DocuSign, Inc. (NASDAQ:DOCU) Citi’s 2020 Global Technology Virtual Conference September 10, 2020 6:05 PM ET
Dan Springer – CEO
Conference Call Participants
Walter Pritchard – Citi
All right. Thanks everybody for joining us again here, continuing the afternoon. I’m Walter Pritchard, Software Analyst at Citi and happy to have with us DocuSign and Dan Springer, the CEO of the company representing. Dan thanks a lot for joining.
Great to be here.
Thanks. So, we’re going to – I’m going to go through some questions I’ve prepared. And there should be – for everybody that’s joined me on the video, there should be a tab of to your left that says questions. And you can click that tab and submit a question if you want to get me a question that I can incorporate into the discussion here. So, feel free to do that at any point in the discussion.
So, Dan, I guess, it’s been quite a year for DocuSign probably not the way you thought the year would proceed, but company is definitely capitalized on the opportunity and shown some strong growth. Maybe you could just sort of step back and help us understand I think digital signing is somewhat intuitive as a beneficiary of all this in this environment, but in what areas have you seen the most strengthened and accelerated adoption of your technology given the COVID environment?
Yes, absolutely. In fact, it’s interesting at the beginning of the year, our fiscal year starts February 1. At the beginning of the year we were off to a really good start. We were quite pleased. And then about halfway through the quarter, we actually saw a significant increase in demand, acceleration of demand due to COVID. And what we saw is that a lot of companies that were existing customers, as well as a lot of folks that have been prospects in discussions with us, very quickly wanted to get onboarded with eSignature.
And the core eSignature use cases once you would expect, where people felt that they were doing things with paper and manual processes that were okay in an office environment, but in a work from home we’re going to cut it. Sales contract was a common one. People used to both from their own standpoint, sending out contracts, routing around before they sent them. But then they had to send it to an office where maybe two or three people needed to sign something and normally that get routed around.
Now, there’s no office where the customers were sitting, so they needed to do those things electronically. We also saw a lot of people with internal use cases like – people are still hiring people. DocuSign hired a thousand people since COVID. We have to get off the letters out to people. And there wasn’t a way to sort of send them someplace, have them get sent back and process because no one was there to receive them. So those are kind of use cases where people kind of urgently need them to put the place.
And the other big area was there is a lot of COVID related use cases, healthcare, small business administration, PPP programs where people needed to, it didn’t have a model for what they would do in this scenario. So we saw quite a good acceleration of the business. That’s why we had – Q1, we have 59% billings growth, pre-COVID-19, we’d only once then above 40% of billings growth, so it was bigger than Q2, we just announced about 61% billings growth. And some of that is our business is strong, and some of it is definitely because of COVID. And on the flip side, the only real sort of headwind, I’d say, Walter, as we had this phenomenon where some of our small businesses are really being put into an existential dilemma, can they survive?
And so we could see that on the small business exposure be something both today and in the future could be problematic and then certain industries. So if you’re in the travel hospitality industry, as an example, you’re feeling really challenged. And so some folks there that were either existing customers looking to expand or prospects looking to come on, we’d see some slowness from those verticals. But the net of the kind of tailwinds were significantly stronger than the headwinds. And so, we did see acceleration in the business.
And then, you give customer metrics and you give metrics around the dollar based net expansion and we’ve seen an uplift in both, you know, I think probably what it look like to me is more upside around the customer numbers. And can you talk about sort of how that’s played out with – have you had existing customers, who were starting on eSign side and dramatically accelerated and that’s just sort of buried in the dollar-based net retention? Or has it really been the new customers that have – from your purchase of the company you’ve seen sort of come in, in a major way?
It’s been both. I think you actually hit the two best metrics. I like to talk about lots of in terms of trying to describe the impact. So we put numbers for the folks, but not as familiar with the DocuSign story. But our dollar net retention rate has historically been between about 112 and 119 when we went public. That’s what we kind of guided the way we thought we would be and where we have been historically, we’re pretty much right about the middle of that.
And then actually even before COVID that started inching up a little bit, and then we hit the 119%, and so we’re pleased this last quarter, we went above that. So outside of that range, we’d experienced at 120%. And we think that’s going to continue to be a strong metric for us going forward. And I think that’s indicative of what you described with your existing customer base is just growing more with us, but on the new customer ad side, you’re also right.
If you look at the first half of last year, we were adding 3,000, 4,000 customers, new customers for direct customers, not counting the web and mobile, but these are the ones that come and have a relationship directly with the sales rep. And at DocuSign that was 3,000, 4,000 and now it’s been the last two quarters, 10,000 each quarter. So that’s a fairly substantial impact.
But from an impact on our financials today, those net new customers don’t add that much of an impact relative to the size of the tripling, a bit more than a doubling, almost a tripling there because we tend to have that land and expand model. So their initial context in oftentimes be relatively small and then with 120% net retention rate, we grow them over time. So from a dollar impact in the short run metrics, it was very well evenly weighted between the new acceleration in new versus the acceleration in the base.
Got it. And then, I guess, relative to the U.S. and international markets, there’s been some legal differences in how the systems are set up and you had seen much stronger business in the U.S. historically than in international markets. But could you talk a little bit about how the impact has differed in those two general theaters?
Yes, so I think the answer is not very different. We haven’t seen a lot of difference from a COVID impact on our international business versus our domestic business. Our international business has been growing a little faster than the domestic business. I mean, domestic is kind of quite a clip right now, too. So international is trying to take share. It’s hard to take share when the base business is growing as fast as it is. But if you look at this last quarter, our total revenue growth is 45% and the international was about 60%. So it is growing faster.
I don’t think that’s particularly COVID related. I think that was already happening prior, and a lot of it is just growing off a smaller number. So it’s easier to have the higher rate, 80%, 81% of our revenue still is domestic and just the 19% international, which is a big focus area for us and it’s why we obviously announced it. Mike Sheridan, our CFO, is going to move into this key role as the President of International for us to really drive that international growth. We think it’s our single biggest growth opportunity on top of all the things we’re doing well today and when we see opportunities to do more, that’s a single biggest one I see, so thrilled to have Mike leading that effort to try to accelerate even faster outside of the U.S.
And on that – and I mean the eSignature in the U.S. is something I think, it started to become sort of an accepted technology. DocuSign has a brand. There’s sort of a network effect. Can you compare sort of how you’re thinking about the network effects internationally? How COVID has driven that? You’re realizing when I say international it really is country by country. And so I wanted to hear you incorporate that in.
Yes. Well, to answer your point, there is some global business that does go across border for sure. When we look at our transactions, the dominant component is within a country to your point. So, I would say that, the COVID impact, I don’t think again has been super strong in driving international disproportionately. But I think what’s happening is because of the brand, as you said, was so strong in the United States, we were well understood because people are now finding themselves in situations in other countries where their work from home, and they need to find a solution is driving more people to find us.
So we’re closing some of that gap on our brand recognition in other countries vis-à-vis whereas in the United States. And so I think over time that will help us close that revenue gap I was describing where our penetration outside of the U.S. is smaller than we’d like to see it. So I do think COVID will probably accelerate a little bit that establishment of the DocuSign brand in additional markets.
And how are you thinking about we had Kelly Steckelberg, who’s the CFO Zoom on earlier today and we were talking about some of these sort of effects in their business, which I think these are two companies that have seen just quite a dramatic impact. From a sales and marketing perspective, marketing and brand awareness and this sort of – general sort of overhead you kind of air cover activity that you’ve done in the – done a lot of in the past. What have you done to reallocate? Or if at all marketing and sales spending sort of accounting for the fact that you’re now getting this sort of uplift and recognition from kind of more organic processes.
Yes. Well, actually, it’s interesting. We see so much extra demand that we’re actually looking to double down and pull forward growth spending, whether that’s hiring reps, whether that’s more online marketing and advertising spend. We’re saying we want to do more because we just see that demand has accelerated forward. So we want to meet that demand, and we feel good about how it played out in the first half. We want to look for that opportunity to do more than the second half as well.
Talking about Zoom interestingly, I had a conversation with Eric about this the other day, And one of the things they’re seeing, the same thing we are seeing is more opportunity in that direct business, the digital, direct business or e-commerce business because people are seeking us even more than we need to seek them. Some of those things like Google search and online advertising, and some of it is around building the brand as you described.
So I think we’ll see an opportunity. I don’t think we’ll get it as much of a percentage as Eric has of his business in digital, but I think we see as an opportunity for us to have a bigger portion of our business. And we are definitely going to double down on that marketing more to people who are again looking for – in this case, an eSignature solution. But it will be true for the overall DocuSign agreement cloud overall, it’s just that the entry point, most companies have into the DocuSign agreement cloud is still eSignature because it’s such a high ROI. It’s so fast to implement and get value that in times like these it’s the place that most people will start.
Got it. And just as you sort of think about the sales and marketing strategy, you’re obviously having a lot of business come to you right now, As you look out, a year from now, two years from now, how do you expect to adjust sort of the way you’re going to market given what you’ve seen in terms of a massive amount of awareness over the short-term here. Is it just get back to the kind of business as usual or do you think there is an adjusted playbook that you’ll put in place over the long-term?
Well, I think it’s interesting. There is a lot of things. It’s funny, when you think about the work from home world, I don’t think it’s ever to go back to the old normal. I think there’ll be a new normal, we don’t know exactly what it is. When we look at our own business, we’ve realized there is a bunch of jobs we thought needed to be a 100% in the office that we are saying, wow, they’re working pretty well outside of the office.
So it’s changing our view. So I don’t know exactly what the new normal will look like, but my instincts are telling me that we will not be the way we used to be at both the way we operate our company or the way we sell our market. But we’ll be somewhere in between where we are today and where we used to be.
And I think from a standpoint again for us, we look at that increment as an incremental growth opportunity. And so we’re looking to spend quite frankly more aggressively than we were spending. We’re still getting improvement in our margin because the top line is growing faster, but we’re not thinking about this as, so do the same thing, get a onetime bump that falls to the bottom line. We’re saying, how do we reinvest that surplus to set up many years to come of higher growth than we would have otherwise had.
And in the customer count, which has been substantially higher than we had modeled at the beginning of the year. You know, you mentioned revenue contributions, there are modest at least upfront from those customers, but as we, and so hopefully you get to see the benefits of those upsell over the next 12 and so four months.
But as we think about, we get into next year and so forth, and even the second half of the year, how do you think about any of the dynamic that you’ve seen so far that’s may be pulled forward, some of those customers versus not – and just trying to sort of set expectations around how we should think about modeling that even though we understand, I think it doesn’t drive a lot of in-period revenue.
Yes. Well so two thoughts. First one is we to get sort of quantitative, I put out guidance for the second half. And the nice thing about this quarter is you ended up getting both the third quarter and a fourth quarter number by getting the third – the next quarter and the end of the year. And now Cynthia of course, fantastic new CFO that we’re so thrilled to have in this role. And it’s hard to replace Mike Sheridan. But I think we found someone that can absolutely do that, which I think is awesome for us.
I think you’re going to see her talking a lot about the same concept that Mike has always spoken about. We’re giving guidance to what we can see, where we have visibility, sometimes that will appear to be conservative, because we’ll say, well, that we’re not going to guess that’s what we can see.
We’re giving you the visibility we’ve got. And we’ve got that feedback from this last call, but there is a lot of uncertainty right now in the world. And again, we talked about the headwinds that we’ll also get for some of our small businesses. So it’s hard to understand how that would play out. So from a quantitative standpoint, we’ve put out the guidance in the second half that we see, it’s still significant increases from where we were before. Not at the same growth level we had at the first half, which is sort of unprecedented levels that we’ve had.
Going forward, I think you’re going to see more of the same. I think we’re saying that the people that have pulled forward, those use cases that they probably would have done anyway. We believe there is plenty more use cases behind them.
So it’s not a situation like we think they’ve pulled forward and now we’re going to have a gap. Next year, we’re all guiding that was gotten is done. And one of the reasons we feel really strongly about that as we look at this from TAM standpoint. And if we think about the construct – we see about a $25 billion global TAM for eSignature alone, and then about another $25 billion-ish for the rest of the agreement cloud opportunity.
And you look at where we are, we’ll do in the $1.3 million, $1.4 million revenue to shift, it’s the bulk of that being eSignature, it’s still a tiny penetration. So we’re very early days, even in our most mature markets. And we feel like the growth potential here within our base is substantial. So from that standpoint, we think we’re going to continue to operate at this new sort of higher level, and it’s not going to be in give back. And I think some industries work from home or in a tricky spot right now, is if people stop working from home, will people go back to the old system.
We don’t believe in the signature-centric world or the Agreement Cloud World. People are going to say, what, now that I’m back in the office, I want to start doing paper-based contracts. I want to FedEx some of the people, I want to wait a week to get them back. I want to have all of those other challenges. They’re not going back. The savings are significant in time, in money, is a better customer experience in the process. So we really don’t think anyone is going back to paper once they switch, and we think this is going to empower them to see the benefits they’ve gotten and the ROI they done to want to do more. So we’re pretty bullish in that stand.
Got it. One question that came in at – I think the last one for now on eSignature, because I want to talk about some other topics, but there has been – you’ve seen volume growth. I just want to understand, you have customers that have certain sort of volume, volumes contracted on an envelope basis that are in their agreements with you. To what extent have you seen customers come back, and early sort of up their volume commitments, and then pricing as well, I guess I’d expect in any market where volumes are exploding the pricing, continues to come down to drive more volume, but what has been the sort of impact of pricing in this environment?
Yes. So two things, one on the first piece around the volume, we haven’t seen dramatic increases in volumes, but remember we actually price on capacity.
So we go to a customer and say, you’re going to use this level of capacity for one year, two year or three years whatever the length of their contract is, and they – we come to an agreement. If they start to go way over, we’ll come back to them and say, hey, you’re using way more than you’re contracted to. Let’s renew your agreement early and get you the right set of volume. If someone is a slight bit above their volume, we just wait until the contract comes to the end and do it.
We don’t go back and try to charge overages in most situations. So from that standpoint, if people are going over by a little, it doesn’t have any change in the impact. It gives us a nice setup for their renewal, because they’re very well utilized. We actually love it when people are using all of their volume. Our gross margins are high. The incremental costs of volume is not so high to us. So it’s not an overage model when we get that extra cut.
But it is an opportunity then, as you said, if they’re dramatically over to early renew, and if they’re a little bit over, it just sets up for a strong level. So that’s kind of the first piece. In terms of pricing, we have not seen any real changes in our pricing. And we review or we do it on a quarterly saying it right before our earnings call. So if we get these kinds of questions, we can give people a thoughtful answer. And we look at it by geography, we look at it by size of customer, we do very detailed analysis, and frankly I’ve seen very little change in our price characteristics.
I think the value that we get is high. And I think quite frankly, we’re priced at a place where the ROI is very, very high. The other alternatives are not nearly as good, relative to the price point we charge. So we’re not getting a lot of price pressure from that standpoint. We do see price pressure in competitive deals, because the only thing other people can really do to try to compete with DocuSign is to come in and bundle or give away for free sometimes, but try to dramatically lower price.
And we just see most of our customers look at it and say, it’s just not an attractive option. And it’s not that surprising, also because if you think about software, there are very few companies, who have actually been successful saying our software is going to be not as good as someone else’s, but we’re going to make it cheaper. And then people are going to buy it. People tend not to buy software with that mindset of how do I buy cheaper software.
It doesn’t mean they don’t beat up on their vendors to say they want to pay less, but they don’t really make a lot of switching costs for a lower price player. If they think the higher price player has better software, because again, the ROI tends to be pretty high. The value proposition is pretty high. It’s not worth getting a 20% lower pricing. Well, that sounds like a lot. If it degrades the value of the implementation and the software.
And then the last piece is even in a SaaS world, people still embed us. They use our APIs to connect in with their processes. They integrate with their other software and they use our integrations. We have 350 software integrations like SAP with Successfactors or Ariba or Salesforce for their CRM tool. So we’ve built Microsoft, but their CRM we’ve built these connectors. And so people get integrated with us. It tends to be, not be a thing where they want to come back and say, we’re going to threaten to leave. You know, if you don’t give us 15, 20, 30, whatever percent cheaper. So our pricing effort hasn’t had to change very much.
Got it. And on – so moving to the agreement cloud, which you’ve mentioned a couple of times, you know, if I go back a year and a half ago or so, I mean, you had acquired SpringCM, you’d start to roll that out. I think there was a quarter even in the mix where you – business overall had slowed down because you pushed pretty hard on the agreement cloud. Where are you in terms of sort of trying to push the broader messaging around agreement cloud into customers, how are you sort of carving that up into pieces that are easy to consume, so they can do it in a more natural way. And you talked about COVID as, for sure, had to focus on eSign for now, but help us put into perspective the broader context.
Yes. So the last piece, no question, our field organization, as I would expect them to do is saying people are standing in front of me demanding eSignature. We’re a customer success organization. We’re going to give them the eSignature. And what I always say to our field force is that when you start any conversation with a prospect or existing customer, and you say DocuSign is the agreement cloud company, and we’re here to help you prepare, sign as you know is core, act on and then manage all of your digital agreements.
And that’s the company we are. Now, if that customer sits back to us, okay, that’s great. And I appreciate that vision. And they do tend to be quite excited about the vision, because it’s the vision we developed with feedback from our customers. But then if they say, I want to get started with eSignature right now, well, I need to expand my eSignature.
We say yes ma’am or yes sir, we have eSignature for you. We’re not going to try to push them to our vision if they need their business needs today are more in eSignature, but we’re passionate about what we believe will be that long-term success is the next big cloud opportunity is in fact going to be the DocuSign Agreement Cloud, and it is going to take all of those components.
The way we sort of bite-sized it to your point, which I think is a good way to think about it is we have the SpringCM acquisition, which we did is actually two years ago. I know time flies, but two years ago this month. We finalized the deal with Spring, and we’ve now taken their software integrated with some of our work and created DocuSign CLM. And so CLM is that core product that we’re selling that came out of that deal.
We also closed this last May, the Seal acquisition. Now Seal we’d already been selling with jointly for the advanced analytics product and for intelligent insights. So we’re now trying to do is look at those two pieces and sort of the AI tool, the CLM tool, and start to sell those through our channel, our own internal channel of our existing Salesforce into our customers.
And I think what happened, if you think about the end of last year, we kind of reported that, the CLM progress, DocuSign CLM became top in the Gartner survey in the upper right quadrant one other player. And it was going very well. And we were ahead of plan for what our expectations were. And at the same time, we get to the COVID, and this is one of the few areas of our business that was actually not positively impacted.
A lot of companies said, this is a big purchase, the CLM purchase. I need to get a systems integrator or some professional services helped in signing in STW. More people need to be there for involved in my company and the transaction. And that’s elongating some pieces. So we saw that go from being ahead of plan to a little bit behind where we’d like it to be. And I think through this year, we sort of said, we’ll catch back up.
We see that pipeline building now CIO’s and CFO’s are starting to saying we’re still in a remote work environment, but I need to upgrade my contracts management processes. So I still need to do that work, even though it’s harder to do it in work from home environment, but we see that demand will come out of this year, back at where we wanted it to be prior for the other sort of agreement cloud functions, again focusing on CLM and the advanced analytics.
Got it. And as we think about just sort of this furthering the kind of roadmap around the system of agreement, I think you started out with the – sort of upfront part of an agreement where I might exchange documents, we might use Dropbox, we might use One Drive, we might just email it. There’s an Adobe Document Cloud, for example. How do you see yourselves, especially on that part of it, sort of inserting yourself into – what is a landscape that’s already, I would say, populated with a number of different mechanisms for us to start our process?
Yes. I think we’re thinking about in two pieces. Again, we have that prepare versus the sign side, and prepare is where it really gets to the creation of the document. And I think we’re still going to see that the bulk of DocuSign agreements will come from someone taking a Microsoft word document and entering into the system, and then using DocuSign workflow and DocuSign software to send it to someone to sign.
But we’ve built pretty thoughtful integrations like with Salesforce as an example, the first one for us on Prepare and we’re extending that, we started off with this model of, hey, if you’re in their CRM tool and you effectively say, I need to get a sales contract, we can actually have you build that native to DocuSign.
So if you get down to the sales process and you’re negotiating a contract, and someone wants to change something after you’ve sent it for signature, that you can edit that live and make those changes on both parties and then proceed with the transaction. In the past, we’d say, cancel that envelope, go back to Microsoft word, edit, make that change, put it back in the system.
It’s not a terrible system, but if a contract was going to have three or four times where it got that’s keep getting canceled and starting over, there is a little bit of extra work. So we think that negotiate piece could be really powerful within that system. But I think I’d say going forward again, we expect the bulk of these agreements that occur. People will offer them in another system and we’ll continue to look for opportunities. You mentioned the Salesforce CRM, if also come back to us and say, “Hey, we also do bill presentment through our CPQ product. Could that be an opportunity to use DocuSign to build that kind of a document generation system? I think you’ll see us look for more and more of those opportunities, particularly the key partners to build up more of a – just sort of really valuable consumer experience and customer experience on sending it to the end consumer around ease of creation and then management of that workflow of the document. So I think that will be a growth area for us.
Got it. And then on the notary side, you entered that space through an acquisition. And I think we’ve all had an interaction with the notary in some transaction that we’ve done, I think you’ve talked first about the sort of first priory notary market, and then the third party notary market. How do you sort of paint the maybe ultimate future where you participate sort of broadly in that market, and maybe paint the vision first, and then would love to hear a little bit about what needs to happen for that vision to be fulfilled.
Yes, so we already had an electronic notary capability, but it required people to be in the same place. And so while it was a cool thing, if you and your notary were sitting someplace, you do it electronically. It’s made it easier to keep copies and it just goes up more modern digital experience. But in a COVID world, we were started to realize the real win here is not having to have people be in the same place. And so we actually tried to accelerate that and turn our electronic notary into a remote online notary. And so the purchase of Liveoak, which gave us that online collaboration capability is really what is going to enable that to happen.
And you’re right, we’re starting off with first party notary. And for those who aren’t as familiar with that means is if you’re a company that has your own notary capability, like you’re a big bank, and you’re opening accounts for somebody, that’s a lot of our big banks do, they say, I want to do that in my branch. I can’t do it in my branch anymore. I need to not do that in remote way, but I can still be the notary. I just, you know, internal notary, I just need to do this in a remote way.
So that’s the first piece we’re going after. And that data is – we already have customers in pre-beta, but beta will be out in a couple months. And then we think that should be at the beginning of the next year, alive product and our big customer that allow the financial services, some healthcare where they want to have a notarized agreement if someone’s usually like opening an account or making a big commitment of dollars to something. They have that functionality and it gives a more of a heightened, if you will, legality to the agreement.
At the same time, we see that third party notary opportunity, which is, you said, it’s the kind of the mom-and-pop notary business where people are earning out there, traveling around, or you’re going into a Kinco’s, I guess those are not called FedEx center, and they have a notary there. We believe that can also go the remote online notary way. And we’ll look at building out a network of notaries in each state, because most of the notary regulation of state specific. So people – those notaries can move to a much more efficient way to do their work. And our customers can benefit from that ease of use of getting documents notarized going up dramatically. So it’s kind of a two stepper and that’ll probably be like a year away before we have that. And that third-party notary after rolling out, first-party notary at the beginning of the New Year.
Got it. And as it relates to the business model there, I assume this is a sort of per signature per envelope type of a model. Could you help us to understand sort of how – is that at a premium price to a basic eSign?
Yes, we’re still finalizing some of the pricing even on the third party piece, but how Liveoak was doing it and how we were thinking about it is exactly what you said. It’ll end up being a volume metric piece on the number of notarized documents and not the number of notary, just sometimes the document; you might notarize one document three times for different clauses or different aspects. When we probably do that same we do per envelope here to be per document. And it will definitely be a higher price point than a signature because there’s a lot more involved in the software and in the process of executing that notary.
Got it, got it. Wondering just as it relates to – you’ve done three acquisitions that we’ve covered here, and one, as it relates to future M&A, I mean, they’ve all been similar size sort of similar sort of playbook, it feels like. But how are you thinking about just potentially larger acquisitions? Are there geographic consolidation types of deals? What are sort of the ways you might use M&A, especially as it relates to what you’ve done in the past?
Yes. What’s interesting is we – two things. One is we hadn’t done deals for many years. And when I joined almost four years ago, my concern was that I didn’t think we’d executed our M&A as well as we could have in the past. So I was a little bit – let’s go really slowly. And I wanted to make sure we figured out a way to ease in and ensure successful integration. So after we did the Spring two years ago, I said, we’re not doing another one until we can put hand on heart and say we have successfully integrated this business. Fortunately, that happened, set up the opportunity to go deeper with seal Software.
Now, Seal, we closed that in May. And then we announced just a couple months later, the Liveoak deal. The Liveoak is a lot smaller organization than Seal or the Spring. There are certain things that are just sort of the same, right. It’s the same amount of work in some cases even it’s a smaller deal, but we felt so good about the progress on the Seal integration, we’re able to very quickly do the third. So, I guess, by that I’m saying, I think we have the capacity to do a higher velocity of deals, but I’m not sure that means we will.
I mean just – I think we now feel comfortable and we have the capacity. And now, we have added even more firepower in our new CFO because Cynthia, of course, had been the Head of Corp Dev at Twitter and before that she was a tech investment banker. So she’s got a lot of experience obviously there. So, I think, we’ve got all the capability to do more. In terms of doing bigger, I’m not really sure, I’m not sure we’ll see a lot of that.
Our M&A is going to be focused on driving our Agreement Cloud strategy, seeing those places around the overall Agreement Cloud, where we think instead of building it ourselves, we could accelerate our pace of innovation for our customers by finding someone who already has domain expertise, maybe they’ve built out some really useful software already that we can integrate into our business and we say, let’s buy it instead of building it.
I don’t think there’s a lot of giant companies in the Agreement Cloud, at least not relative to DocuSign size that we could purchase because there just aren’t that many companies that are very big scale in that Agreement Cloud space. So that’s kind of my perspective on it. We’re not – we’re open. We’re agnostic to whether we do more frequent or bigger deals. I just don’t think there likely going to be a lot of much bigger deals sort of game changer about the company. I just don’t think there are those companies out there. But, I mean, if they were there, if we find them, we’d be open to doing it, but don’t see them as much.
And then on the velocity, yes, we could probably up the velocity given our confidence that we’re now integrating well, but I’m not sure that I think there’d be a big increase in velocity because I think we’re seeing there about the right number of opportunities to kind of continue at the pace we are at right now.
Got it. Okay that makes sense. And then two of the questions I had. One on just on the fed opportunity you’ve kind of gone through that process of getting the right certifications. And I think there’s probably almost no other market in the world that pushes more paper around than government organizations. Where are you with the go-to-market – the certifications of the product, which I assume is the same in the go-to-market around the fed? And what are your expectations in the coming year there?
Yes. So, I think, we feel very good about we’ve built out – and we tend to talk about government, including state and local and fed, but I can speak a little bit about fed. Fed has certain characteristics that are different than state and local and certain that are similar. It’s easier to be successful in state and local if you’re FedRAMP approved as an example. So if the federal government gives you that good housekeeping seal of rule, it does help state and local governments, but they don’t require it in the same way certain federal agencies do. So we don’t – we had a lot more traction historically in state and local than we did in federal before we got the FedRAMP certification.
The next big piece we talked about was this IL4. So it’s basically a separate data center where the government data is going to reside, not commingled with commercial businesses. And we finished the work on that. And we’re at our sort of final stages of just being a certified by the government. And so, we’re hopeful that it will be done very quickly, but it’s up and running and functional and post certification we think that will also increase our ability to serve more agencies. I would tell you this though about federal of all the state and local groups, I think it’s going to continue to be the slowest move. And so, we’re super excited about the long-term opportunity and they’re very sticky customers, I think, for DocuSign. But it’s going to take multiple quarters to get there, to get the full advantage of what we’ve built out with that dedicated IL4 database – data center.
Yes, got it, got it. And then another question I get around kind of longer-term and there’s some kind of technology buzzwords and early stage technologies out there. Blockchain is something that – I think has the promise to folks that have never met to sort of share something, come to an agreement and end up. It’s entered in the registry and everything is sort of a hunky-dory. How do you think about blockchain is a competitive technology, maybe with others using it? How have you looked at using blockchain technology in your own service potentially into the future?
Yes. So we looked at blockchain as an underlying technology that we think is actually quite intrigued. There are challenges of blockchain today because it doesn’t have the scale to provide attractive economics. So we built a partnership with Ethereum a few years ago, which is an open environment, open source blockchain network and – which we think is the best one winning, they’re very good. And we’ve created the opportunity for our customers.
They want to build a sort of engagement with us on the backbone of blockchain because they can store all those agreements in the Ethereum blockchain forever. The challenge is that the cost is about an incremental dollar per agreement. And if you think about our total cost to deliver a full – just start with the eSignature component, but everything from the creation to the identity checking to the workflow capability, just soup-to-nuts down through an agreement. It costs us about $0.07.
So to spend a dollar just on the storage is a little bit crazy. That’s why I always say the few customers we have today that have done a blockchain implementations with DocuSign. They are highly correlated, in fact, a one to one correlation with the people who have done a press release internal or external about doing a blockchain project and they are sort of looking to test the technology, which is also – it’s all good, but it’s not economically sort of viable or feasible rationale to use blockchain in the past today. It’s going to have to come down in order of magnitude or maybe even two. But I believe that could happen. So I think the answer is a super promising future technology. It’s just not economically viable at scale today.
Got it. And one more question here that just came in on the question submission was just around the competitive angle. We talked a little bit, a little bit about this, but the question was around which of the competitors have you seen – have you seen anybody capitalized on the environment similarly to how you have and sort of come up more in competitive situations in the last say four or five months that this has been going on.
Yes. So two things, one, we talked about this a little bit to your point on the pricing piece. I think the answer is we haven’t seen a different net impact from competitors in terms of pricing. We just haven’t seen them in the marketplace in a different way, but I think people who are using eSignature product are competitive to us are probably also doing well. And so if we look at what Adobe has talked about, what HelloSign or now part of Dropbox and eSign product that Adobe bought a signature product as well, but like seven or eight years ago. That’s called EchoSign.
And so those companies are reporting that their eSignature business have been very strong. There are no surprises for the same reasons we’re seeing that great demand they would as well. I think we’re still growing faster than they are from what they’ve reported. Adobe has actually given numbers when they had specific growth and it’s been way less, almost half as much as our growth. So I feel like we’re still taking share and the competitive threats don’t seem to me to be any more significant than they were before. And I think our position is still true that our competition is paper. It’s paper and manual processes. It’s not someone else, not to us on the technology side.
Got it. Great. Well, Dan, appreciate the time here. We’ve run out of it, but it has been a good discussion and I wanted to thank you, especially for participating, your support of the conference here. It’s helped me to make the event a success.
Good. I’m glad and always great to connect with you, Walter.
All right, great. Thanks and have a great afternoon, evening everybody. We’ll see you back. We do have a late night session with Atlassian, so live from Australia. So I’ll just put in a plug for that and we’ll talk to everybody later.
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