• Triton

Here's one way to think about DocuSign

You know the end times are coming for the American legal system when a company can be paid more than half a billion U.S. Dollars a year (and growing 35%) to facilitate execution of legally-binding contracts the signatories have not actually read.

While it is technically possible to review the underlying documents, DosuSign and similar tools make it oh-so-easy not to even look at them, much less haggle over the provisions.  

Click, boom.

This is part of a much larger pattern of assuming away the fine print.  The fine print in general is so voluminous and preposterous that it’s not only rational, but also increasingly common practice, to ignore it entirely.  Would anyone understand the details of Twitter’s TOS anyway, or remember them if they did?  “Click here to to acknowledge that you have read that which neither you nor anyone else has read.  Terms and conditions apply.”

Mandatory, unavoidable cognitive dissonance.

We read a lot of S-1 filings around here (like DocuSign’s 206-pager) and while they are not agreements to be executed it’s clear these things are not meant to be read, either.

It’s hard to say when it got this bad, but there have been some clear milestones along the way.  Like the mortgage crisis, when millions of sub-prime borrowers were encouraged to execute sketchy paperwork in exchange for more than a trillion Dollars.  Or the Affordable Care Act, when Congress passed a 17,000-page law no member of Congress had read.  

Sure, this is not good – but at least in both of those cases everyone was in on the basic concept.  Mortgage borrowers knew at some level that it would be good form to pay back the loans, and the broad outlines of Obamacare were so hotly debated for so long that the bill itself seemed superfluous.

As consumers we assume away the details all the time, in favor of a general understanding of the basic deal.  Like the iTunes TOS (yeah, yeah I agree I won’t put this track on Napster) or pharmaceutical disclosures (yeah, yeah I acknowledge you told me I could maybe have dizziness, swelling, mood disorder, or possibly painful death (but if I actually have any of these things I’m lawyering up)).  And we assume that anything beyond the basic concept will not be enforced, or will be held un-enforceable in the face of large-group outrage.

But then there is Facebook.  

Sure, no living human has read the Facebook TOS, but it’s a little weird that consenting users (and Congress, again) can profess shock that Facebook deploys the users’ own data in service of advertisers who are – gadzooks – attempting to sell stuff or influence votes.   So much money goes into political advertising that there is a very large and persistent effort to reduce it called "campaign finance reform.”  What did we think those political billions were paying for, exactly, if not to influence voter behavior?  And didn’t we all know that Facebook is the biggest dog among ad-supported digital publishers?  Even controlling for hysteria related to anything Trump, we seem to have lost the thread at the concept level.

Obviously people have been talking about killing lawyers since Shakespeare, but this seems to be a new way to get at it.  Get the corporate lawyers to write oceans of text that no one will ever read, and then pay litigators to brawl for justice when the actual provisions of those documents invariably conflict with vague after-the-fact notions of what a fair deal should have been.  It may not kill the lawyers, but with the consumers opted out at least the lawyers are only fighting with each other.

Maybe tools to facilitate the non-reading of (theoretically) binding agreements have moved us farther down this road.  Maybe the one-sentence disclosure, like on cigarette packages, would be a better solution than un-readable agreements (“WARNING: use of Facebook has been proven to cause Political Rage Disorder”).  Maybe if it can’t be Tweeted it shouldn’t be binding.

DocuSign’s IPO roadshow launching on Tax Day — the day the IRS website crashed — is an interesting piece of poetry as there is no greater example of mass cognitive dissonance than the electronic filing of incomprehensible U.S. tax returns.  We are required to sign them, under pain of prison, and we do – right where we are told to.  But do we understand them?  Do we take comfort in knowing that no one really understands them and therein we have safety in numbers?  Or is it like living near a fault line, reliant on the mind’s complex self-preservation functionality to protect us from threats against which neither numbers nor lawyers can defend?  Maybe it’s denial, or maybe we just don’t care.

Nonetheless, DocuSign’s Triton Score of 6.65 is an exact tie with Zuora, placing it in the 56th percentile of tech IPOs in the last four years, and slotting it between Paycom (6.63) and Zayo (6.69).  

Whatever DocuSign’s long-term impact on species rationality or contract law, unless something weird happens this deal should work fine.

Click here for a complete rundown of tech IPOs year-to-date.