SPEAKER_00: season five of angel is brought to you by linkedin jobs a business is only as strong as its people and every hire matters post your first job for free at linkedin.com slash angel odoo is a fully customizable and fully integrated suite of software that lets you build and scale your stack as you build and scale your business your first app is free forever and right now odoo is offering one thousand dollars off your first implementation pack at odoo.com slash twist that's odoo.com slash twist and assure is the leading provider of special purpose vehicles and fund administration with over 5 000 completed transactions and 2.5 billion dollars under administration angel listeners can get 20 off their first spv at assure.co slash angel hey everybody welcome to

SPEAKER_05: season five of angel my guest today is dez 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 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 because 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 i have quite a track record is there something that you look at as your north star for investing i think uh first of all

SPEAKER_13: yeah thank you for uh inviting me back i think uh the thing i look to most when people ping me url

SPEAKER_15: 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 piece is 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 problems so it's that pairing of like quality execution and an actual real problem and 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 problem such that like they'll subscribe and they'll stick around and it's not just a one and done type solution uh so that's usually where i start the next thing like 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 have no connection to and let me see how they use the product and if i 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 that you're spending your time doing this and it's obviously valuable so that's kind of like the 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 uh it's like good product you know real problem good customer and then at that point i'm usually happy

SPEAKER_18: and then you're into questions about market size yeah it it does seem like once you get that table

SPEAKER_05: stakes of hey this is a great product okay now let's qualify the customers and i thought 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 customer for 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 what they're trying to prove with a free

SPEAKER_15: pilot i think i it's just so hard to get real market signal without actually dollars on the table and like uh 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 through advertising but my area is more

SPEAKER_24: b2b it's more like charge for the product you've built or like maybe prosumers like this as well and i i just think like you know a classic example would be i've invested in many email startups

SPEAKER_15: 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 paying 29 yeah exactly and it has to be worth it i if you could imagine if you if you 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 that the actual uh

SPEAKER_24: the the sort of revenue that he needs to get to so i just think like not charging is 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 it 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

SPEAKER_04: 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 three hundred and sixty dollars a year right for gmail which is free that would be the cynical

SPEAKER_09: interpretation of superhuman why would people pay 360 dollars a year for what they can get for free from gmail 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

SPEAKER_22: intercom and i've pioneered a bit is like this idea of jobs to be done which is just like what's

SPEAKER_24: the person really trying to get done and i think like what you realize uh and what rahul certainly

SPEAKER_15: when i spoke to him about this realized is for a lot of people and you're probably a prime example uh email is a thing you need to get done quickly and 90 of the emails you don't act on you're just like gone gone gone gone gone gone gone this sounds interesting gone gone gone gone gone and gmail is 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 no real challenger and i think what rahul identified was like there's a select set of users for whom email is incredibly important and it's it's like a big regular problem right

SPEAKER_24: it's in that spectrum if i use it multiple times a day and it's really important i can do it efficiently and there's no there's no tool for for that set now there had there'd been a few efforts along the way but not 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

SPEAKER_15: which is people want to stay in the city they want to do it a certain price point but like all the big hotels that are near the thing they want to go to are hella 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 it is and i think like uh 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 uh for brian and co at airbnb to actually see that intersection like there's a reason no one else saw it 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 uh i i can't like i can't i'm not sitting here saying 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

SPEAKER_18: think about how many people actually passed on investing in yeah 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

SPEAKER_35: 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 when the product hits the

SPEAKER_05: 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

SPEAKER_38: absolutely that's how we focus in intercom all the time we're just the question is always just what's the customer what's the job the customer is actually trying to get done and like oh they're

SPEAKER_15: trying to increase growth okay now that 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 to 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 um it kind of just gives you that clarity of focus which is like it's easy for technologists to get excited about tech but the 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 you'll produce beautiful technology but you just forgot to do anything for anyone

SPEAKER_18: yeah all right when we get back from this quick break i want to know what you've learned in the

SPEAKER_09: process of angel investing that has made you better at your day job at intercom when we get back on

SPEAKER_41: this week in startups all right the new year is here and it marks a fresh start for your small business and you are gonna need talent to pursue all these new efforts you thought about over the break so we're hiring a ton of people at launch customer support we need a new produce another producer for this week in startups we need another video editor for this week in startups we need a community manager and i need people who are driven hard working and who have skills both hard and soft skills and you know where i'm looking for them the best place to look for talent that's linkedin jobs you know that linkedin is the greatest place to find talent they have more than 722 million members worldwide and let's face it we're now a remote company and i'm willing to hire anybody anywhere it doesn't matter to me where you live i'm able to post jobs on linkedin jobs with screening questions and they will get all of those job offerings all of those amazing career opportunities in front of the right people and you can edit this on your mobile phone or do it on your desktop bottom line linkedin is going to match your job with the right candidate so i want you to visit linkedin.com angel again 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 to you for free linkedin.com 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

SPEAKER_09: to this amazing episode welcome back it's our super angel season of angel uh just angels who have made

SPEAKER_35: a lot of investments in a lot of winning companies uh is what i would consider a super angel and des trainer from intercom has invested in a lot of great companies from superhuman to notion to hop in dakota uh uh all have been on the podcast recently except for notion we gotta get notion on founders a little bit uh i think podcast shy but notion's done pretty amazing huh yeah i mean when i uh first first met ivan

SPEAKER_22: and the folks at notion it was uh i i incorrectly characterized it as like an intranet like it was

SPEAKER_15: going to be a confluence killer you know that atlassian product confidence like which confluence is a classic like microsoft's word it's hanging around making loads of money but it's not good and uh so immediately my first pass was like yep 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 this could work

SPEAKER_24: the 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 it's

SPEAKER_04: very interesting how putting a really nice user interface we talked before about a beautiful product

SPEAKER_09: uh really can make a difference wikipedia you know and media wiki has existed for a long time there was a whole uh phase of people bringing wikis inside their organizations but they were kind of hard to use they were clunky they were ugly and the notion is so elegant and simple it feels like a new design

SPEAKER_35: aesthetic that will carry us for the next decade or two right the the design is a key piece of their

SPEAKER_15: 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 of 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 internet being there and i think that's like it's it's a genius stroke to to keep it minimal

SPEAKER_16: where we're frankly aesthetics aren't going to add anything the whole job of notion is get the right

SPEAKER_50: information to the right people friends of ivan uh ask him to come on the pod i want to i'm obsessed with the product so let's get notion on the uh on the pod so before we went to break i wanted to know

SPEAKER_09: 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 they 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

SPEAKER_22: biggest uh there's probably two sides so one is you often find yourself i'm sure as i do giving

SPEAKER_33: 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 you hang up the call you're like man i should listen to that des guy he sounds smart you know and so you you sort of you the problems that frustrate you

SPEAKER_15: 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 or are you just good at saying it uh so there's definitely a genuine value there um another but probably the more meaningful thing is like intercom is like obviously scaled at this point like we have 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 building 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 like a launch incubator startup and that we've got like 30 000 customers ready to go but uh we still need to like get new stuff started and we need to embody whatever the best of modern software is so like and and the sort of there's a rising tide of consumer expectations people like today it's not it's no longer good enough to launch something that isn't at least half as good as notion 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 shithot startups that people are admiring because it kind of raises your own bar internally so when we see like oh we're gonna 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 it 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 it 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 our service cloud or whoever so like i 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

David Friedberg: yeah what it's i think it's a really great way to frame it which is if you're looking at what you've

SPEAKER_09: done in your previous success while it's in the review mirror and if you look at what other people are doing they're building off of your ideas as a 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 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 uh 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

SPEAKER_18: market we have equity crowd funding 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

SPEAKER_09: markets are opening up with spax to startups at an earlier time maybe even pre-revenue you have crazy pre-revenue companies going public which is nuts i don't know if you or i ever anticipated that

SPEAKER_18: so let's take that in two parts one the mistakes people are making in the early or in the early days

SPEAKER_15: and then we'll go to the late stage stuff i think like the biggest trend i've seen it just wasn't true when we were doing our say seed round uh in 2011 is um there are people willing to write huge checks who are just individual angels and i'm talking like five ten million dollar checks uh 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 um i think like 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 was going to be scrubbed through 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 you see people now sharing like four paragraphs and being like you know here's the idea and we're raising five on twenty who's in you know it's um i 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 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

SPEAKER_24: so much you can occasionally forget to look at the fundamentals the basic metrics to sort of like you know how's the business performing is revenue expansion looking good what does good look like

SPEAKER_15: 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 have a churn problem in this segment like when you can't tap into that knowledge from an investor um you can definitely go and read read the 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 so one fear i have is just a lot of companies will you know take a substantial amount of money but not really get uh 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 cac it's all

SPEAKER_18: 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

SPEAKER_09: a partnership and they don't invest in other companies or they're just kind of winging it or

SPEAKER_18: 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

SPEAKER_09: fine or quarterly that's fine but do something so that you as a 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

SPEAKER_66: targets and goals are if you make a plan the chances of hitting it are much better than if you

SPEAKER_67: have no plan at all what's planning like now at intracom as you've grown well so we're actually

SPEAKER_68: in the middle of right now so like a lot of sas companies we're like 12 days away from our end of

SPEAKER_15: year and then our financial year starts in february so we're quite deep in it uh planning is basically it's a 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 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 dollars i can go and hire maybe 10 product teams what can i do with that that will actually change intercom'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 uh can i change churn can i change expansion uh 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 the return and so there's like there's 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

SPEAKER_56: get and let's see what we can build you know yeah a little bit of thoughtfulness goes a long way

SPEAKER_09: 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

SPEAKER_75: and take off because people need to know what to pack and to know how long the flight is and if the

SPEAKER_78: plane is the expectations are and yeah yeah exactly what is the range of this plane like

SPEAKER_75: and are we flying to the north pole and is there a landing a place for us to land this uh plane

SPEAKER_09: uh when we get back i want to talk about the later stage funding rounds and what life is like when you as you have uh you know in this i think you're 10 years into your journey with intercom you know i remember back in 2016 you'd broken the or 2017 you've broken that 50 million dollar mark 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 dollars a year and you're you know planning on doubling every year and you've got all these investors and you must have

SPEAKER_41: 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 sas 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 odoo.com twist that's odoo.com 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 lets 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 a thousand dollars right now on your first implementation pack that's right not a joke they're going to give you a thousand dollars they really want you to try the product odoo.com twist check it out odoo.com twist welcome back to angel super

SPEAKER_18: angel des trainer 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

SPEAKER_38: company wants to have conversations with its customers for sales support or marketing that's

SPEAKER_15: what intercom is and most people buy us for one of those things and end up using us for all

SPEAKER_66: are all of these products converging the sales forces the zendesk yourselves is everybody building one

SPEAKER_18: crm customer relationship management sales total funnel product and as opposed to zendesk was help desk now they've added you know crm and effort and sales and now sales force is adding customer support

SPEAKER_91: everybody seems to be adding every piece is there like a singularity going on i do believe there is i

SPEAKER_22: think like so when we started we didn't actually think about it as being like sales support and

SPEAKER_15: marketing say because our whole thing was just we're going to build a messenger like a a whatsapp style like just real nice rich messenger for businesses and customers to talk we never like

SPEAKER_24: 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 a messenger what's happened is if you think about the funnel top of the funnel sales where

SPEAKER_15: 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 yeah what are trying to branch out and uh and we're sitting here kind of like part of us is going haha 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 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 they'll everyone will have their strengths uh at various market segments or for various b2c b2b type use cases but yeah that i i think

David Friedberg: you're totally right there's a singularity on the way you hired a cfo word is heading towards an ipo what is life like in this sort of and then the last time i knew you guys raised money that it was

SPEAKER_35: announced at least was i think 2018 the series d that cloner perkins led it was 125 million dollars vulcan uh gv and bessemer were involved in that one has there been a rough round of financing since then

SPEAKER_18: and then how are you thinking about going public and and raising capital at the later stages what's it like in 2020 raising or 2021 now raising money at these late stages yeah so the last round was like

SPEAKER_22: uh definitively to be our last round and we haven't broken we haven't a need to break and i know everyone

SPEAKER_15: kind of says that about every round from series a onwards but like genuinely it was it was a big round with 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 effectively done by our ceo own 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 that 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 a few of these conversations like it's mostly an extrapolation of spreadsheets with a few anomalies that people want an answer on like oh

SPEAKER_24: 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 thought but like it tends to be a lot more like uh like just mathematical

SPEAKER_15: uh versus like there's no ver if data 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 it generally speaking the the story gets a lot it's kind of good because it preps you for like 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 five ten fifteen percent uh but ultimately with your b2b sauce business they're going to put us up alongside snowflake and pager duty and hubspot and zendesk

SPEAKER_24: and they're going to be like does this fit does this fit does this story make sense okay you know

SPEAKER_18: so they basically the the romance and the storytelling is gone and it's just

SPEAKER_101: you know it's reality and analytics and just yeah it it's incredibly boring to me yeah but it's the

SPEAKER_22: same it's the same thing that happens like you know when you invest in a startup and then they start

SPEAKER_33: charging and they had this great story about how everyone loved their product yeah and once they start charging it's like i guess they do or i guess they don't like you can't make it up anymore you

SPEAKER_35: know right there yes storytelling as a device is uh secondary to reality you're going from selling yes exactly reality battles we often say reality battles yeah i mean it's you go from selling the promise of the business to the actual performance and boy does that uh that that does change everything

David Friedberg: but you guys have hit profitability or you were profitable at some different points during the last

SPEAKER_18: 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

David Friedberg: from building this singularity that's occurring um or do you think about it like jeff does at twilio where he bought you know uh sendgrid and he also bought segment and he's just like you know what we

SPEAKER_66: need to get big and in order to get big we're not going to be able to build segment or send grid we

SPEAKER_07: we're going to need to buy it we could build it but it's just going to take too long precisely uh i think

SPEAKER_22: like we've we have yet to buy a company we've definitely looked at a few and we've gone we've

SPEAKER_24: gone like to maybe mid-stage negotiations with a few i think like uh it's definitely like it's obviously a route to growth and what you're seeing a lot and you 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

SPEAKER_15: definitely a we're in a sweet spot right now where people are like taking advantage of their valuations i'll say twilio did to pick up a really expensive uh company in segment like 3 billion dollars is a no joke acquisition but it all makes sense when valuations are kind of universally high i think basically acquisitions to to fund future growth or to unlock new sort of platform opportunities

SPEAKER_22: makes total sense as i said we've looked at a few we've yet to find one that's a perfect fit

SPEAKER_15: um and uh i i i think as it relates to say profitability and what what basically what do you do with your extra capital in general and do you want to go and raise more as a lot of it comes back to like where do where can we deploy money effectively uh to to increase our growth rate and just continue to

SPEAKER_24: sort of this trajectory of hyper growth and oftentimes for us that's like build more software it's funds 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 exit 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

SPEAKER_15: 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 like three or four years working that out and now we're back onto 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

SPEAKER_18: it's really hard uh as you're pointing out with a business to focus on multiple things at the same

SPEAKER_05: 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 got to just really get laser focused and solve some acute

SPEAKER_09: problem like the sales before you go on and add more products so it it does become a sequential

SPEAKER_15: kind of thing you do things in order yeah yeah i 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 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 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

SPEAKER_09: 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 hoppin comes to mind the virtual events business that was the quickest unicorn i think from zero to unicorn they raised 40 million dollars this summer uh or this past summer in the pandemic people moved all their events online at a 2 billion dollar 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 spax and going public and then finally the slack acquisition what's your take on that because that seemed to me

SPEAKER_41: 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

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David Friedberg: 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

SPEAKER_09: all right slack hoppin spax lightning round des what do you think about each of these take it in whatever

SPEAKER_22: order you like uh i'll do maybe hoppin first uh hoppin's an interesting one for me it was like october

SPEAKER_15: 2019 a friend introduced me to a guy called johnny he said this guy's building a conference thing i was a conference speaker as you know and i was like oh conference online great speaker yeah thank you um would make sense so i met him the thing that blew me away with johnny was he gave me a full demo of the platform it all made sense and then uh and his whole pitch at the time was uh this is better for the environment done online done 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 hoppin after i invested uh as i often do i do a couple calls and you know move on then uh 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 this could be a good one yeah and uh and yeah they've gone from i i can't i can't remember the valuation where i got in but it was certainly sub 50 million anyway um and now obviously it's worth i think like 2 billion or whatever 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 streamer they're called uh 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 uh full stop so it's uh i can't say there's any foresight the thing i saw that i liked again was real problem person who really knew the really knew the problem and uh built a great piece of product and it's worked out for me obviously to the tune of a substantial upside well and

SPEAKER_32: there's a big lesson here i think you would agree in that getting started and pursuing your vision

SPEAKER_09: you don't know what 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 kind of run every friday and all hands meeting and i got 17 offices and 300 people working from home and then all the pandemic hits and

SPEAKER_66: now i've got 3 000 people working from home and nobody is interacting with each other i need to i need to solve for culture i need to solve for communication i need to solve for depression and

SPEAKER_09: melancholy in my workforce and get people pumped uh 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

SPEAKER_127: and not being able to do what you and i both love which is travel the world and meet people

SPEAKER_22: yeah it's it's really sucked i i didn't realize how much i liked travel uh like i used to if you

SPEAKER_38: asked me on any given point i'd give out because i would travel quite a lot i'd be over in san

SPEAKER_24: francisco 10 times a year etc but now like i've 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

SPEAKER_15: being grim and like the backlog of people i need to catch up with when i get back to sf uh the backlog of like restaurants you know 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 like um 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 but i'm doing you definitely miss this you and i this is

SPEAKER_66: 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

SPEAKER_132: able to see each other and being on zoom long i can't even begin about that that's just impressive

SPEAKER_15: right being on video there's a few things we've tried to do um we try to encourage people to work more asynchronously and like not try to replace every meeting with a zoom call because you're just gonna be like looking at people on screens for just way too long we've forced the company to take a lot

SPEAKER_22: of a lot of mandatory time off so we actually we shut down the company for a week in july uh we just said right for this whole week no one's working and uh smart like that was you know what was nice

SPEAKER_15: about that is like you know oftentimes uh taking time off work can be stressful because you do all this

SPEAKER_22: work in a run-up to try and clear your desk and then when you come back a load of shits 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 fourth of july off because we figured it wouldn't be a

SPEAKER_15: great week for sales and support 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 um 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 are they 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 times just say

SPEAKER_24: you're taking this day off but we just want you to recharge it is there's something that is like

SPEAKER_41: this i find it's like just this weight that everybody's carrying about this and you you

SPEAKER_18: 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 etc 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

David Friedberg: i would see all these slack messages and emails going back and forth and i was like i can't enjoy

SPEAKER_09: taking time off because when i open up the video game that is you know running a business yeah there's all these fireworks going off and boss level events occurring yeah 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

SPEAKER_142: because you might fire off a couple of ideas and and yeah it's especially important when you're a

SPEAKER_38: boss or an executive in general because like people will then try to impress you by spending you know

SPEAKER_15: 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 and 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 our emergency team for devops and so i thought but like we made it all work we actually it's it's a good muscle we have now we can do it regularly and it's it's quite i think the staff definitely really enjoy it that's what i'm moving

David Friedberg: towards what do you 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

SPEAKER_41: lot of places uh new zealand they're they're they're back at it is anybody going into the office in any

SPEAKER_38: country uh for us australia is open and working fine uh we were like this close to reopening dublin

SPEAKER_15: and not for everyone but for people who who just really don't like working at home like maybe like noisy household bad wi-fi whatever we were very close and then the numbers turned and we have to like abandon that plan entirely uh i think uk uh and san francisco have never really got close since the

SPEAKER_16: start like and i don't know about chicago i suspect probably probably never got closer at least

SPEAKER_18: i never heard about it yeah it's and what are your thoughts on remote work and going forward do you

SPEAKER_66: 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 do is something missing in the business when people aren't in the same space i think it's

SPEAKER_15: 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 works 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 and then i write my update and then they reply to my update and it's just you know a grind and like you're never going to put anything in creative doing that i think honestly the the future of work is probably going to be a mixture and and like we've seen this already in intercom like there are people who are like hey i still want to go back to the office but maybe not maybe not like 9 30 a.m monday to friday maybe i'll do like you know tuesdays and thursdays in the office or whatever people are people want to adapt to uh to a kind of what you might optimistically call a best of boat worlds it could go the wrong way it could go worst about world so we need to kind of design what we think the future should look like but i do i do think like you know we'll find some some and like office design will change for this we'll need to work out how we 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 um 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 assumed everyone would

SPEAKER_111: be in the office that's almost certainly not going to be true anymore so what makes sense now

SPEAKER_41: 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 and 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 yeah i remember all of the remote workers that we've had or i've seen in other companies they

SPEAKER_18: 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 your whatever google hangouts or microsoft teams you know everybody

SPEAKER_66: gets the same amount of screen real estate the ceo the cto the cfo you know the the junior developer the the person in marketing who just started and out of school everybody gets the same real estate everybody gets the same size font in slack although that maybe should change maybe the ceo should

SPEAKER_142: get like two times of font size i don't know different color that would be really cool if the ceo's got 50 larger fonts in the slack room but i do think that that's going to be the challenge like you're

SPEAKER_66: saying it could be the worst of all worlds where the people who work from home get forgotten there become second-class citizens to the people who are in the in the locus of power what do you think of that when you 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 kind of 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

SPEAKER_22: about startups as like you know the board game snakes and ladders yeah and i think like uh if your objective is shoots and ladders sorry it's snakes over here is it really yeah genuinely oh wow there's a

SPEAKER_38: little thing i didn't know snakes and ladder shoots and ladders there's probably some uh cultural uh thing there i'm sure but um so in shoots and ladders like uh i think if if stewart's objective

SPEAKER_15: 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 the 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 go to market plan to hit all the enterprise companies i know they are making so many roads 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 offers them it was this sort of the cheat code for enterprise domination uh 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 uh will salesforce have a much stronger like uh battle plan to go up against say microsoft now absolutely i think the next thing salesforce should go shopping for 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 uh concern there like in that you know we we have a great slack integration i i 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 well i really uh i've always been a fan of microsoft i think they're an incredible company i think satch has done incredible i think nat friedman at github is phenomenal uh so i think part of me if i had to bet i wouldn't uh i probably would go microsoft

SPEAKER_66: i might give the edge to microsoft too i think they they seem to have a more methodical relentless

SPEAKER_09: 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 and to sell and to cash in your chips and you know then just instead of going for five days to mykonos 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

SPEAKER_85: why didn't you guys sell when you had the opportunity to uh you know over the last couple of years yeah

SPEAKER_68: i think we've had like uh four distinct opportunities to to sell and i think we've kind of been proven

SPEAKER_15: correct every single time uh because our value has exceeded anything around whatever we whatever anyone would have thought we were worth the time now we never actually played them out properly so i can't say for sure oh well we finished negotiations we got this offer but i think um our ambition is pretty big and i really want to realize it so does uh 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 uh and i think like you know anytime uh 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 uh anything more than that i think the company and 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's that type of thing has never really made sense to me uh but also like i you know the business is doing great like it's you know as is said on the other famous podcast uh let your winners ride and intercom was definitely being a winner for us so like i'd be tempted not to not to cash out too early it definitely is a let your

SPEAKER_18: winners ride type uh 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 and go through the roof they did but slack i think is on under monetized

SPEAKER_41: they do not charge for the free they give this free version so many people i know are on the free

SPEAKER_18: version i've got 10 instances of slack of which two are paid and the rest are all free i get that but

SPEAKER_66: you know they're 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

David Friedberg: while everybody else did and i think that's probably what spooked the entire board and made them make

SPEAKER_66: that decision like gosh we're not our stock price isn't growing the product isn't adding features fast

SPEAKER_91: enough and that's a dangerous place to be when everybody else is growing so violently a danger i see

SPEAKER_22: and even in some companies i've invested in and you could probably think about it for your portfolio too is

SPEAKER_24: companies that emerge from a bottoms-up adoption path where like you know you know the whole consumerization of it pitch we're 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 like that's a strength and a weakness it's a strength it's the reason why everyone started using the thing without ever without anyone noticing that like nine dollars a month is going on the credit card or whatever it's 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 a month and when we talked you know and when we talked to them

SPEAKER_15: i remember the guy saying like he's the 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 like uh but i think it's a muscle you

SPEAKER_24: need to grow to get comfortable understanding enterprise value and charging against it but even even if you don't believe in that and you really want to be cheap 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 so it's 20 grand you're right yeah

SPEAKER_15: time exactly so you just you need to like you need to like kind of step up there so i i don't know about the ins and outs of slack or whatever but i just say a pattern i've seen you could argue maybe like dropbox have suffered from videos as well like we're like it's insanely valuable but somehow it hasn't uh cut the value uh in the in the way it could have and uh 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 and if our pricing doesn't spit that out our pricing is wrong you know right it is something pricing that so many

David Friedberg: founders get wrong early in on and i 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 um if you and i just do the simple exercise with them if you doubled your i just asked if you doubled your prices or 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 five percent or ten percent i'm like okay you lose ten percent you triple so now you're at 270 you know versus yeah you know where you're at now like this would be a 2.7 per you know x lift in revenue your valuation

SPEAKER_09: is going to go up correspondingly why are we not doing that and they're like oh i never thought of

SPEAKER_15: that like you never thought starting contract value is one is one area and then the other one people often don't realize is like uh expansion pricing so like the amount of times i see startups give like an unlimited plan like oh so it's nine dollars 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 that's who benefits from the unlimited here and yes that discount will not even be appreciated in a second you

SPEAKER_194: know uh so like to your point as you said that they would actually it would work against you

SPEAKER_41: yes because those enterprise then think you're dumb you're weak you're going away you're not going to

SPEAKER_192: survive because you're not charging us what we need to pay in order to get the value we need totally

SPEAKER_15: and 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 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 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 s1s that i review a lot of s1s as you'd guess and you sort of see some people get you know real low acb but they absolutely nailed the expansion like i think pager duty is like 145 expansion it's insane right

SPEAKER_199: explain to the audience what's that what that means if they don't know so what i'm what net dollar

SPEAKER_24: expansion is basically so imagine a hundred thousand dollars worth of customers a hundred thousand dollars worth of revenue signs up for you in january the question now of net dollar uh 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 all you know net of everything where do you end up and in pager duty's case it'd be worth 145 000

SPEAKER_15: and that's insane because that literally means if you're pager duty 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 grand 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 like what actually matters is how much of all these customers quit and then you can splice and dice that 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

SPEAKER_18: right in your business so if that hundred thousand dollars represented ten customers ten thousand dollars each if two of them went away your gross retention would have been eighty thousand dollars

SPEAKER_09: correct yeah but if two of those went from you know 10k to 40k you would have been you'd have that

SPEAKER_18: 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 how because one of them shows how many people turned 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

SPEAKER_66: who are going to churn that is a complete waste of time right that is a something you must deal with

SPEAKER_09: 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 fourteen dollar subscriptions to something that's not going to work for a five thousand dollar ad but if you're selling salesforce or zendesk or you know whatever it is something that costs you know fifteen thousand a year or twenty five thousand dollars a year

SPEAKER_206: it makes it says like oh yeah buy 10 ads for fifty thousand and you get one customer and you're in

SPEAKER_207: the black and it's fine and like the other numbers people look at there so you're totally right like

SPEAKER_15: 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 the customer quits and then you move on to the next customer it looks good on a spreadsheet but when you went up when like when the it's like musical chairs when the music stops you're gonna run out of like you're gonna run out of customers to blaze through and you're just after pissing off all these other people uh the other figure that you hinted at there is like when you take a company like pager duty

SPEAKER_24: like 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 like

SPEAKER_15: because that 10 grand becomes 14 grand becomes and i'm gonna lose the maths here whatever like 21 grand becomes 30 grand yeah so like 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 cac 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

David Friedberg: going public process of this you've seen the spax you've seen direct listings and then you've seen these price rounds where 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 and lobbying for the last decade how is

SPEAKER_68: all of that informed how you think about your future we haven't uh we haven't spent too much on the

SPEAKER_15: actual uh 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 sas there's like a big seven metrics there's like revenue revenue growth rate net dollar retention are you cash flow break even or early what's your cash situation like uh what's you know your um what else is in there like you know sales and marketing efficiency your magic number like all that sort of stuff like there's a kind of a big say like a guy called tom tungas does the best analysis of this every single time a sas ipo comes out he's like here's the big seven here's our ranks against everything else so we have a set of targets that we want to achieve with muscles we need to grow just 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

SPEAKER_24: have now but like it's it's a new muscle for us to learn how to like contact the business coldly and say would you like to try intercom like these these are new things uh that we we'd rather find out

SPEAKER_15: we have them and they work pre-ipo and get paid for them on 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 it's really like getting a lot of various different tactics in a row getting getting everything deployed um and we have a internally we have a time horizon for that that we're working towards etc the actual question of like direct versus uh old school versus spac hasn't come up that often i 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 uh has happened like where someone goes i like to look at that one and that may well happen but it's it's certainly i wouldn't i wouldn't advise any customer just sit there and hope the phone rings or sorry any business um so i think your options are direct listing which i you know the danger of direct listing is i think it 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 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 uh so uh so i i think that the likelihood if i had to guess sitting here today uh having not researched it like i think the likelihood is will probably be somewhere between traditional and like with a with a you know whatever chance of a spark might happen yeah the sparks are changing like in

SPEAKER_35: two years time it could be very different yeah it could be and uh just watching a firm in doordash and airbnb they all popped on that first day a hundred percent so the amount of money left

SPEAKER_18: 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

SPEAKER_67: 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

David Friedberg: marketing you spend a million dollars on your sales team that's two million dollars how much

SPEAKER_18: in new arr you know how much in new revenue did they bring in so if they if you spent two million and you brought in two million in revenue annually it's a one but if you brought in one million it

SPEAKER_09: would be a 0.5 and if you bought in four it would be a two so obviously if you're at a two 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

SPEAKER_224: good but let's try to get it closer to one because yeah is one the magic number or 1.5

SPEAKER_22: it depends honestly like so uh it kind of comes down to like you know because you're the figure you

SPEAKER_15: have to think but here is the expansion line of that revenue as well so what comes in versus what it's worth over time you like they're all they're all important figures like oftentimes you'll see and when it comes to sales and marketing you see a lot of startups fall for this they're like hey our magic number looks pretty good uh you know we're getting paid back real quick so we're gonna go dump a load more money on a load less effective ads because we have that room but ultimately like 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 uh like you know versus a healthy balance sheet right and if the agenda is truly grow at all costs yeah you'll spend a dollar to make 10 cent uh because you know you have this other campaign that's doing really well that make up for it but like you there's a philosophy philosophical questionnaire of what are you actually trying to do right like um 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 focus on that right

David Friedberg: yeah we i had this happen in my own life we 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 100 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 75 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

SPEAKER_75: all the channels would work so let's just make it 300 and then i could just let the marketing team run

SPEAKER_229: buck wild because we don't need to make money off of we're just doing it for you know to build up the

David Friedberg: 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 uh 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

SPEAKER_22: did you not have to even cross that bridge yet uh we we don't have any rules on it like the rule i personally apply is i want to i won't invest in anything and in fact i've actually with withdrawn

SPEAKER_24: from companies where uh where dave moves into intercom territory or if i uh or if i ever felt i mean it's unlikely because i just wouldn't do the investment that intercom would move into their

SPEAKER_15: 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 grand to an employee probably means more that probably means a lot to them so for them to see hey intercoms just launched that feature they're gonna you know they're probably you know they might be motivated to leak that information or whatever so it's just it's cleaner to say as long as it doesn't compete with intercom which basically means like no in-op tools no like customer support tools then

SPEAKER_09: we're good you know yeah i mean the appearance of impropriety means you failed right like i mean you

SPEAKER_35: 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 uh been great to catch up with you uh here's looking forward to getting on the other side of this and visiting uh whatever backlog of san francisco restaurants are still in business hopefully we have a resurgence in just a couple of months it's looking good over here i know the in ireland you're getting the vaccines online so that's fantastic and so hopefully in another six months

SPEAKER_50: we'll be on the side of this and we'll be able to uh go uh 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