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The Scoop: Layoffs at DocuSign
DocuSign was one of the winners of the pandemic, yet is letting go 9% of its staff. What happened at the company, where business is still strong?
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DocuSign has had a rollercoaster couple of years, from the start of the pandemic. The company’s valuation exploded from around $10B in 2019, to $60B by mid-2021, before crashing down to $11B at time of publication. The stock is down 76% in the past twelve months. Here’s how the stock price changed over the past three years:
DocuSign was an undoubted winner during the global health crisis and associated lockdowns, as companies moved to digital signing of paperwork. The company became the leader in the e-signature market, with skyrocketing growth in 2020-2021.
While in 2019 the company grew revenues by 38% on the previous year, this revenue growth accelerated to 49% in 2020 versus 2019, and then by another 45% in 2021, year-on-year. Putting it plainly, in 2018 the company generated $701M in revenue, then twice this amount in 2020 ($1.45B) and three times as much in 2021 ($2.1B.)
So, what happened at the end of 2021? In December last year, the company reported guidance of lower than previously estimated revenues, suggesting its previously very strong growth was slowing. Until then, DocuSign was priced as a growth stock. Afterwards, investors rightly assumed the end of this very high growth was over. They were right to make this assumption, as year-on-year-growth on a quarterly basis is steadily trending downwards:
DocuSign’s CEO, Dan Springer, stepped down in June. He had been CEO since 2017, and it was he who took DocuSign public in 2018. While the company did not explain the change, media reports connected his departure with the steep decline in the company’s stock value over the previous twelve months.
Dan Springer was replaced by chairman Maggie Wilderotter as interim CEO. A week ago, on 22 September, the company announced its new CEO will be former Google advertising executive, Allan Thygesen.
Docusign laid off 9% of staff on Wednesday, 28 September. Interim CEO, Maggie Wilderotter, sent an email to all staff in the morning, US time, in which she shared that the company will be making cuts, mostly in the US and Canada. The email did not share what percentage of employees shall be let go. I got the 9% figure by reaching out about it to DocuSign, which replied that approximately 9% of the workforce is impacted.
Quoting from parts of this email:
“The leadership team has worked together these past few weeks to prioritize our company activities around our “vital few” deliverables for FY23 and into FY24. This exercise has resulted in a decision to restructure our company in a significant way for growth at scale.
This process included making hard decisions to eliminate initiatives and activities that are no longer relevant for our current or future success. Our new direction and focus will result in eliminating a number of current jobs at the company, so regrettably some of our valued colleagues will be leaving DocuSign.”
Why the layoffs? In the email, this was the answer:
“With regard to the why; we all know the competitive environment we are operating in requires us to double down on the most important initiatives that will drive long term success. This new “playing field” requires us to be more nimble, innovative and customer focused with valued solutions and superior products.”
This reasoning for layoffs strikes me as hand-wavy. Looking into the financials of the company, it’s more clear why a cut has been decided upon. Revenue growth year-on-year was up 22% in Q2 2022, while stock-based compensation increased by 40%. In Q2 of this year, DocuSign also made a net loss of $45M. While this is nothing to be alarmed about – after all, the company has more than $1B of cash at hand – it is clear DocuSign has been growing compensation far more than its revenue.
The company is providing severance to affected staff, although did not detail how much, plus two months of accelerated equity vesting. The email said DocuSign is providing outplacement services, mental health services and financial counseling for those let go.
Software engineers have also been let go, including several new grads. I talked with current DocuSign employees who confirmed several software engineers were let go, based on a conversation on the internal Slack channel. All the affected engineers whom my source was aware of, were in-post for under one year.
I also confirmed the layoffs hit a lot of new grad software engineers. I’m somewhat puzzled why the company would target new grads, as experienced engineers are more expensive. Letting new grads go suggests there was not a budget target to hit in savings, but a headcount target to be filled.
I am starting to get more concerned about the prospects for new grads in the industry. It’s disheartening to hear first-hand how DocuSign appears to have let a lot of its new grad software engineers go. It’s exactly what would happen when managers have a headcount to hit with layoffs. I expect the tech hiring market to be especially challenging for those entering the industry in the coming period.
This was one of the five topics in today’s The Scoop issue. Read the full The Scoop for the following coverage:
Hiring slowing further at Meta? Production engineering hiring is frozen, and some teams can no longer backfill. Exclusive.
More salary transparency to come in the US. California is following in the footsteps of Washington state by mandating companies to make public their salary ranges. How could this impact tech? Analysis.
Three formerly high-flying companies which are struggling. Klarna, Juni and Graphcore were all ‘hot’ companies less than a year ago. All are reducing headcount now. Exclusive details, and analysis.
Figma’s $20B exit. 2022 has seen no notable tech IPOs. However, we have what might be the biggest exit of the year: Adobe buying Figma for $20B, which is more than Spotify and Cloudflare are worth by market cap. Analysis.