This Week in Startups - Intercom’s Des Traynor on the importance of pricing, product-market fit metrics & more | Angel S5 E2

Episode Date: January 28, 2021

Check out Intercom: https://www.intercom.com FOLLOW Des: https://twitter.com/destraynor FOLLOW Jason: https://linktr.ee/calacanis

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Angel listeners can get 20% off their first SPV at Ashore.co slash Angel. Hey, everybody, welcome to season five of Angel. My guest today is Des Trainer. You know him because he's been on the pod many times. Last time, March 2018, episode 807, he gave a great talk to our accelerator. And he has been a real great fan and supporter of founders for a long time. his day job as the chief strategy officer and co-founder of Intercom, where is really informs, I think a lot of Des is thinking on startups because he helps them reach product market fit and helps them

covet customers and listen to customers. And really at the end of the day, I don't know how you feel about this, Des, welcome back to the program, but at the end of the day, I've kind of learned as an angel investor that really cannot fake two things. I always try to think about what you can't fake, right? Founders are so good at spinning a yarn. And the two things I find they can't fake is a great product because you can use it and you can tell it's a great product. And the second thing is passionate customers. I don't know how you feel about startups at this point, but when you look at making angel

investments, and that's not your full-time job, I know that, but you do do it on a pretty regular basis and I have quite a track record. Is there something that you look at as your North Star for investing? I think, first of all, yeah. Thank you for inviting me back. I think the thing I look to most when people ping me URL and say, hey, I'd love to like check it. I'd love you to check in my product.

It is, I mean, I think I go straight for the actual product quality. And that usually looks like the UI. Like, does it all make sense? And then the related pieces, like, does the actual problems that you're trying to solve make sense? And oftentimes you can build a beautiful product, but doesn't really solve any real problem. So it's that pairing of like quality execution and an actual real problem. By real, I usually mean it should be a big enough problem such that people will pay money to get rid of it.

And ideally a frequent enough problems such that they'll subscribe and they'll stick around and it's not just a one and done type solution. So that's usually where I start. The next thing I would move on to is like, show me a customer who's not your like friend or not like in your incubator batch or whatever. Just someone who you've no connection to. And let me see how they use the product. And if I get suspicious, I might ask to talk to them. but in general I'm looking for like somebody who doesn't know you to make a relatively like conscientious purchase of your product and a purchase can be like yeah it could be like 50 bucks a

month or whatever and you're like yeah you probably have to think about that or it can be like I spend three hours a day in that product and I'm like that's a purchase as well in my opinion it's you're spending your time doing this and it's obviously valuable so that's kind of like the ranking I go through if I don't see a good product I'm all nearly almost always gone there's a few exceptions I'd make for that. But beyond that, it's a good product, you know, real problem, good customer. And then at that point, I'm usually happy. And then you're into questions about market size. Yeah, it does seem like once you get that table stakes of, hey, this is a great product. Okay, now let's qualify the customers. And I thought it was really instructive that you said in that

sort of opening salvo is repeatability and then skin in the game. If a customer is not paying, that is really problematic in terms of determining if they're committed and they have skin in the game. And the only way to really know is how much time and engagement they're spending in it. But it is important for most companies to charge for their product early on, right? That is your suggestion is to not delay. Everybody wants to do these free pilots. I don't understand what they're trying to prove with a free pilot. I think it's just so hard to get real.

market signal without actually dollars on the table. And like, there are like, you can look deep into engagement and you can be like, right, well, this person is a daily active user and they upload 20 files and they share with all their friends. And you can use all these kind of weak proxies. And if you're in B2C land where you're never going to charge the end user, that's okay. You're going to make money for advertising. But my area is more B2B. It's more like charge for the product you've built or like maybe prosumer is like this as well. And I just think like, you know, a classic example would be I've invested in many email startups. One of them I think we're both in, superhuman. By setting that price early, Rahul set the challenge of this thing has to be really good.

There's no way you're being 29. Yeah, exactly. And it has to be worth it. If you could imagine, if you, if he didn't have that price point and that feedback, he would have convinced himself it was plenty good, maybe at 50% of the product quality, because it would have been good enough for people to use, but he never would have been able to realize the actual, the sort of revenue that he needs to get to. So I just think, like, not charging it. You're basically saying, yes, you're going to see all your metrics go, go up and, you know, that will make you feel great.

But you're basically saying, I'm going to take a risk and get no real market feedback for quite a long time. And hopefully, I've been doing it right. And I just, there's a few occasions where it makes sense, but most of the time, I feel like you're just taking a massive risk there. And how do you explain the phenomenon of like a superhuman or an Airbnb where these things actually didn't make sense when presented in a, you know, in a presentation, the idea that people would pay $360 a year, right, for Gmail, which is free, that would be the cynical

interpretation of superhuman. Why would people pay $360 a year for what they can get for free from Gmail? And then the other cynical one for Airbnb is like, there are plenty of $99 hotels, why do you need a $99 sleep in my extra bedroom? That makes no sense. How do you get past that cognitive dissonance when the idea itself does not seem logical? I think, like, you know, one of the things we use a lot in Intercom and I've pioneered a bit is like this idea of jobs to be done, which is just like, what's the person really trying to get done? And I think like what you realize and what Rahul certainly when I spoke to him about this realized is for a lot of people, and, you know, you're probably a prime example.

Email is a thing you need to get done quickly and 90% of emails you don't act on. You're just like, gone, gone, gone, gone, gone, gone. This sounds interesting. Gone, gone, gone, gone, gone. And Gmail's not designed for that at all. And in fact, on top of that, Gmail is just kind of, it has had like 15 years kind of asleep at the cash register, except for it's not really cash in a sense. It's just usage because there's not a real challenger.

And I think what Rahul identified is like, there's a select set of users for whom email is incredibly important. And it's like a big regular problem, right? It's in that spectrum. I use it multiple times a day and it's really important I can do it efficiently. And there's no tool for that set. Now, there had, there'd been a few efforts along the way, but nothing close to the degree of polish or the degree of upfront investment that superhuman went for. I think the other end of the spectrum is what we call like untapped usage, which is people

want to stay in a city. They want to do at a certain price point. But like all the big hotels that are near the thing they want to go to are hell expensive. Yeah, there's a $99 place by the freeway. But I'm actually trying to be here for this event or this conference or whatever. whatever it is. And I think like, that's one half of the demand, right? Like, that's one half of the market. The other side is I can only barely afford this apartment. I wish I could do something

with it. And I don't want a full-time roommate. So, you know, there's a genius stroke that was required for like for Brian and Co at Airbnb to actually see that intersection. Like, there's a reason no one else thought it's, it really is one of those like one in a billion type things to spot and connect. And obviously, they had a regulation minefield to walk through to get to the success they've had. But I can't, like, I can't, I'm not sitting here saying, like, oh, I would, I would have spotted that too. No one would have. Like, there's a reason. There's only one Brian Chesky, and there's a lot of us, you know. Yeah. And think about how many people actually passed on investing in Airbnb. They had a list of 30, 40 investors who passed. And the same thing for

Uber, people were just like, this doesn't make any sense. Why do you, why do you need this? Like, you can drive, you can rent a car. There's taxi stands. Why do you need to get it on your phone? It doesn't make any sense to me. And, and, and, and, and, when the product hits the market, that's when you actually find out. But having a job to do something to get done, this is an actually really good way to frame thinking about whether an idea is a good idea or not correct? Absolutely. That's how we focus on Intercom all the time.

The question is always just, just what's the job the customer is actually trying to get done? And they're like, oh, they're trying to increase growth. Okay. Now do we know that. We can make a load of inferences and we can say what's important and what's not important. Oh, and PS, we should remind ourselves that we should prove to the user. they've done their job at the end of all this.

And I think it kind of just gives you that clarity of focus, which is like it's easy for technologists to get excited about tech, but people pay for outcomes. They pay for like getting promoted. They pay for like being a productive person or a better engineer or whatever. That's what you're actually here to deliver. And unless you're, unless you have a laser focus on that,

the chances are they'll produce beautiful technology, but you just forgot to do anything for anyone. Yeah. All right. When we get back from this quick break, I want to know what you've learned in the process. of angel investing that has made you better at your day job at Intercom when we get back on this weekend startups.

All right. The new year is here and it marks a fresh start for your small business. And you are going to need talent to pursue all of these new efforts you thought about over the break. So we're hiring a ton of people at launch. Customer support. We need another producer for this weekend startups. We need another video editor for this weekend startups.

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LinkedIn.com slash angel, and you can post a job there for free right now. That's right. They're giving everybody who hears my voice right now a free job listing. Some terms and conditions do apply, of course, because they're giving it you for free. LinkedIn.com. Com slash Angels to get that first free job posting because we need to get to work. We need to do the work in 2021. Okay, let's get back to this amazing episode. Welcome back. It's our Super Angel season of Angel.

Just angels who have made a lot of investments and a lot of winning companies is what I would consider a super angel. And DesTraner from Intercom has invested in a lot of great companies from Superhuman to Notion to Hopin, to Coda. all have been on the podcast recently, except for Notion. We got got Notion on. Founders a little bit, I think, podcast shy. But Notion's done pretty amazing, huh?

Yeah. I mean, when I first met Ivan and the folks at Notion, it was, I incorrectly characterized it as like an intranet. Like it was going to be a Confluence killer. You know that Atlassian product? Confluence is a classic like Microsoft word. It's hanging around making loads of money, but it's not good. And so immediately, my first pass was like, yeah, Confluence Killer, that will work.

I think at the time, Confluence's revenue is like 60 million a year or something. So I was like, yeah, this could work. They've taken a leap to being much more like a digital platform for organizing your life at this point. And they've been on an absolute terror since then. It's been incredible to watch. Yeah, it's very interesting how putting a really nice user interface. We talked before about a beautiful product really can make a difference. Wikipedia, you know, and media wiki has exactly.

existed for a long time. There was a whole phase of people bringing wikis inside their organizations, but they were kind of hard to use. They were clunky. They were ugly. And then Notion is so elegant and simple. It feels like a new design aesthetic that will carry us for the next decade or two, right? The design is a key piece of their success. Yeah, I would totally agree on it. I think minimalism is the key. I think if Notion had a really opinionated design and like lots the signature colors and all that, it would turn off people. They've actually gone for that sort of timeless nature, which is just anyone looks at it and they can see their own intranet being there.

And I think that's like it's a genius stroke to keep it minimal where, where frankly, aesthetics aren't going to add anything. The whole job of Notion is get the right information to the right people. Friends of Ivan, ask him to come on the pod. I'm obsessed with the product. So let's get Notion on the pod. So before we went to break, I wanted to know if you had the same experience that I've had, One of the great benefits of investing in startups is you get to build a nice circle of CEOs.

Hopefully you've picked well. You picked companies that have great products that actually help customers get a job done, that have great design and really passionate customers, which means those founders are probably doing something right. You can learn a lot from them. Even though you're writing the check, the boomerang effect is they're going to send you knowledge and they're going to teach you something. So I'm curious what you've learned from some of the investments.

if things come to mind that when you get the update or you talk to the founder or they're asking you for help with something, do you start to get some ideas for your own business? I think the biggest, there's probably two sides. One is you often find yourself, I'm sure, as I do, giving advice that you actually need to hear yourself and you're like, you're telling somebody, this is how it should be done. And like, you realize after the hang up to call, you're like, man, I should listen to that Des guy. He sounds smart.

you know, and so you sort of, you, the problems that frustrate you most are the ones that you see because you know you embody them yourself or they exist in your own work. So there's some amount of holding a mirror up to yourself when you're dishing out that advice and being like, do you actually follow this shit or are you just good at saying it? So there's definitely a genuine value there. Another, but probably the more meaningful thing is like intercom is like obviously scaled at this point. Like we've many product lines. You know, way over 100 million in revenue and all that. One of the things we still continue to need to do is like build a new, build, build, build. and like new lines of business into the, into the sort of the platform and get them started. So,

you know, every year or two, we have to kind of start a new type of startup. Now, we have an advantage versus, say, a launch incubator startup in that we've got like 30,000 customers ready to go. But we still need to like get new stuff started and we need to embody whatever the best of modern software is. So like, and the sort of, there's a rising tide of consumer expectations. People, like today it's not, it's not, it's no longer good enough to launch something. isn't at least half as good as an ocean and superhuman needs to be really fast, needs to be really pretty, needs like, there's all like the sort of the rising tide of customer expectations, it catches up with everyone.

So whenever we go to build new stuff, it's good to be like regularly in and amongst shit hot startups that people are admiring because it kind of raises your own bar internally. So when we see like, oh, we're going to launch this new, let's say, this product tourist feature, you look at that and immediately, I'm not comparing it against the worst piece of intercom UI anymore. I'm comparing against the best thing I saw on Product Hunt yesterday. And that just kind of means that your bar is so much higher for what you think. And that's really, I think it helps Intercom stay quite modern and fresh because, as I said, we're always comparing ourselves with what the latest and greatest is, as opposed to,

oh, we're catching up on Zendesk and look how clunky this thing is or that thing is or, you know, or service cloud or whoever. So, like, I do think there's a value in like, kind of, it forces you to stay in with the cool kids in a sense. And you always know what good looks like. Yeah, I think it's a really great way to frame it, which is if you're looking at what you've done and your previous success, well, it's in the review mirror. And if you look at what other people are doing, they're building off of your ideas as an entrepreneur who's been at it for a while. So of course they're going to be trying to one up you or, you know, notion's going to look at intercom and go, oh man, that looks old over here. We got to redo this interface.

And then all of a sudden, the student, in fact, becomes the master. and things move at a pretty, you know, brisk pace in our industry, and you can very easily just rest on your existing success. I'm curious when you invest in companies and you're talking with founders, what mistakes do they make in terms of fundraising, mistakes that you've made in terms of fundraising that you try to educate them to in terms of picking investors, how much money to raise? This has become a big issue as, you know, so many angel investors have flooded the market. We have equity crowdfunding. We have accelerators.

You have so many different choices to raise early stage capital. And now this crazy thing has happened that you've experienced as well. Late stage investors who were previously doing public markets are coming down into private markets. Private markets are opening up with SPACs to startups at an earlier time, maybe even pre-revenue. You have crazy pre-revenue companies. but he's going public, which is nuts. I don't know if you or I ever anticipated that. So let's take that in two parts.

One, the mistakes people are making in the early days, and then we'll go to the late stage stuff. I think the biggest trend I've seen that just wasn't true when we were doing our say seed round in 2011 is there are people willing to write huge checks who are just individual angels. And I'm talking about like $5, $10 million checks. And they're individuals. and they don't take a board seat and they just kind of, you know, they'll write the check and

they'll just add that to the portfolio and move on. And I think that has just changed so much about like what, you know, what I think, uh, what happens with these early stage companies. I would say like, uh, we started to get like structure and periodic reviews of the business kind of as a, as an output of raising money. It became like, oh, well, we, I guess we need to present a deck and like the deck we were going to be scrubbed true. and we knew we were going to have to offer up a lot of customers for, like, for due diligence.

As that's gotten much more like lightweight or like, let's just say diet, due diligence and like, you know, scrap your decks. And I've got, you see people now sharing like four paragraphs and being like, you know, here's the idea. I'm raising five on 20 who's in, you know. It's, um, I, there's a hygiene that you pick up by as a result of having like people who are genuinely interested in your business succeeding and have the time to monitor and invest themselves in it that I, I, I, worry where it comes from outside of that. And it's not to say that these founders don't care. It's just like when you care, as a founder, you care about the problem so much, you can occasionally forget to look at the fundamentals, the basic metrics, the sort of like, you know, how is the business performing? Is revenue expansion looking good? What does good look like? Well,

I've compared it across the portfolio and here's what good gross revenue retention is and here's what bad is. And I think we've a return problem in this segment. Like, when you can't tap into that knowledge from an investor. You can definitely go and read blogs and you can like, you know, you know, drink everything that David Sachs has ever written in mind. Like, you can get pretty smart, but it really helps to have somebody who's going to sit down with you and go through all that. So one fear I have is just a lot of companies will, you know, take a substantial amount of money, but not really get any of the sort of value add that they probably need specifically on the area that's their blind spot. And I typically invest in product people and the blind spot is almost

always the rest, right? It's the business, it's the metrics, it's net dollar attention, it's LTV, cock, it's all that sort of stuff. Yeah, there is a discipline that comes from taking other people's money and having to explain how you deploy that capital and what is the reasonable expectation for them to get a return on their investment. And if you are raising from, you know, somebody who doesn't have a partnership and they don't invest in other companies or they're just kind of winging it or you do a party round. You might lose some of that. I mean, it's one of the reasons we ask all of our accelerator companies, please write a monthly update. And if you want to do six times a year, that's fine or quarterly. That's fine. But do something so that you as a

founder can stop for a second and assess what you've accomplished and what you're going to accomplish in the next year or what your targets and goals are. If you make a plan, the chances of hitting it are much better than if you have no plan at all. What's planning like now at intercompetion? as you've grown. Well, so we're actually in the middle of right now. So a lot of SaaS companies, we're like 12 days away from our end of year. And then our financial year starts in February. So we're quite deep in it.

Planning is basically it's a function of like a lot of spreadsheets. Our business is on a certain trajectory. And you basically assume that that's going to continue unless you do anything inorganic to change it. And then you say, right, that's like, you know, things are going well. We've had a great year. We're going to invest a lot more into hiring a lot more. Okay. What do we think that's going to do?

So a question I've only really learned how to answer over the last two or three years is like, what's the ROI of a product team? So like if you give me $10 million, I can go and hire maybe 10 product teams. What can I do with that that will actually change Intergram's growth trajectory such that the balance sheet still makes sense. So that was a positive thing. And like, can I find new lines of business or can I just tap into existing ones? Can I change churn?

Can I change expansion? So like there's a lot of that like in my world, planning looks like, you know, I can generally speaking, have as much money as I want. The question is, can I deploy it all effectively and when will we see to return? And so does an extreme sobriety you have to take with all this? Whereas I do think, like, five years ago was like, just pack them in. Let's see how many engineers we can get. Let's see what we can build, you know?

Yeah. A little bit of thoughtfulness goes a long way in terms of not having to do layoffs down the road or reorganizations. And once you've been through those things, I assume you've been through some of those things, you're like, oh, my Lord, you know. pretty good idea to have a plan and a destination in mind before you put a bunch of people on a plane and take off because people need to know what to pack and to know how long the flight is and if the plane is...

What the expectations are? Yeah, yeah, exactly. What is the range of this plane? Like, are we flying to the North Pole and is there a place for us to land this plane? When we get back, I want to talk about the later stage funding rounds and what life is like when you, as you have, you know, in this, I think you're 10 years into your job. journey with Intercom. You know, I remember back in 2016, you'd broken the, or 2017, you'd broken that $50 million mark

of pretty significant. And I know last year you did over $150 million, if my research is correct. I want to know what life is like when your little two or three person company goes from having three or four customers and three or four thousand a month in revenue to now having, you know, $150 million a year and you're, you know, planning on doubling every year. and you've got all these investors, and you must have people saying, hey, now would be a good time just back when we get back on Angel. As somebody who's invested in over 250 startups, oh my God, has it been that many? Well, I want to talk to you about a serious pain point that I see all the time with my startups.

Too high of a burn. They're just spending too much money and the runway is too short. One of the things that people have spent a ton of money on these days is buying SaaS products. great idea make your company more efficient but what if you're buying too many what if you're not using some and then you're wasting all this time integrating them together well there is finally a solution and the solution is odo dot com slash twist that's odio dot com slash twist that's odo dot com slash twist to get a thousand dollars in credits that's right one thousand dollars in credits odoo is a fully customizable and fully integrated suite of software that let you build and scale your stack as you build and scale your business it's simple It's modular, and you only pay for what you use, and you can just add components as you grow. You can do project management, invoicing, sales, marketing automation, help desk, timesheets, inventory, and so much more. For example, their accounting products are perfect for anyone who upgraded from Excel or QuickBooks, but doesn't want to break the bank with some of the more expensive options out there, and they're going to give you $1,000 right now on your first implementation pack.

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Dez Traynor is with us. He is the co-founder of a little company called Intercom, which all startups use to help them understand their customer journeys and to talk to their customers. You've got a full suite of products now. How do you describe Intercom now? Because most people just experienced it as, oh yeah, there's a little chat box in the bottom right,

and we can help you. understand and talk to your customers. What is it now? How do you explain it to people now? A conversational platform. So any company that wants to have conversations of its customers for sales support or marketing. That's what Intercom is. And most people buy us for one of those things and end up using us for all. Are all of these products converging the sales forces, the Zendesks, yourselves? Is everybody building one CRM customer relationship management sales, total funnel product? And as opposed to Zendesk was Help Desk. Now they've added. you know, CRM and sales and now Salesforce is adding customer support.

Everybody seems to be adding every piece. Is there like a singularity going on? I do believe there is. I think, like, so when we started, we didn't actually think about it as being like sales support and marketing safe because our whole thing was just we're going to build a messenger like a WhatsApp style, like just real nice, rich messenger for businesses and customers to talk. We never, like we weren't mature enough or probably old enough to assume well, there's actually

buyers and sales marketing and support and you need to think about each of them individually. So we just focused on building. building a messenger. What's happened is if you think about the funnel, top of the funnel sales where Salesforce is strong. The middle of the funnel is HubSpot, end of the funnel is say Zendesk. And they each like, so Zendesk were like support and they're running back up the funnel, much like Salesforce are running down the funnel. The HubSpot are trying to branch out. And we're sitting here kind of like part of us is going, ha ha, ha, we were right all along. But then the other part of us is like, oh, all these people are now trying to move into our space. So I do think

you're going to see like a convergence on some sort of oligopoly like where there'll be like three or four or five players and it's just which one of those do you use and like you know, everyone will have their strengths at various market segments or for various B2C, B2B type use cases. But yeah, I think you're totally right. There's a singularity underway. You hired a CFO where it is heading towards an IPO. What is life like in this sort of? And the last time I knew you guys raised money that it was announced, at least was I think

2018 in the Series D. I like Cloner Perkins led, $125 million, Vulcan. GV and Bessamer were involved in that one. Has there been a round of financing since then? And then how are you thinking about going public and raising capital at the later stages? What's it like in 2020, or 2021 now, raising money at these late stages? Yeah. So the last round was like definitively to be our last round.

And we haven't broken. We haven't a need to break. And I know everyone kind of says that about every round from Series A onwards. But like genuinely, it was it was a big round with that as a plan. And we've kind of stuck to that piece. I'd say like the, you know, a lot of our, all of our fundraising was fact that we'd done by our CEO, Owen, who moved into chairman position this year, or sorry, the year just gone. I think like the biggest thing I noticed shifting is like you move from like vision and

pitch and like, you know, big story and like here's a rosy future. And like a lot of it really puts a lot of pressure on like the founders and specifically the CEO to just paint this future scape that like you have to, the investors need to put a lot of trust into the individual to realize. And then later stage and like we, you know, I've been involved in a few of these conversations. It's mostly an extrapolation of spreadsheets with a few anomalies that people want an answer on. Like, oh, I noticed that, like, you know, churn is high in this segment, and I noticed your early stage program is working out better than you taught.

But, like, it tends to be a lot more, like, just mathematical versus, like, there's no, if they didn't like our net dollar attention, there's no story I'm telling that makes it any better, you know? It's just fix it or don't fix it. Now, thankfully ours is good. But, like, it's, generally speaking, the story gets a lot. It's kind of good because it preps you for what I imagine public markets would be like, which is just jazz hands and bright lights and fancy PowerPoint decks might get you an extra

5, 10, 15%. But ultimately, if you're a B2B SaaS business, they're going to put us up alongside Snowflake and PagerDuty and Hobspot and Zendesk. And they're going to be like, does this fit? Does this story make sense? Okay. So they basically, the romance and the storytelling is gone and it's just accountants. It's a reality, you know.

It's reality. in analytics and just, yeah, it's incredibly boring to me. Yeah, it's the same thing that happens. Like, you know, when you invest in a startup and then they start charging, and they had this great story about however they love their product. Once they start charging, it's like, guess they do or I guess they don't. Like, you can't make it up anymore, you know? Right.

Yes. Storytelling as a device is secondary to reality. You're going from selling. Yes, exactly. Reality bats last, we often say. Reality bats last. Yeah, I mean, you go from selling the promise of the business to the actual performance. And boy, does that, that does change everything.

But you guys have hit profitability or you were profitable at some different points during the last couple years. How do you think about that in today's world where there's so much money sitting around? And then how do you think about acquisitions and is that something that's going to slow you down from building this singularity that's occurring? Or do you think about it like Jeff does a Twilio where he bought, you know, So Sangrid and he also bought Segment and he's just like, you know what? We need to get big. And in order to get big, we're not going to be able to build Segment or SanGrit.

We're going to need to buy it. We could build it, but it's just going to take too long. Precisely. I think like we've, we have yet to buy a company. We've definitely looked at a few. We've gone, we've gone like to maybe midstage negotiations with a few. I think like it's definitely like it's obviously a route to growth. And what you're seeing a lot and also you're seeing this even,

in the early stages. Like, for example, Hoppin, you mentioned earlier, bought a company recently. I think there's definitely a, we're in a sweet spot right now where people are like taking advantage of their valuations, as say Twilio did, to pick up a really expensive company in segment. Like, $3 billion is a no-joke acquisition. But it all makes sense when valuations are kind of universally high. I think basically acquisitions to fund future growth or to unlock new sort of platform opportunities makes total sense. As I said, we've looked at a few. We've used. yet to find one that's a perfect fit. And I think, as it relates to say profitability and what, what do you do with your

extra capital in general? And do you want to go and raise more? A lot of it comes back to like, where do, where can we deploy money effectively to increase our growth rate and just continue sort of this trajectory of hypergrowth? And oftentimes for us, that's like build more software. It's fun to new teams. There's a while, there was a while for us where like we were quite heavy on the R&D side. And actually the area where we were kind of more underfunded or on our exec or whatever was on the go to market side where we're like, oh my God, we have like this monster self-serve business and like four people in marketing.

And it just made no sense. So I think like there was a while where like the biggest path to spending money to make money was actually learn how to do sales and marketing properly. And so I think we spent, I guess, three or four years working that out. And now we're back on to like, all right, the whole system's humming. Let's start going back over to the R&D side of house and build out new businesses. And that's what I'm spending this year and next year doing. It's really hard, as you're pointing out, with a business to focus on multiple things at the same time. But that really is kind of necessary.

But it's hard because you only have a certain number of cycles. So you're saying, hey, sometimes you've got to just really get laser focused and solve some acute problem like the sales before you go on and add more products. So it does become a sequential kind of thing. You do things in order. Yeah. Yeah, at any given point, there's like a big, like, especially when you're up and running and you've proven the market needs your product, it's basically what, you know, the question you find yourself constantly asking is, why aren't we growing faster? And at some point, product isn't the answer. It might be like, we're not marketing enough or it might be that we don't have a sales team yet. And you might solve all those. And like, and like, you might get to where we are, which is like, okay, the thing that we could do most to give us new stuff to sell would be build new product. And then off we go back again. But like, you're kind of just always looking for what's the biggest area. that would present the highest leverage for the money that we're going to deploy. All right.

When we get back from this quick break and final break, I want to know about a couple of the investments you've made recently. Hopin comes to mind, the virtual event business that was the quickest unicorn, I think, from zero to unicorn. They raised $40 million this summer or this past summer in the pandemic. People moved to all their events online. At a $2 billion valuation, it just sort of came out of nowhere, this incredible growth. And then also want to know, just wrapping up, how you think about SPACs and going public.

And then finally, the Slack acquisition, what's your take on that? Because that seemed to me like a very confusing moment for our industry. Shouldn't Slack have stayed independent? Or do you think they did the right thing by selling to Salesforce when we get back on Angel? If you're an accredited investor, you need to understand what a special purpose vehicle is. This is how I have made my career. What is a special purpose vehicle? Well, it's an investment vehicle that allows up to 250 investors to invest up to $10 million into one entity on a cap table of a startup. Nice and clean, not 250 names, but one name. If you're an angel investor with a bunch of rich friends, you could start your own syndicate powered through SPVs.

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you guys know intracom uh go check it out if you're running a startup you already know about it I don't need to tell you. It's the best way to get to know and talk to your customers. All right. Slack, Hoppin, Spacks. Lightning Round, Des. What do you think about each of these? Take it in whatever order you like.

I'll do maybe Hoppin first. Hopin's an interesting one for me. It was like October 2019. A friend introduced me to a guy called Johnny. He said, this guy is building a conference thing. I was a conference speaker, as you know. And I was like, oh, conference online. Great speaker, yeah.

Yeah, thank you. It would make sense. So I met him. The thing that blew me away with Johnny was he gave me a full demo with the platform. It all made sense. And his whole pitch at the time was this is better for the environment done on real world conferences. And I was like, I wasn't sold on that as an angle, but the software worked. So the thing I was pushing with time was like, consider internal company events.

Like we have to run in all hands every week, five different offices dial in. Consider that use case. That might be an easier one to latch on to done just environmental concerns. Anyway, I totally forgot about hopping after I invested, as I often. do. I do a couple calls and move on. Then a pandemic hits. Obviously, I'm dealing with a lot of intercom stuff. And then I got a message from Johnny saying, hey, can we jump on a call? Things are kind of busy. And I was like, oh, this could be a good one. Yeah. And yeah, they've gone from, I can't remember the evaluation when I got in, but it was certainly sub 50 million anyway.

And now obviously it's worth, I think, like, $2 billion or whatever to the figure you quoted earlier was. The whole world very quickly realized online conferences are a thing. And it's just absolutely blown up. And even most recently, they've actually, they have bought a company, I think it's a streamyard they're called, specifically to enable more online streaming. So I think there's like a good opportunity. They have a really clean run up basically dominating what it means to be an online conference full stop. So it's a, I can't say it was any foresight. The thing I saw that I liked again was real problem, person who really knew the really knew the problem and built a great piece of product.

And it's worked out for me obviously to the tune. of a substantial upside. Well, and there's a big lesson here, I think, you would agree in that getting started and pursuing your vision, you don't know how the world is going to adapt to it. And, you know, your storytelling might be like, hey, I really don't think people should be getting on all these flights and burning all this jet fuel and carbon. And everybody else is like, yeah, I've got to run every Friday in all hands meeting. And I got 17 offices and 300 people working from home.

And then all the pandemic hits. And now I've got 3,000 people working from home and nobody is interacting with each other. I need to solve for culture. I need to solve for communication. I need to solve for depression and melancholy in my workforce and get people pumped. Speaking of that, how have you been, you're a super social guy like me. You speak at more conferences than I do. How have you been dealing with this pandemic and not being able to do what you and I both love,

which is travel the world and meet people? Yeah, it's really sucked. I didn't realize how much I liked travel. Like, if you asked me on a given point, I'd give out because I would travel quite a lot. I'd be over in San Francisco 10 times a year, et cetera. But now, like, having been pretty much in this room since March 12th or whatever, give or take, right, with a couple of small vacations around Ireland, it's definitely being grim. And, like, the backlog of people I need to catch up with when I get back to SF, the backlog of, like, restaurants. Some of my favorite places in San Francisco have closed in the time since I've been there last.

It's like, it's just such a bummer. I can't say I've done particularly well. I'm definitely doing a lot of Zoom calls and Zoom drinks with friends and all that sort of stuff. But, you know, it's not the same. I'm doing terrible, Des. You and I, this is good for us to commission it. I am doing terrible. You're an extrovert.

I'm an extrovert. We love going out to restaurants with meeting people. This is like torture for me. And I went into quarantine as you did on March 12th. I had done a speaking gig the week before in Houston. I was a keynote for some startup thing. Had a great time. And then nothing.

And then all these restaurants closing and not seeing everybody. it is maddening. How do you keep the troops at intercom motivated and upbeat when, you know, it has been like just a horrible experience being locked in our rooms and not being able to see each other? And being on Zoom all day long, I can't even begin about that. That's just impressive, right? Being on video and camera.

There's a few things we've tried to do. We've tried to encourage people to work more asynchronously and like not try to replace every meeting with a Zoom call because you're just going to be like looking at people on screens for just way too long. we've forced the company to take a lot of mandatory time off. So we actually, we shut down the company for a week in July. We just said, right, for this whole week, no one's working. And smart.

And like that was, you know, what was nice about that is like, you know, oftentimes taking time off work can be stressful because you do all this work in a run up to try and clear your desk. And then when you come back, a load of shit that unfolded and you have to pick it all up again. Yep. When you actually take the whole company offline, it actually, none of that happens. So we took the week of 4th of July off because we figured it wouldn't be a great week for sales and support it would typically be lower.

So we just said all five sites, no one's working. And then we've had like three or four. In fact, this Friday of this week, I think is another where we're taking like a few just company-wide days off. And then the thing we're trying to do is tell people, please, please, please, don't just refresh Twitter and get more pissed off with the world on your day off, do something else. And we've like in the run up to Christmas, we posted people out like, you know, DIY kits for making gingerbread houses with their families and just like just anything to try and like,

please don't do the thing you do every other day on your day off. Like go for a walk in a forest, hang out with your children, you know, play with this kit, whatever it is, but like anything to try and get people out of work. Because the thing that we actually need,

like the thing I need is to go to Greece and stay in some fancy hotel with a pool and enjoy cocktails. But I can't do that. So I have to do something. And that's like, that's the challenge we're all facing. So we do what we can. I think the most meaningful way a company can say we care about you is often

I'm just say, you're taking this day off, but you just want you to recharge. It is. There's something that is like this, I find it's like just this weight that everybody's carrying about this. And you talked about the doom scrolling and just staying up late at night and looking at the news, whether it's what's happening here in the States or the pandemic or the, you know, borders being shut down, et cetera.

It just all becomes so overwhelming. What I love about the shutdown of the company for a week, and I started doing it over Christmas holidays in the break, was. I was not able to enjoy taking time off because I would see all these slack messages and emails going back and forth. And I was like, I can't enjoy taking time off because when I open up the video game that is, you know, running a business. There's all these fireworks going off and boss level events occurring. And I get sucked back in. But if everybody's off, then there's no Slack messages. There's no emails. And I told people like, please do not email. Do not drift back

in, you know, if you want to clear your email inbox, that's fine, but don't start emailing everybody in the company work to do. And I had to, you know, get myself to do that as well, because you might fire off a couple of ideas. And yeah, it's especially important when you're a boss or an executive in general, because like people will then try to impress you by spending, you know, Christmas day working on something that you hinted at as an idle daydream once. Yeah. And I'm, you know, so we have to be really disciplined about being like, we really mean it. This isn't a joke. We want you to disconnect. You know, obviously we had to do some some shuffling we had to have support so we had our support team take a different time off

etc and same with our emergency team for DevOps and so like that but like we made it all work we actually it's a good muscle we have now we can do it regularly and it's quite i think the staff definitely really enjoy it that's what i'm moving towards what do you have you have so many offices around the world have any of your offices i don't know if you have an office in in australia but they're back to work in offices Taiwan japan a lot of places uh new zealand they're they're back at it. Is anybody going into the office in any country? For us, Australia is open and working fine.

We were like this close to reopening Dublin, not for everyone, but for people who just really don't like working at home, maybe like noisy household, bad Wi-Fi, whatever. We were very close and then the number is turned and we have to like abandon that plan entirely. I think UK and San Francisco I've never really got close since the start.

I don't know about Chicago. I suspect probably probably probably never got closer, at least I never heard about it. Yeah. And what are your thoughts on remote work and going forward? Do you think it's going to be here to stay?

Or do you think you want to get people back in the office? And do you, is something missing in the business when people aren't in the same space? I think it's definitely for a lot of people more inefficient to try and work everything out in a Google Doc, constant back and forth comments and notes.

And like, it's, you know, it's okay for people to say, hey, I'm an I'm an extrovert. I like being in a room with somebody. That's actually what makes work, what makes work fun for me is the actual back and forth, the high dynamic exchanges, the real fast idea sharing. I just don't enjoy it when I get an update and then I write my update and then they reply to my update and it's just a grind. And like, you're never going to come up or anything in creative doing that.

I think honestly, the future of work is probably going to be a mixture. And like we've seen this already in intercom. There are people who are like, hey, I still want to go back to the office, but maybe not like 930 a.m. Monday to Friday. Maybe I'll do like, you know, Tuesdays and Thursdays in the office or whatever. People want to adapt to a kind of what you might optimistically call a best of boat worlds. It could go the wrong way. It could go worse at boat worlds.

So we need to kind of design what we think the future we should look like. But I do think like, you know, we'll find some, and like office design will change for this. We'll need to work out how we can. can have good, productive in-person, back and forth positive meetings and then also isolated work where you don't all need to be together. And we need to design for both, basically. And I think we'll probably we're building and we have a whole new building coming online in Dublin soon. It's going to be a huge skyscraper type thing in the middle of the city. Intercom HQ. We're very proud of it. But we're actually

like genuinely reconsidering the layout and design of this building because it's just like we had to assume everyone would be in the office. That's almost certainly not going to be true anymore. So what makes sense now. Yeah, and I got to think for employees and team members, how do you game it? If I'm in the office, you know, then I'm going to be closer to Des and the leadership and the action and I get more collisions with people. My career path is going to go through the roof. And, you know, if I'm home, people may forget about me. And, you know, then there's a meeting going on and they couldn't get the AV set up and they gave up or they popped up the AV but they never called on anybody. And, you know, I remember all of the remote workers that we've had or I've seen in other companies that kind of get forgotten during meetings, right?

And the reason I think it's working now is because when you're on a Zoom call or whatever Google Hangouts or Microsoft Teams, you know, everybody gets the same amount of screen real estate. The CEO, the CFO, you know, the junior developer, the person in marketing who just started out of school, everybody gets the same real estate. gets the same size font in Slack. Although that maybe should change. Maybe the CEO should get like two times of font size. I don't know. That would be really cool. If CEOs got 50% larger fonts in the slag room.

But I do think that that's going to be the challenge like you're saying. It could be the worst of all worlds where the people who work from home get forgotten. They become second class citizens to the people who are in the locus of power. What do you think of that? When you woke up and you saw Slack sold, they took all this time to go public. They go public with direct listing. The stock. didn't surge. They obviously had some headwinds against Microsoft teams, freezing companies from

thinking that like Slack was a waste of time. You're just going to get Microsoft teams for free. Should they have sold? And do you think that that was like the purchase of the century for Mark Benioff? My first reaction was kind of like, I often think about startups as like, you know, the board game, snakes and ladders. Yeah. And I think like a, if your objective is, shoots and ladders. Shoots and ladders. Sorry, it's snakes over here. Is it really? Yeah, genuinely. Oh, wow. There's a little thing I didn't know. snakes and ladder, shoots and ladders. There's probably some cultural thing there, I'm sure.

So in shoots and ladders, like, I think if Stewart's objective and Slack's objective in general was we want to get Slack in front of as many people as possible and we want to just change a nature of workplace communication, you kind of need to get into the big companies. And I think it would have taken them a long time to work out like how to go to market plan to hit all the enterprise companies. I know they are making some inroads, but if you can imagine what Salesforce represents is like, the biggest ladder possible. It's like, how do we get in to the most powerful GTM machine outside of perhaps just Microsoft,

realistically, right? In terms of like getting this software into the hands of the entire planet, I think that's what Salesforce offered to them, it was the sort of the cheat code for enterprise domination. And that, you know, so I think it's possibly, I'd have to like know the individual terms and all that to say if it was the right deal for Slack. But I think if the question is, will Slack get more market penetration because of this? Hell yes. Will Salesforce have a much stronger, like, battle plan to go up against, say, Microsoft now?

Absolutely. I think the next thing Salesforce should go shopping for it, genuinely is going to be like a proper Zoom, a proper Zoom type product, a proper, like, email type client or whatever. And they'll really be able to go office to office, right? I think that's going to be a really interesting war. And so that was kind of my first reaction. And then obviously I had to trickle down and think, what does it mean for Intercommon? I don't really think there's too much concern there, like in that, you know, we have a great slack. integration. I didn't really anticipate too much pain there. But my first reaction was the next decade will be, I believe, Microsoft versus Salesforce. And I think it's going to be an exciting fight. Who wins?

I really, I've always been a fan of Microsoft. I think they're an incredible company. I think Sach is done incredible. I think Nat Friedman at GitHub is phenomenal. So I think part of me, if I had to bet, I wouldn't, I probably would go Microsoft. I might give the edge to Microsoft too. I think they seem to have a more method. methodical, relentless, unified approach. But yeah, Salesforce is pretty amazing. Their stock price and their ability to buy stuff, certainly they must have tried to buy intracom without talking about them specifically if they did or they didn't. Why you guys have had multiple opportunities to get off the train and to sell and to cash in your chips and, you know, then just instead of going for five days to Mekanos and having cocktails by the pool, which sounds amazing. I'll meet you there.

the second we get our vaccines. You and I are getting up there in age so we can get our vaccine soon, right? Exactly. Why didn't you guys sell when you had the opportunity to, you know, over the last couple of years? Yeah, I think we've had like four distinct opportunities to sell. And I think we've kind of been proving correct every single time because our value has exceeded anything around whatever we, whatever anyone would have thought we were worth of time. Now, we never actually played them out properly.

So I can't say for sure. oh, well, when we finish negotiations, we got this offer. But I think our ambition's pretty big. And I really want to realize it. So does own. So does Kieran, like our founders and so does Karen our CEO. Like we really want to like make internet business personal. And we really want to like change what it means to be a customer or a business on the internet.

And I think like, you know, anytime people have ever talked about like intercom as a potential acquisition target, it's always been to plug a gap in their offering. and it's never been anything more than that. And I think the company on its potential represents a lot more than being, oh, you know what we need, we need a messenger, pick up those Intercom guys or whatever. It's like that type of thing has never really made sense to me. But also like I, you know, the business is doing great. Like it's, you know, as is said on the other famous podcast, Let Your Winners Ride.

And I think Intercom was definitely being a winner for us. So like I would be tempted not to not to cash out too early. It definitely is a Let Your Winners ride type situation. I think. And Slack was perplexing because at the same year of the pandemic, people just immediately said, well, Slack usage is going to go through the roof and Zoom usage is going to go through the roof. And they go through the roof they did. But Slack, I think, is under monetized. They do not charge for the free, they give this free version. So many people I know are on the free version. I've got 10 instances of Slack of which two are paid and the rest are all free. I get that. But, you know, I think they weren't

cutthroat enough about charging and maybe the product velocity wasn't there for whatever reason they didn't have the growth in their stock price while everybody else did and I think that's probably what spooked the entire board and made them make that decision like gosh we're not our stock price isn't growing the product isn't adding features fast enough and that's a dangerous place to be when everybody else is growing so violently. A danger I see, and even in some companies I've invested in, and you could probably think about it for your portfolio too, is companies that emerge from a bottoms up adoption path where the whole consumerization of IT pitch were like, oh, it turns out all the staff have picked this up before the CIO had a say in the matter. They're all under monetized. And I think that's a strength and a weakness. It's a strength. It's the reason why everyone started using the thing without anyone noticing that like $9 a month is going on the credit card or whatever. It's incredible. for adoption. But when you then need to like shift gears and like we had a thing, we used to sell intercom

to IBM for $49 at once. And when we talked to, you know, and when we talk to them, I remember the guy saying like, he's distinctly remember he said on the phone, he goes, you know, I go for a coffee run for the team that costs a lot more than your product. And he's like, that's why we're wary of like, of, you know, investing too much more in you. We just don't see how you're going to survive. IBM are still with us. They don't pay $49 a month anymore.

But I think it's a muscle you need to grow to get comfortable understanding enterprise value and charging against it. But even if you don't believe in that and you really want to be cheap or whatever, the thing every startup never gets is how expensive it is for you to even sell into these businesses. Because you go through these lengthy procurement processes and all that sort of shit. It's 20 grand. You're right in time. Exactly. So you just you need to like you need to like kind of step up there. So I don't know about the ins and out of slack or whatever.

But I just say a pattern I've seen. And you could argue maybe like Dropbox have suffered from videos as well. Like we're like it's insanely valuable, but somehow hasn't cut the value in the way it could have. And I just think like there's a challenge there. You need to shift modes. You need to be like, yes, we're the tool for every person and we're the good guys in the internet. But also when like PWC or IBM or whatever come knocking and they want to buy, it's

going to be a six figure deal. And it just has to be. And if our pricing doesn't spit that out, our pricing is wrong, you know. Right. It is something pricing. that so many founders get wrong early on. And I can't tell you how many startups we've invested in as angel investors or seed investors and then simply said, how did you come up with this price?

And they were like, well, we didn't want to lose customers. And I was like, so you wanted to please everybody. Okay, got it. And I just do the simple exercise with them. If you doubled your, I just asked you, if you doubled your prices where you tripled your prices, how many customers would you lose? And they're like, I don't know. I'm like, take a guess.

and they guess and they're like, I think I'd lose like 5% or 10%. I'm like, okay, you lose 10%, you triple. So now you're at 270, you know, versus where you're at now.

Like this would be a 2.7x lift in revenue. Your valuation's going to go up correspondingly. Why are we not doing that? And they're like, oh, I never thought of that. Like, you never thought about it. Starting contract value is one area. And the due to when people often don't realize it's like expansion.

pricing. So like, the amount of times I see startups give like an unlimited plan, like, oh, so it's $9, $49, or if you spend $99, you get unlimited seats. And I'm like, congratulations. You're giving a massive discount to Microsoft. That's who, that's who benefits from the unlimited here. And yes, that discount will not even be appreciated in a second, you know. So like, to your point as you said that they would actually, would work against you. Yes. Because those enterprise then think, you're dumb. You're weak. You're going away, you're not going to survive because you're not charging us what we need to pay in order to get the value we need. Totally. And the other thing is they will ask you to like do things

that you can't afford to do at that price point. Like come out to us and have a sales engineer, rig stuff up for us. And can you give us a custom report on how things are going or whatever? And the answer to all those things is generally some form of yes, but it just has to be like or are I positive for the business. Anyway, it's like the two things I always say with people is like, pricing is not one number, it's two numbers. It's basically your starting point for the company, and it's the trajectory you want them on assuming they're a successful business. And you need to solve for both because,

and you see this a lot with the S-1s. I review a lot of S-1s, as you'd guess. And you sort of see some people get, you know, real low ACV, but they absolutely nail the expansion. Like, I think PagerDuty is like 145% expansion. It's insane, right? Explain to the audience what that means if they don't know.

So what net dollar expansion is, basically, so imagine $100,000 is worth of, customers, $100,000 worth of revenue signs up for you in January. The question of net dollar retention is how much of that is around next January? So we're sitting here in January 2022. Is that 100 grand? Just looking at those specifically, how much is that earning you? Some customers will have died, right?

Other customers will have expanded. So we're looking at the total, you know, net of everything, where do you end up? And in page your duty's case, it'd be worth $145,000. And that's insane because that literally means if you're paying, page you do, you can take your hands off the wheel and your whole bit revenue line is growing incredibly strongly without you touching a thing. And that's like super valuable. The other figure while we're going through this is just another one to look at from a product perspective is gross revenue retention. So again, take the same hundred grant, ignore all the expansion and just sort of

say how much of that revenue is how much of those pockets of revenue is still around. And that's just asking you how much of the revenue walks out the door. And that's really a good proxy for product market fit in terms of what actually matters is how much of all these customers quit. And then you can splice and diced up by segment, by product usage and all that sort of stuff. And you'll find what's wrong in your business and you'll find what's right in your business. So if that $100,000 represented 10 customers, $10,000 each, if two of them went away, your gross retention would have been $80,000. Correct.

But if two of those went from, you know, 10K to 40K, you would have been, you'd have that 80K would add another 60K, so you'd be at 140 and that would be your net dollar retention just to explain the math to folks. So both of them are important. Because one of them shows how many people churned and the other one is showing how many people expanded and spent more money with you. And the expanding and spending more money with you is fantastic. But if you are selling into bad customers who are going to churn, that is a complete waste

of time, right? That is something you must deal with where your sales team is like, I can convince these people to buy the product, but you're like, but they don't need the product. So you're so good at sales. You're talking people into it. I had that on this podcast where, you know, if we're selling $14 subscriptions to something, that's not going to work for a $5,000 ad. But if you're selling Salesforce or Zendesk or, you know, whatever it is, something that

cost, you know, $15,000 a year or $25,000 a year, it makes, it says like, oh, yeah, buy 10 ads for 50,000 and you get one customer and you're in the black. And it's fine. And like the other numbers people look at there. So you're totally right. Like you can't just look at expansion independent of churn because otherwise you can have businesses that like blaze through the forest. So like that they win customers jack up their bill, customer quits and then move on to the next

customer. It looks good on a spreadsheet. But when you went to like when the, it's like musical chairs, when the music stops, you're going to run out of like, you're going to run out of customers to blaze through. And you're just after pissing off all these other people. The other figure that you hinted at there is like when you take a company like PagerDuty, they might well spend happily like 25 grand to get a customer who would only be worth 10 grand to them a year. And the reason is that 140% because their their CAC payback period is different.

Because that 10 grand becomes 14 grand becomes, and I'm going to lose the maths here, whatever, like 21 grand becomes 30 grand. So if they're willing to like if they're confident in their future and they want to bet long term, they can say, you know what, we'll pay today because in three years' time, this business will be paying us 30 grand a month. So it's absolutely worth it. And that's like, you know, you get into LTV KAC and all those sort of numbers to try and understand your business. But ultimately, if you have the expansion, it unlocks so much in the future for you. Yeah. So how do you think about the going public process of this?

You've seen the SPACs. You've seen direct listings. And then you've seen these priced rounds where, or priced, uh, or priced, uh, you know, traditional IPOs, let's call them, where they're massively underpriced per bill, girl,

he's, you know, tirades and lobbying for the last decade. How is all of that informed how you think about your future? We haven't, we haven't spent too much on the actual time on the execution. We kind of have a financial profile that we want to hit when we, when we would go public.

And it's like all the core metrics, like in general in SaaS, there's like a big seven metrics. There's like revenue, revenue growth rate, net dollar retention. Are you cash flow break even or really? What's your cash situation?

What else is in there? Sales and marketing efficiency, your magic number, all that sort of stuff. There's a kind of a big, say, like, a guy called Tom Tungas does the best analysis of this every single time a SaaS IPO comes out. He's like, here's a big seven, here's it ranks against everything else. So we have a set of targets that we want to achieve with muscles we need to grow. There's things we've only really dipped our toes in. Like, Intercom doesn't yet have an outbounding team. Like we've never really, now we have now, but like it's a new.

muscle for us to learn how to like contact the business coldly and say, would you like to try Intercom? These are new things that we, we'd rather find out we have them and they work pre-IPO and get paid for them at IPO time, right? Rather than finding it afterwards, turns out we're a brilliant business and we should have gone out hard, you know. Yeah. So it's really like getting a lot of various different tactics in a row, getting everything deployed. And we have a internally, we have a time horizon for that that we're working towards, et cetera. The actual question of like direct versus old school versus SPAC hasn't come up that often. I think like the SPAC thing is probably like it's, I think waiting for a

SPAC is to some degree. I think it's going to be like waiting for an M&A type thing. I don't think it's a strategy. I think you can get sniped out like like has happened like where someone who goes, I like to look at that one. And that may well happen. But it's certainly, I wouldn't, I wouldn't advise any customer just sit there and hope the phone rings or sorry, any business. So I think your options are direct listing, which I, you know, the danger of direct listing is I think it benefits heavily, like the consumer brands. Like, you know, if you're looking for retail people to come in. Yeah.

If you're Airbnb, Spotify or whatever, like you have a chance because people have heard of you. You know, intercom's cool and all that, but like most of the world's never going to hear about us, right? So I think that the likelihood, if I had to guess sitting here today, having not researched it, like, I think the likelihood is will probably be somewhere between traditional and like whatever chance of a SPAC might happen. Spocks are changing. In two years' time, it could be very different. Yeah, it could be. And just watching a firm in Dordash and Airbnb, they all popped on that first day 100%.

So the amount of money left on the table is just colossal. But I think, you know, the SEC now here in the United States is looking at it saying, hey, maybe we'll let direct listings also raise money, which would then really be magical. And for folks who don't know, you may have heard the magic number. This is basically my understanding of it is you take your sales and marketing costs for the year. So you spend a million dollars on marketing. You spend a million dollars on your sales team. That's $2 million. How much in new ARR, you know, how much in new revenue did they bring in?

So if you spent 2 million and you brought in 2 million in revenue annually, it's a 1. But if you brought in 1 million, it would be a 0.5. And if you bought in 4, it would be a 2. So obviously if you're at a 2 magic number, you need to spend more money on marketing and sales because it's unbelievable. If you're at 0.5, it means, well, you're on your way, right? Because you're going to make that back the next year. And so that's good, but let's try to get it closer to one.

Because is one the magic number or 1.5? It depends. Honestly, so it kind of comes down to like, you know, because you're the figure you have to think about here is the expansion line of that revenue as well. So what comes in at versus what it's worth over time. You like they're all, they're all important figures. Like oftentimes you'll see on when it comes to sales and marketing and you see a lot of startups fall for this.

They're like, hey, our magic number looks pretty good. You know, we're getting paid back real quick. So we're going to go dump a load more money on a load less effective ads because we have that room. But ultimately, yes, your marketing campaign is still profitable, but nowhere near as profitable as it once was. Now, at this point, you're into a question of how much do you prefer growth versus a healthy balance sheet, right? And if the agenda is true to grow at all costs, yeah, you'll spend a dollar to make 10 cent because you know, do you have this other campaign that's doing really well that makes. up for it. But like, you know, there's a philosophical question here of what are you actually trying to do, right? Like, you know, if there's good, if there's good campaigns and bad campaigns, there's worse things to do than just run the good ones and a focus on that, right?

Yeah, we, I had this happen in my own life. We do this Angel University where I teach people six times a year virtually about Angel investing. And I was like, I'll just charge a hundred bucks for it and whatever proceeds we have to give to charity. But then acquiring paid through the paid channels cost like 100, anywhere from seven. $25 to $300 depending on the channel. Like some channels are more expensive than others, obviously. And then I was like, wait a second. If we just made it $300 to come to the class, all the channels would work. So let's just make it $300. And then I could just let the marketing team unbuck wild.

Because if we don't need to make money off of, we're just doing it for, you know, to build up the number of angel investors in the world. How do you think about employees now? You know, you probably have some employees who are done well. You're going to create a lot of millionaires inside, your company, they'll become angel investors. If an employee comes to you and says, and they must have at this point, hey, can I angel invest? Is there some rule that you say? Like, do you have to run it by folks or did you not have to even cross that bridge yet? We don't have any rules on it. The rule I

personally apply is I won't invest in anything. And in fact, I've actually withdrawn from companies where Dave moved into intercom territory or if I ever felt, I mean, it's unlikely because I just wouldn't do the investment that Intercom would move into their territory. But that's the only thing I'd say is like just don't be in a position where you're conflicting with Intercom because like one will probably win and that's going to be a shit experience for you. But two, like it'll get harder to trust you because like, you know, because 10 grants to an employee probably means more. It probably means a lot to them.

So for them to see, hey, Intercom's just launched that feature. They're going to, you know, they're probably, you know, they might be motivated to leak that information wherever. So it's just, it's cleaner to say as long as doesn't compete with Intercom, which basically means like no in-op tools, no like customer support. tools, then we're good, you know. Yeah, I mean, the appearance of impropriety means you failed, right? Like, I mean, you just have to avoid the, even the appearance of it.

And so I would just have people stay away from enterprise tools that touch customers, right? Just keep it simple. All right, listen, Des, it's been great to catch up with you. Here's looking forward to getting on the other side of this and visiting whatever backlog of San Francisco restaurants are still in business. Hopefully we have a resurgence and just a resurgence. in just a couple of months. It's looking good over here.

I know in Ireland you're getting the vaccines online, so that's fantastic. And so hopefully in another six months, we'll be on the side of this and we'll be able to go get some Peking duck or grab a drink or something. All right, stay safe, my friend, and we'll see you all next time on Angel.