pressure on DocuSignto go public or sell, neither of which Krach wants to oversee, saidpeople familiar with the matter. Instead, he offered to resign, andthe company hired a recruiting firm to find someone to “lead usinto the next decade,” wrote Krach, 59, in his e-mail to staff.
DocuSignidentified that person early this year and invited reporters to apress briefing introducing the new CEO. Shortly before theannouncement in March, DocuSign canceled the event, saying the personhad backed out at the last minute after receiving an offer from“another company with unlimited resources.”
Thelost CEO candidate, whose name hasn’t been previously reported, wasRick Osterloh, said people familiar with the matter, who asked not tobe named discussing confidential information. Osterloh, a formerexecutive at Motorola Mobility during its transitions in and out ofGoogle, returned to the internet giant in April as senior vicepresident of hardware at the Alphabet Inc. unit.
RickOsterloh is said to have pulled out as DocuSign CEO for a job atGoogle.
Krachand Google declined to comment. Osterloh didn’t respond to requestsfor comment. A DocuSign spokesman said recruiting efforts are ongoingbut declined to comment further.
Thecurrent list of candidates includes Enrique Salem, a DocuSign boardmember and managing director at Bain Capital Ventures, peoplefamiliar with the matter said. Salem, a former CEO of Symantec Corp.,has orchestrated multi-billion-dollar deals since leaving thecybersecurity company, including sales of Mandiant to FireEye Inc.and Blue Coat Systems to Symantec. At Bain, he led DocuSign’s $233million round of financing, which nearly doubled the company’svaluation. Salem declined to comment.
EnriqueSalem, managing director at Bain Capital Ventures.
Photographer:David Paul Morris/Bloomberg
DocuSignis aiming to make a decision as early as next month, people familiarwith the matter said. The search is exceeding the length of recentCEO selection processes for many public tech companies, includingYahoo! Inc., Intel Corp. and Symantec. It’s already more thandouble the time considered normal for a private company, said DerrekMilan, a vice chairman at executive recruiting firm Korn Ferry.
Itusually takes three to four months to place a CEO at a private techcompany, Milan said. The process can get derailed if board membersdisagree on what qualifications their ideal leader should have, suchas whether a background in mergers or in taking companies public ispreferred, he said. “The biggest impediment is a lack ofcalibration at the beginning of the process,” he said.
Amidthe CEO disappointment this year, four of DocuSign’s nine topexecutives leftthecompany, signaling disunity in the senior ranks. The search isdragging on as any potential CEO must face the prospect of dealingwith impatient shareholders in an unpredictable business environment.Initial public offerings have been almost nonexistent for technologycompanies this year, and acquisitions have been sluggish overconcerns about over-inflated private-market valuations.
WhileTwilio Inc.’s successful debut last week and Microsoft Corp.’s$26.2 billion purchase of LinkedIn Corp. are sources of optimism,neither is expected to open the floodgates. And Britain’s vote toleave the European Union could put deals on hold, leaving companieson the threshold of going public or selling in a difficult position.
DocuSigndeclined to share details of its financials. In order take thecompany public, the new CEO must outline a plan for DocuSign tobecome profitable within four quarters of its debut, people familiarwith the matter said. Krach, who is also chairman of DocuSign’sboard, has said he plans to keep that role for at least three yearsafter a new chief starts.
Meanwhile,staff are trying to look past the CEO distraction as they prepare toroll out tools that comply with Europe’s new e-signature rules.Krach describes the initiative as “the boldest” in the company’shistory.
DocuSignsaid it has spent roughly $100 million on research and development,acquired three companies, and opened data centers in Amsterdam,Germany and France in preparation for the new regulations known aseIDAS, which take effect in the European Union on July 1. BradBrooks, the chief marketing officer at DocuSign, said the outcome ofthe Brexit vote will not affect the project.