ZenDesk Co-Founder Morten Primdahl Shares How to Scale a Software Business

All right everybody, today we have Morten Primdahl, who is the former CTO of Zendesk. Zendesk is a publicly traded company on the New York Stock Exchange. In 2017, they did, what is it, I think about $430 million in revenue. Also recently, fun fact, the CRM that we use, Base, was just bought by them. So there's a lot to talk about here. Really excited to have Morten on the show. Morten, how's it going?

Fantastic, thanks for having me. Yeah.

Thanks for being on the show. So why don't you give us a little background on kind of who you are and what your story is? I know it's a loaded question, you decide how it goes. Excellent.

Those are the best questions. So I'm one of the 3 founders of Zendesk, and we founded the company back in Denmark in 2005. That's when we started working on it. In our spare time, we were all freelance consultants at the time, and we started building the product in our spare time, weekends, vacation. And then in 2007, we had a scrappy enough of a product that would scale up when we started it, and we put it into production. We sent out an email to a bunch of people and then we sort of started from there. So we went live in 2007 in Copenhagen.

How long did it take you from inception to reaching product-market fit?

The moment we went live, we had the good fortune of getting some early customers who gave us great feedback on the product. And we were just the 3 founders sitting there getting all the feedback in via support tickets. And some would just say, hey, it looks like you guys made more of a help desk kind of thing for internal IT. We would really like a B2C kind of public communication And that made complete sense to us. So it didn't take a whole lot of time to move from what we'd launched to get on the path we're on today still. And that was a very easy thing to do when you're a small company.

Got it. So approximately how many months from inception to like you got the feedback and let's go down this direction?

No more than 6 months.

Got it. Because typically what I, what I hear from people, it's like, you know, product-market fit might take 2 years or so, and then after that, in the next 2 years, you're supposed to roughly aim for about $2 million ARR or so.

So we came from a background Mikkel and I had been working in selling enterprise-level customer service systems, and we had seen how broken that software was, and we wanted to do a modern take on it. So we knew the existing terminology and what the concepts were, the processes were that people used the most, and we took that and implemented them in what became Zendesk. So we had a direction of where we wanted to go with the product early on, and we knew that there was something to sell, there was a market there already, and then the final tweaks came when customers started using it.

Got it, okay. And your 3 co-founders, I mean, what's the story behind them? How do you know them?

So Mikkel and Alex had companies during dot-com and knew each other from back then. I worked for Mikkel back in 1999, so we've worked together in different constellations for the past 20 years or so. And Mikkel and I, you know, worked at his company until that went bankrupt in 2002.

Okay.

Then we worked together in another company where they sold these enterprise helpdesk systems. That's when we really thought, hey, we can do something better here. And then finally we got onto Zendesk. So different constellations over the years, we know each other quite well.

So it was a pretty professional relationship before. And so the company he ran went bankrupt. So what was it that kept you with him? Because part of you might be like, oh, the company went bankrupt. How am I going to trust him with my life again?

So if you've ever met Mikkel, he's a fun, good, quirky character. He's a really good company. But on a professional level, what I always enjoyed about Mikkel that I didn't meet in other people I worked for or with was that he would always just trust us to go out on the deep end and see what happens, and we'd make it work. And I got independence, I wasn't taking direction, I could just, okay, let's try and reach this over here, and we just ran that way, you know, and I had the freedom to do it the way I wanted to do it.

Right. What do you think was the impetus of success of Zendesk, right? Because there's so many competitors in this space right now, but I mean, I'll let you kind of speak to it, I have my own thoughts, but go for it.

So timing was right, both in terms of where we were with our careers as founders, we were in our 30s, we had, you know, been around the block a few times, we had knowledge, of the space. And then technology-wise, this what we call Web 2.0 was happening, which was sort of a reboot of what you could do with internet technologies. That was happening, so we could see, hey, there's a path towards building more modern software that's really consumer-friendly.

Mm-hmm.

And then this was pre-smartphones, pre-social media, so we got lucky to hit those as drivers for our growth as well, where customers started demanding more from businesses and being very vocal about whether they got good or bad service. So all these things sort of gave us a good And of course the entire SaaS movement. Early on we made a bet on SaaS and it turned out that's the way the world wants to move.

And SaaS at the time wasn't that popular yet, so how did you know to make the bet on SaaS?

Because we've seen the broken delivery model of us coming into a customer and installing like million-dollar licenses on a Sun server and then it would crash and we need a technician out to look at it. You know, we've seen how that was broken and then we saw Salesforce and Third SymSignals, those first movers in SaaS as well, and that just made complete sense to us.

Right, got it. Okay, and so why the move from Denmark to San Francisco and then the move back?

Yeah, so this is a long timeline, over 10 years, but we were live in 2007 and in 2009 we were lucky to get a US investment.

How big was it?

It was tiny. I'll get a little more into it, but you know, we've been looking for VCs in Denmark and nothing existed. Denmark is a tiny country, a tiny economy, and not a lot of risk in investments. So it took us a long time to find an investor, and that was an American investor. And we had very early on agreed implicitly we're willing to take this as far as we can, even if that means moving to the US. And I think that's really— it was a big driver of the company growth as well, to get into the US and to be able to tap into the knowledge that exists in Silicon Valley. It's decades and decades of experience. People have done this 3, 4, 5, 6 times before. They just come in and help you build out sales and marketing functions, things that we didn't have had enough experience with. And we moved to the US in 2009 with a small Series A investment. We got a Series B investment of $5 million, which today is practically seed money. And that took us to the West Coast, to Silicon Valley.

Got it. And how did that conversation go with your families that, hey, we're going to uproot everything in Denmark and the 3 of us are going to move to San Francisco?

So only at the time, only Michael was married and had kids. Me and Alex were like, okay. Yeah, right. So we had girlfriends, it didn't really work out. It's a hard proposition. But so we were free and we were committed to this journey already.

Got it, okay. And so, I mean, just for people to know, people that don't know Zendesk, can you give like a quick one-sentencer and how you guys make money? I should have done that in the beginning.

Oh yeah, sure. So obviously we're a SaaS company, a subscription-based service that helps you handle the communication with your customers. You have an online business, you have a business of sorts, you sell products, you get feedback. That feedback you need to collect and respond to. And Zendesk can help you do that process and make sure the questions get to the right people at the right time.

Right, okay. And I would even argue that one of the reasons for your success was probably because you were one of the first movers in the space. Would you agree with that?

Oh, definitely. We had a lot of years to ourselves, a lot of years to really iterate our understanding of the product, to reach a broader audience, and to build fans and supporters.

And when you— so you left recently, right? And how many people— So you started with you 3, and by the time you left, how many people were you?

So I haven't left. I'm still with the company. I stepped down as CTO. I'm still here doing evangelism and customer work and that kind of stuff. And we're 2,300 people globally now. I moved back to Denmark in 2016 after 7 years in San Francisco. I had twin girls half a year and a half ago, so half a year after I came home. And that sort of changed my focus entirely.

Okay. And I want to get back to that in a second, but in terms of growth lessons from, you know, starting from you 3 all the way up to 2,300 This is a loaded question. What are some key lessons you learned along the way to that many people?

Yeah, so Mikkel, Alex, and I, we didn't really, we didn't like being sold to ourselves. We didn't really like the enterprise sales model, so we shunned it for a while. And we had 8,000 customers, I think 8,000, 10,000 customers before we hired our first salesperson. So we had a very bottoms-up approach into SaaS. And then we started feeling increasingly As the product matured, we had more offerings for companies, larger companies, and we started feeling increasingly, you know, there are some people out there who would really like an account executive to have an ongoing dialogue about upselling opportunities and these things. So we tried out to hire a salesperson in 2010, so in recent time pretty much, and he did phenomenally well the first month, like triple quota, and we're like, okay, there's something here. Then we got some seasoned leadership in on the sales side who helped us build out Got it.

So that was one of the key lessons, being against sales and then eventually realizing that it makes sense.

Right. And today you would not start without it, obviously. It was really the old sales model we didn't like. It was not sales per se, we just had to come to that realization.

Right. And for you 3, I mean, I have to assume this is the largest company that Mika has run as well. What kind of management lessons did you learn?

It was hard, I would say, but not only that. In terms of culture, coming from Europe to the US, so I love Americans, they're optimistic, positive, charismatic. I went to high school here myself and I know how you get trained to get up in front of the class and recite a poem and all these things. We don't really have that in Scandinavian culture. We're more like, ah, little shy, humble people.

Yeah.

So when you move to the US and you try to hire in the US, you should understand as a European that it's a different culture. You may speak the language, you watch the movies, but you do not understand the subtlety, how people are different. So you need to really focus on that.

Got it, okay. And what do you think were some key struggles as you were growing the business? What are some big turbulent bumps you hit?

Of course, you know, CTO, lots of technology. Zendesk was like a top 400 website in the world. Going from something 3 guys built and living on a single server somewhere to this massive global infrastructure, it's been a tremendous journey and we're still People are very much hard at work and making things work. So, you know, we've seen scalability issues of all sorts, near-death experiences in the early years in the US, but we're lucky that we could tap into the talent people have there. They've seen things at scale that you would never experience in Denmark.

So near-death experience, can you give us like an example?

Oh yeah, so it gets a bit nerdy, I hope that's okay. Around 2010, we moved to SSD drives, which which was rocket science, super cool stuff back then. And we did that to accommodate an increasing demand on the databases. Sometimes they would crawl to a halt and just, you know, in a SaaS company that means all the customers just stand still pretty much. And so we couldn't accept that. And so here's a new technology that really addresses this problem. So we moved to these super fast drives. A bit later than that, we started having these database crashes. So the database would just crash really hard and become corrupted and really get banged up. So we were running with what's called 2 replicas. So you have a primary database and 2 replica databases. So primary dies, you flip over to replica. Then that dies, then you're on your last replica. And that's when you start to get really, really nervous.

Yeah.

But it turned out we were able to reproduce this, and like with a little piece of code we can reproduce it and found out where the bug was. And we had a connection to MySQL, the database vendor, and that's fantastic in Silicon Valley. The networks are super short to get We sent the test case to them and they patched it the day after. That's a fantastic example of how Silicon Valley works. If we had not gotten that patch, we'd probably been out for hours, if not half a day or so, which is just not where you want to be in a SaaS company.

Definitely not.

But thankfully on the technology side, that's like the worst story we have. I think we've been able to grow and adapt and overcome.

Right.

Cool.

That's amazing. So, I mean, your daughters, how old are your twins?

A year and a half. Identical twin girls.

Okay.

Congrats on that.

So, going— I mean, so, okay, a year and a half ago, what's going on through your head and what eventually led to your decision to step down as CTO?

Yeah, I've been on this journey and been in the technology grind for more than 10 years. I lived in San Francisco, which is all about technology, for 7 years. I think I was at a sort of saturation point. We had IPO'd in 2014, and then you start thinking about, so what else, this life thing, you know. I was 40 when we IPO'd, and I was like, okay, not quite young anymore. And I was increasingly sure, you know, I want to settle down and have a family. And so that's sort of what happened.

Got it.

And, you know, perspective changes through life. I'm super grateful for the journey, but I had also reached a point where, you know, more than 2,000 people, well-oiled machine, great teams, great executive team, Great engineers. I think it's a good time.

And what were your co-founders thinking?

I think they understood it. We've also like diverged in our career, right? So Mick is having this fantastic CEO career. He's doing a tremendously great job, and it's just that's what he wants to do, and that's fantastic. For me, I've reached sort of the pinnacle of this accomplishment. Accomplishment is it for me, and I'm ready to move into the family Got it.

The family stuff. That's what you call it. Cool. So for you guys, I mean, what do you think? Word of mouth is one thing. You guys were first mover, but what else were you guys doing from a customer acquisition standpoint that really helped you stand out and get to that IPO point?

Yeah. So customer service was a super dry, unsexy business. Our first slogan was "Love your help desk" because that was just like okay. Actually, no one loves their help desk, but it was. a mission statement and it drove how we thought about things. We made it super consumer-friendly, very tongue-in-cheek early on. Like, our first mascot was like a helpful Buddha with a headset because we hated these stock photos of people with headsets.

Yeah.

How can I help you? You know, so we didn't want that. We wanted to make it more human. So we very much addressed consumers instead of enterprises on the signup pages, and the entire look and feel of Zendesk is still very clean and sweet and appealing to human beings. And it's not just about enterprise today.

Right. So are you saying the Buddha is no more?

It's no more. You know, I think we grew apart. The Mentor was his name. We sort of grew apart and had to open up the brand to be more inclusive of other products. So we now have a portfolio of different products, and we needed to have a brand that could scale across that and also maybe a tad more professional.

And you guys started to buy up some software companies in the past couple of years. Recently you bought the CRM that I use. Can you talk a little bit about the strategy on, I guess, why?

Yeah, we've been heavily focused on our space throughout all the years, but we also recognized that in the enterprise software space, the modern enterprise software space, you know, there are multiple players and they can actually play along quite well together. Like, we acquired Zoho in Singapore. They have great chat products. It makes sense from a customer support perspective. We acquired Biome Analytics in Montpellier, France. They make analytics products which also supplements what we want to do, take data from all sorts of sources and present it so we can make informed decisions. And then we acquired Base just recently, which allows us to move into the CRM space as well, which is also very supplemental to customer service.

Right. Part of it, I think, is you're buying the attention, you're buying the users as well, right? And that helps you guys just plug everything together, makes everything just make sense, right?

Yeah, but you've also had like really smart people focused on this problem for many years. You buy that experience and the outcome of their efforts, right, instead of trying to do it yourself. So you can keep your focus on what it is that you do really well.

Got it. So working to— I guess actually before that, how do you guys source these types of deals? I I guess, do you guys have like a criteria? Like, what is, what is the foundation of these deals?

So obviously we have a corporate development arm, and it's their job to sort of COVID what's out there and see opportunities. Sometimes it's a build versus buy kind of thing, and we have an outbound product we acquired instead of building it ourselves. Yeah, again, because it existed, it scaled well, and, you know, it made even more sense to do the investment there than to have to level up our own skills And hiring tens of people to build this product.

Right. Okay. And when you say outbound, it's outbound outreach tool, sales tool?

It's called the Zendesk Connect product, so it's really for tracking user behavior and being proactive on engaging with the users.

Got it, got it, got it. Okay, cool. So we're working towards wrapping up here. I mean, what are— I like this question because you're a product guy. What's one new product or app that you've added in the last year that's added a lot of value to your So it could be like a Peloton bike or it could be like Evernote.

You know, I try to dial down on that, to be honest. I've disabled notifications, getting better at the calendar. So I'm sort of in the counter space right now where I'm just trying to focus on the family stuff.

Yeah. What did you buy for the family? Could be something that's helped you a lot with your daughters.

So there is this one app that's called Famly, F-A-M-L-Y, which interacts with the kindergarten.

Yeah.

And it's fantastic. They take photos of your kids in the kindergarten. And keep you updated when they go to sleep, when they wake up, and you arrange when you pick them up. Definitely a lifesaver in terms of managing your family.

Great, that's what I was looking for. How— so now, I mean, how do you structure your day now?

So when you get really busy at work, what's the first thing you do? You stop exercising. So now I have more time on my hands. I have a part-time agreement with Zendesk. I can focus on exercising, getting family going, and just structuring my day around that.

Right.

And then of course I go out and meet some of the customers and show up at conferences like this and meet people.

Great. Do you bring your family to these?

None. Yeah, so we have taken the girls out flying, but you know, and I really want to take them to the US, but this 10-hour flight is so intimidating.

Yeah, it's a tough one.

Also for the other travelers.

Yeah. What is one must-read book you'd recommend to everyone? So it could be first one that comes to mind or your favorite of all time.

I actually have 2. I have 2 for that one question because I read both while flying for business. And one is Stoner by John Edward Williams.

Okay.

And the other one is How to Get Filthy Rich in Rising Asia by Hameed.

Yeah.

And what both of those books do is that very subtly they just poke at your sense of urgency in life, you know. They're life stories in 200 pages and life just passes by like spring comes fall and then winter happens.

Right.

And it really instills this sense of, oh wow, Yeah, this is real, you know. I really recommend those 2 books.

So I know the second one. What's the— Stoner? Like stoner?

Yeah, it's the story of this farmer guy who goes in and gets an education, becomes a learned man, and his parents don't really appreciate it. And he ends in a relationship with a woman where he's not really seen or don't really have good interactions. Yeah, the time just passes by, you know. having fights with his colleagues. It's not an uplifting story, but it gives you this profound sensation of, okay, you can't just sit and watch the world pass by.

Got it. I thought it was about a guy that like smokes weed.

It could have been. Maybe that's the second one, Stoddard 2, the sequel.

This has been great. What's the best way for people to find you online?

Twitter.

Twitter. What is your Twitter, Morten?

@Primdahl.

Okay, @Primdahl. So it's at his last name. Morten, thanks so much for doing this.

Thanks for having me.