Why This $3 Billion Tech Startup Is Still Searching for a CEO

  • Unicorn company is said to have been spurned by Google exec
  • Bain’s Enrique Salem emerges as candidate for chief executive

Keith Krach, chairman and chief executive officer of DocuSign.

Photographer: David Paul Morris/Bloomberg

DocuSign Inc. is one of Silicon Valley’s most prominent unicorns. But it’s taking an unusually long time to fill a key position: chief executive officer.

In an e-mail to DocuSign staff last October, Keith Krach said he wanted to step down as CEO and that a search for his successor was under way. But almost nine months and one major public setback later, the hunt continues. And Krach remains in the job.

DocuSign rose to prominence starting in 2003 with a service that lets people electronically authorize documents they otherwise might have to print out and sign. The San Francisco company quickly spread in the real estate world for leases and other contracts. It has since added document management and archival software that’s been embraced by various industries as a quick and secure way to sign using a finger on a mobile device.

Krach has been running DocuSign since 2011 when he replaced founding CEO Tom Gonser. Under Krach, DocuSign has kicked its fundraising efforts into high gear. The company has raised more than $500 million in total. A financing round last year valued DocuSign at $3 billion.

With coveted “unicorn” startup status, having reached a valuation exceeding $1 billion, came new investors expecting to see results. The company’s board of directors has increased pressure on DocuSign to go public or sell, neither of which Krach wants to oversee, said people familiar with the matter. Instead, he offered to resign, and the company hired a recruiting firm to find someone to “lead us into the next decade,” wrote Krach, 59, in his e-mail to staff.

DocuSign identified that person early this year and invited reporters to a press briefing introducing the new CEO. Shortly before the announcement in March, DocuSign canceled the event, saying the person had backed out at the last minute after receiving an offer from “another company with unlimited resources.”

The lost CEO candidate, whose name hasn’t been previously reported, was Rick Osterloh, said people familiar with the matter, who asked not to be named discussing confidential information. Osterloh, a former executive at Motorola Mobility during its transitions in and out of Google, returned to the internet giant in April as senior vice president of hardware at the Alphabet Inc. unit.

Rick Osterloh
Rick Osterloh is said to have pulled out as DocuSign CEO for a job at Google.
Photographer: Jin lee/Bloomberg

Krach and Google declined to comment. Osterloh didn’t respond to requests for comment. A DocuSign spokesman said recruiting efforts are ongoing but declined to comment further.

The current list of candidates includes Enrique Salem, a DocuSign board member and managing director at Bain Capital Ventures, people familiar with the matter said. Salem, a former CEO of Symantec Corp., has orchestrated multi-billion-dollar deals since leaving the cybersecurity company, including sales of Mandiant to FireEye Inc. and Blue Coat Systems to Symantec. At Bain, he led DocuSign’s $233 million round of financing, which nearly doubled the company’s valuation. Salem declined to comment.

Enrique Salem, a DocuSign board member and managing director at Bain Capital Ventures

Enrique Salem, managing director at Bain Capital Ventures.

Photographer: David Paul Morris/Bloomberg

DocuSign is aiming to make a decision as early as next month, people familiar with the matter said. The search is exceeding the length of recent CEO selection processes for many public tech companies, including Yahoo! Inc., Intel Corp. and Symantec. It’s already more than double the time considered normal for a private company, said Derrek Milan, a vice chairman at executive recruiting firm Korn Ferry.

It usually takes three to four months to place a CEO at a private tech company, Milan said. The process can get derailed if board members disagree on what qualifications their ideal leader should have, such as whether a background in mergers or in taking companies public is preferred, he said. “The biggest impediment is a lack of calibration at the beginning of the process,” he said.

Amid the CEO disappointment this year, four of DocuSign’s nine top executives left the company, signaling disunity in the senior ranks. The search is dragging on as any potential CEO must face the prospect of dealing with impatient shareholders in an unpredictable business environment. Initial public offerings have been almost nonexistent for technology companies this year, and acquisitions have been sluggish over concerns about over-inflated private-market valuations.

While Twilio 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 to leave the European Union could put deals on hold, leaving companies on the threshold of going public or selling in a difficult position.

DocuSign declined to share details of its financials. In order take the company public, the new CEO must outline a plan for DocuSign to become profitable within four quarters of its debut, people familiar with the matter said. Krach, who is also chairman of DocuSign’s board, has said he plans to keep that role for at least three years after a new chief starts.

Meanwhile, staff are trying to look past the CEO distraction as they prepare to roll out tools that comply with Europe’s new e-signature rules. Krach describes the initiative as “the boldest” in the company’s history.

DocuSign said 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 as eIDAS, which take effect in the European Union on July 1. Brad Brooks, the chief marketing officer at DocuSign, said the outcome of the Brexit vote will not affect the project.

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