Fear, Loathing and Corporate Gifting

Fear: DocuSign has taken a beating this week, with the e-signature company’s stock plunging by more than 40% as I write to you on Friday. Apart from examples of fraud or other business activities, that is one of the worst post-earnings share-price changes ever witnessed.

What went wrong? In the most recent quarter, DocuSign exceeded sales forecasts (Q3 fiscal 2022). However, the company’s billings — a barometer for future revenue — were far lower than expected. Dan Springer, the company’s CEO, stated in an investor letter: We saw clients revert to more typical buying habits after six quarters of rapid growth, resulting in a 28 percent year-over-year increase in billings. Springer believes the market has overreacted and plans to purchase DocuSign stock next week. Is the market exaggerating what looks to be a return to more consistent growth at DocuSign?

Since it happened, I have been talking to others about it, including my close friend Ron Miller, who keeps me sane at work, to see if we are witnessing Wall Street impatience or something else. I am leaning toward the second option. DocuSign is now valued at about $27 billion, according to Yahoo Finance. Alternatively, almost 12.4 time its present pace of production. Who among us will argue that this is too low for a tech business that has already gone public and is exhibiting clear signs of future revenue deceleration?

Many people, but that is because the SaaS multiples climate has so heated for so long. DocuSign would have been acceptable, if not great, at 12.4x its current run rate after showing a 28 percent increase in billings not long ago. So, may a return to previous standards be in the cards?

If we are witnessing several compressions across software businesses, that is what I am expecting to taste. So many private-market wagers have made on the assumption that public comp values will remain high. However, following a string of bad days for tech equities this week, the environment in tech may finally be turning away from a 100 percent risk weighting and toward something more balanced.

Loathing: Better.com was able to extract three-quarters of a billion dollars from its SPAC debut and use it to support its operations. Then it let go of a significant portion of its workforce. During a conference call with the laid-off employees, the CEO stated 15%. Better asserts that the figure is actually 9%. Given that the CEO was reading from notes and claimed to have made the layoff decision, the discrepancy is astounding. How did he get the number wrong if he made the decision?

In any case, here is a master class in how not to dismiss a large number of employees: (Of course, we have saved a duplicate of the video in case the original removed.) Keep in mind that you are not family at your workplace. It sees you as a valuable asset that it wants to exploit and profit!

Corporate gifting: Let us fast forward until early 2020. I reported Sendoso’s $40 million Series B in February of that year, just before the epidemic began. The business, which operates in the corporate gifting area, has recently raised a $100 million Series C round. Separately, a friend of mine introduced me to Postal.io, or just Postal, a competitor in Sendoso’s market. The two companies battle for market share in the market for sending mail to present and future clients, which turns out to be rather large.

Regular Exchange readers may be asking whether we have not previously discussed this. Yes, we did! Back in September, shortly before Disrupt, we peeked at Postal and its growth. However, I have just pulled additional growth figures from Postal and Sendoso, which I would like to add to our ongoing analysis of the space. Why should we be concerned? Because there an intriguing startup cluster to monitor, similar to the OKR software industry or the rapid food delivery business, Sendoso and Postal, for example, compete with Alyce and Reachdesk, among others. 

For the online-to-offline market channel, that’s a lot of startup activity. And the industry is huge enough for numerous competitors to develop at the same time — Sendoso told The Exchange that the “U.S. corporate giving market is estimated to reach $242 billion by the end of this year,” quoting Coresight —

Postal was the most forthcoming with data, revealing that subscription income had increased by 70% for the previous five quarters. GMV increased by 3,765 percent from Q3 2020 to Q3 2021, as customers increased from 35 to 286. We believe this is why it was able to gather funds in September. When it came to numbers, Sendoso was a little more evasive. The company expanded by 330 percent in 2019 but did not provide an updated statistic when asked about its current performance. Instead, Sendoso claims to have 900 clients (with more than 20,000 seats at those firms), and that its warehouses “in North America, Europe, and Asia [have] handled upwards of 3 million sends in over 165 countries.”

We did not get updated figures from Alyce or Reachdesk in time for publishing, but if they do, we will let you know next week. Within the bigger topic, there is variation, much as there is within the OKR startup market. In the instance of corporate giving, Postal is developing a digital solution that connects goods providers with purchasers, whereas Sendoso has a broader IRL footprint that includes its own physical item aggregation points. We enjoy seeing business cases compete in real-time.

Do not forget, too, that fierce rivalry does not often leave everyone undamaged. In the OKR market, Koan failed to reach its next financing milestone, and Microsoft acquired one of the startup cohorts, 1520 just shut down in the middle of a grocery run. Not that Sendoso or Postal is in danger of running out of funds, but it will be interesting to observe when their market does reach a point of a consolidation.