Docusign's CEO on the dangers of trusting AI to read, and write, your contracts | Decoder

Thank you, Nilay. Good to be here.

This morning.

I signed an agreement for our procurement team, but yesterday I signed your release form.

It's not great. I agree.

I mean it is sort of a two-sided network, right? So we sell to businesses and other organizations that want to send documents for signature, prepare them and send them. So that's been historically our business. And then consumers or other companies sign documents, the counterparty, but they don't pay us anything. And so most people have experienced this that way. And then if you work at a company and organization that uses DocuSign, you may have experienced being on the sending side of approvals or other functionality.

Well, yeah. So, you're right. We are a little over 20 years old. And you know the original idea was to help companies and individuals sign agreements online. And at the beginning no one thought that was a good idea. Not regulators, not companies, not consumers. And so there was a tremendous amount of trust building across those three constituencies that happened over time. But as you said, over time we became trusted for a variety of transactions and now it's sort of in the water across companies of all sizes and functions. Look, we did come up with a great idea and when you have a good idea, you want to run with it. And I think DocuSign has done a really good job of that. With that said, I mean, part of my goal in joining about 3 years ago was to say, okay, that's an amazing foundation and we're privileged that people have positive associations and we're used by 1.8 million companies. What do we do for encore? How do we broaden the platform? And the company, I mean, we've had some ideas on that for a while, thinking about the entire agreement journey, but we've never really put it all together. We've never gone beyond the marketing side of identifying that problem to actually delivering solutions that could solve it. And I think that's what we're doing now. And so that's very exciting. But the signature piece is a foundation that is the most pivotal moment in the life cycle of an agreement. It's a very high value, a high stress moment for many people. And making that simple and delightful was a very meaningful value proposition and it's a lot harder than it looks.

I mean signature to me is really identity and consent commingled, right? And the identity aspect, there's a lot of things we do to identify you, right? We obviously this thing comes to you in your email or via SMS or we have WhatsApp, we do all kinds of IP tracing and other things to validate that you are the intended, let's say you're the signer, that you are the intended recipient. And that whole trail is then auditable and can be used in a court of law. So, it's a perfect substitute for a wet signature that you might otherwise have done in practically all cases. There are a few in the US that are still requiring you to sign something in person, but we've done a pretty good job over time getting to a place where it's felt that that's super secure. And from the consent perspective, I mean, you're right, it could be a dot, could be a checkbox, could be a signing, it's almost less important. There are some personal expression aspects of it but it's the identity piece that's the most important and then the fact that you take a step that indicates consent.

That's the aspect of the execution side. There's all the stuff that leads up to preparing a document for execution. And we have a lot of products there that you as a signer would not see but that companies use to get documents ready for signing and to get them approved internally, to get them maybe customized for you. Let's say I'm running a big sales team, let's say DocuSign's sales team, and I want to send an agreement to the Decoder for you to be able to use DocuSign for your releases. I can automatically sort of mass customize a standard template using DocuSign's functionality that's embedded in Salesforce and other CRM. So that's an example of the type of workflows that we do. We do that for hiring. We do that for procurement. We do that for new vendor onboarding. All those tools that lead up to that magical signature moment where it is I think about identity and consent.

Well, I do think that that network effect is very important and people choose DocuSign in part because they know that the recipients, consumers mostly, trust it. And so, yeah, maybe if you're a giant bank and you have an existing relationship and you're sending something to a customer that's already yours, you know, that matters a little less, but for most companies in the world in most situations, all new customer onboarding, etc., that trust component is super important. Now to the other thing that was implied in your question which is well what about identity and these alternative technologies for establishing identity? Well, we could sort of see that coming right and so we worked on a federated identity strategy to give you all kinds of identity validation at different levels of risk. So you probably we let people do knowledge-based authentication that's sort of on its way out but that's answering those questions that you probably remember, you know where did you live on the street 10 years ago. We do biometric-based identification so video or other we can link up with the Apple and Google stuff. We do risk-based assessment so we can fork you to which validation mechanisms. We use the new digital IDs so in the US CLEAR or ID.me which is the government one that the IRS uses, in Europe of course many governments have a national digital ID, same in many other parts of the world and all the way up to a notary solution we have online notaries. So whatever your risk assessment, whatever you feel is the appropriate trade-off between convenience and security, we can give you all those solutions turnkey in one platform and then at the end most of the time you're also legally required to get a signature.

We're incredibly diversified. So, we are used by, as I mentioned, 1.8 million companies. You know, by definition, if you have that many customers, most of them are going to be small. But we are used by over 95% of the Fortune 500 and equivalent in many other international markets. And then many midsize companies and then a huge long tail of small companies. And no one company represents any meaningful share at all of our business. That said, our biggest customers tend to be banks or other large companies that have high volumes of high value agreements. You know if you have agreements that matter and you're entering into them in large volumes you're very likely to be a DocuSign customer.

Well, we already have most large companies in the world as customers, but of course, there's so much more we can do for them beyond the signing piece. And even the signing piece, we're certainly not done with that. I mean, even the large banks who've been with us for a decade plus, you go and audit them on how many of their agreements are actually automated and digitized and executed electronically and it's 20, 30%. Because you know people take the biggest high-value workflows and everything else is sort of left to the side. So we have a lot of opportunity if we can make that more efficient and easy to do we can close all of that gap as well as of course provide this broader value in all other aspects of the agreement cycle.

Well, I mean we ran into Microsoft Word the day we got started, right? And Microsoft Word is where 90 plus percent of legal documents get authored. That's the tool that most lawyers use. That's where documents are crafted and often negotiated, redlined, etc. So, we've always been deeply integrated with Word and of course with Google as well and frankly with all of the tools that people use to do their jobs. So, I mean we've had a 20-year partnership with Salesforce. We were I think the first or second vendor on the AppExchange and deeply embedded in their flows. We do similar work with Workday and SAP and so on. So to your question about I don't think that we or Microsoft have ever thought about competing with each other. Like Microsoft I mean I worked at Google for 12 years before taking this job and so you know similar scale company and you take on the biggest broadest opportunities in your office suites and yeah you might add more and more features to your office suite but you don't want to add stuff that's sort of separate workflow or things that are too specific, you rely on your ecosystem for that and that's what Google and Microsoft have done. So they'll both allow you to render a signature inside of a doc that you author in those packages, but no one thinks that's a substitute for DocuSign for all the reasons we've discussed. And so it just literally doesn't come up with customers. I've never heard anybody say, 'Well, maybe I could use Microsoft Word or Google.' That has never happened in my 30 plus years here.

Let's imagine most contracts are completely custom-crafted, right? But most contracts start with a template of some kind. Maybe it's a template for something really complex like an M&A agreement or something really simple like an NDA or anything in between. Could be a master service agreement between companies or a license agreement, but they always have a template and then they tailor it. Some of that is done sort of legal tailoring, right? You know, I want to have different limitation of liability and a different payment term and some of it is just so we say mass customization. I want to get the data about that customer and some things we've already negotiated and I want that to flow automatically from whatever the system of record is, could be Salesforce, could be Workday, could be SAP, could be whatever and I want to populate that into the agreement. So this template that I have gets personalized, customized and that's also what happens in consumer applications. You know the forms that you get from Chase or Wells or they are mass customized that way and so that's essentially a data hold so that's what I mean when I say customized or personalized, it's taking a standard document. Now there are a lot of things that can flow from that. Let's say that you are a national employer but you need to take into account employment laws in the 50 states that would be an example of a customization that's a little bit more complicated and of course it's even worse if you're a global employer and you have to do offer letters in 180 countries. You know, that starts getting pretty complex. But there are rules. We have a system for applying those kinds of rules so that you can have global standards but still create documents that are tailored to local laws and customs.

Correct. I think there are two big use cases for us. One is to make agreement workflows more efficient. Sometimes just by automating them and sometimes by reimagining them. That's a huge part of what we do. And this mass customization is not a new thing that's been going on for a while. It's sort of advanced mail merge, right? And so you say I didn't want to say it. You said it.

If I could start a business that was charging a premium on mail merge, I would do it too.

DocuSign has a little under 7,000 employees. And you know our structure has gone through some transformation. Historically I would say DocuSign was a, ignoring the very early days of conceiving the product, evolved into becoming a very sales-centered company. Sales, most customers interface with DocuSign through sales. We had a very large sales team and that was sort of the most powerful function of the company and things flowed from there optimized around that. When I joined and I very quickly realized we needed to completely reimagine our product roadmap. I really wanted to put product at the center of the company and say we're going to articulate a new product roadmap and things are going to flow from there. That's not to say that we're not taking lots of customer input. After all, we've got 20 years of experience working in agreements and millions of customers, but we want the product vision and the overall architecting of that to be the guiding light for then how we go to market, how we spend etc. Second area that I focused on was historically marketing here worked in the service of sales. It was basically about creating qualified leads for sales. But I'm like well customers this is an electronic contracting product. They should be able to just come in and do whatever they want to do directly, self-serve to the greatest extent possible. I came from Google where every advertiser, including people who spend a billion dollars plus a year, places their own orders in the system but at DocuSign we couldn't do that. So that was another area and really taking all the pieces of the company that worked on identifying, sourcing and bringing new customers on and combining them in one team. And the third area that I'm really pushing on is we've always felt like we needed to own the ball. When you have an iconic simple product then maybe you don't need partners as much. But now with this broader vision for agreement management, we really need partners to help us go to market and install and service the product. And so we're very focused on working with system integrators like the Deloittes and Accentures of the world as well as distributors and resellers. Those are big changes we've made.

Sales and marketing is the biggest area. We probably we have about a thousand account executives that cover everything from SMB accounts all the way up to enterprises. We're not a small company. We do over three billion in revenue. Our revenue per employee is pretty much in the median of the SaaS businesses. So sales and marketing is the biggest function. And it's everything from pre-sales to account executives to customer success people that help with implementation and support of course. Product and engineering, we have about a thousand people in engineering, 1,200 have been engineering proper and then there are product managers and designers and so on. You know I think if you look at the number of countries and the complexity of the regulatory and compliance environments we're in, that's a significant effort. And then now with AI, I pivoted pretty much all of the open investment dollars in the company the last three years have been pivoted into this. So we've gotten much leaner on the sales and marketing side and we've invested more heavily in product and engineering.

Mhm. That's right.

I mean, I think the low-hanging fruit was helping the company pivot from just being a good machine for acquiring new customers, but not necessarily an amazing retention machine. So focused on customer retention and customer success and adoption. And I think we sort of took that a little for granted. That was one area. Second, getting us to be much more efficient as I alluded to, whether it was through building out digital channels or just streamlining our sales and marketing efforts. So, that was a big immediate push and sort of low-hanging fruit things that were in my control early on. But the biggest change is really the product vision effort and pivoting the company to being product innovation and sort of restarting the innovation engine at DocuSign. COVID was a seminal event in the company's history. Not in a good way. I think everybody thinks that COVID stock is a COVID darling and that we must have been so great for us because everybody had to use. And look, there was some of that temporarily, but if you look at the long run, it didn't change the sort of secular adoption trend of signing things electronically. But everybody literally fell asleep. If you're a sales rep and your revenue growth rate without much effort goes from 25% to 60%, you're in the order-taking business. And on the engineering side we didn't need to develop that much. You just need to keep the service running and scaling that. And so I think restarting that hey we can build something great, something new and reclaim that innovation mojo. That was I think the most important transformation at DocuSign and is still ongoing but I mean the pace of product innovation and product release is completely different now. And we actually had to throttle the number of releases we were doing because there was so much it was sort of starting to overwhelm our customers and our sales teams. We have so much stuff.

And there's so many opportunities. And that's an exciting place to be.

It was a dual pitch. I said, 'Look, what I know I can do is I can come in and make things much more efficient.' And of course, I used my digital marketing background from Google to make some suggestions on things that I thought we could do.

You know, I didn't get time to make a killer deck. I mean, literally, I got a call from a headhunter on a Thursday night that the board wanted to meet with me for an hour and hear my thoughts on the future of DocuSign Saturday morning at 9:00 and I was working full-time at that time. I had a big job at Google and so I couldn't just take a day off. And I suppose I could have, but I didn't. And so I basically had Thursday evening and Friday evening to prepare a short slide deck. I mean the reality in these kind of situations nobody expects the super polished multimedia thing what they really are focused on is what are the thoughts right and you can use 10-point font, that's fine. And so I was really focused on look I know I can make the company more efficient, I know there's gold on the retention side and I believe that the agreement problem is fundamentally unsolved but that DocuSign is the best positioned to capture that opportunity. I mean, we were a big DocuSign user at Google, still is one of our largest customers. Huge e-sign and contract lifecycle management was our advanced contract management project that enterprises used. And yet I knew we were in the earliest possible phase of transforming how agreements get done. And that there was so much opportunity. And so I just articulated my confidence in that. I knew enough that I couldn't that it would be I would lose credibility if I was too specific. So that took 6 to 9 months to really say, okay, that's fine at a 50,000 foot level. How do you get to the real vision of what's the singular thing we're going to do? I mean, just as an example of that, it's easy to talk about all the steps in the journey. And I think people naturally gravitate towards the drafting and negotiating side of agreements because that's almost like what's in movies. Of course, that's what lawyers do. But we actually started at the end. We said look the foundational piece of reimagining agreements is to have an intelligent repository, to have a place where all your agreements are stored and to be able to apply AI to that so we can tell you what's in all your agreements, start comparing them and then ultimately close the loop to what happens under those agreements. So that's what we built.

Well, that's part of it. The way I would describe it is we've digitized the asset, right? We've taken what used to be an offline asset, we turned it into an electronic document and we move it around electronically mostly via email and then hopefully we execute them electronically and other than that absolutely nothing has changed in for the last 50 years in agreements. All other aspects of the workflow, they're just as inefficient, just as brittle, just as unpredictable, there's just as much time lost waiting for somebody in the process. You don't even know who they are, what step they're on. Once you've signed, the agreements go to a deep dark place. It might as well be a physical filing cabinet in a basement. In fact, it's probably harder to find now than it used to be when it was in the filing cabinet. You know, now it's in some SharePoint drive or email inbox or who knows? And so bringing all that together and presenting that information in a way that is intelligent, bite-sized, appropriate for the persona is incredibly valuable. I mean, every CFO wants to know what are the top 10 contracts where we have leverage, things we've negotiated for that we're not getting. Every head of sales wants to know what are their top 10 renewals and what are the three things my rep should be renegotiating. Every procurement, you can just go down the list. It is an obvious pain point that no one has solved. And so that's our opportunity. That was my pitch and I think it was a good pitch.

And I think the story is much better now than it was two years ago.