Growing & Scaling SaaS Businesses from $1M to $500M in ARR with Intercom CEO Karen Peacock

Please welcome byron dieter, partner at bessemer venture partners, and karen peacock, coo at intercom. Hello. Hello. Welcome back from lunch, everyone, and thank you for joining us on the opening day of sastr. I'm Byron Dieter with Bessemer Venture Partners and I'm absolutely thrilled to be with you today. Most importantly, because of my guest to my right. Karen Peacock is not only a friend, but a superstar senior executive, perfectly positioned to address our topic today of hyperscale and in particular this aspirational journey from the 1 million ARR mark up to 500 million and beyond. She's actually done it both as an advisor with small companies, but also at Intuit as a gm, where she managed a multi billion dollar P and l, including over $500 million of ARR directly and walked them on this journey to Decacorn status and then most recently has joined Intercom, one of the hottest cloud unicorn companies in our industry, as their coo. And Intercom, for those of you who don't know, is a messaging product, a modern messaging product for sales, marketing, support and operations teams. And so Karen, today is going to give us some words of wisdom, but maybe first give us a little color, if you can, about Intercom and what COO means and your role there, please.

Absolutely. Happy to do that. Thanks very much, Byron. And thanks everyone for coming. Decacorn, I think we should officially attribute to Byron here. So a little bit of background first on Intercom and then I'll tell you more about my role. And I think it helps set that context. So you know, when you're in a website or you're in an app and you see in the lower right corner a little, little message bubble that is likely Intercom, and that's just one of the faces of Intercom. So companies like Spotify use Intercom embedded in their app in order to send targeted messages to their trial customers and help encourage them to become paid customers and keep them engaged down the road. Companies like Tradeshift use Intercom on their website to help them convert visitors to their website into qualified leads and then turn those folks into paying customers, so driving more customers faster. In fact, one of the things that we just recently heard, Byron, is that of the most recent Y Combinator class, of all of the companies there who are using any kind of messaging or chat solution, 84% are using Intercom. So Intercom's very much becoming a part of the default modern tech stack in order to help companies grow. And my job in Intercom is to help Intercom as a company grow and Scale, just like we help for our customers. Customers. From a functional perspective, I'm responsible for sales, marketing, and support, which are actually kind of a pretty common combination for COOs to work on. What's probably a little bit less common is I'm also responsible for our San Francisco engineering and product team and data and analytics. And that's because of my background in product and in data.

Great. And then talk a little bit about this pairing, if you could, with CEO and coo. Dramatic lighting, please.

Yes, we meant that to happen.

A lot of people in the audience, founders, CEOs, you're probably going through this team building question, and there's always this notion of what level executive do you bring in? How do you divide roles and responsibilities? What should the profile be? And people hear about the Sheryl Sandberg, Mark Zuckerberg pairing, or Dennis and Drew maybe at Dropbox. In the cloud world, how do you think about your role and that interplay with the CEO and maybe even the profile of a COO type for that CEO to consider?

Yeah, happy to talk about that. So before I joined Intercom, I was looking at both CEO roles and COO roles, and people told me, don't take a COO role. I obviously didn't listen very well. And the reason why they told me that is they also quoted figures like, did you know that the average 10 tenure of a COO is eight months? That's terrible, right? I mean, that's just.

You've beaten the over. You've won.

Exactly.

I won.

Done.

All right.

I'm off the speed. So I dug into that and I wanted to learn more. And so I spent time talking to CEOs, successful COOs, to venture capitalists, to recruiters and folks who kind of were around that ecosystem just trying to figure out why that was the case. And I'm happy to share with you today the number one reason why COO hires fail so that you can avoid that. And I think the reason why it fails is because there's a myth out there. And people tell CEOs and founders, think about all the things that you love doing, that you're great at doing, that you want to spend your time doing great. Now think about all the stuff that you hate doing that you're not very good at doing, that you don't want to do, and go hire someone who likes that and is good at that. And if you only follow that advice, you will most likely fail. And that's because what you've just hired is your polar opposite. Right? And so you end up in A situation where, you know, one person's over here, another person's over here. It's like oil and water. And the first time you disagree, you start pulling the company in different directions, and that's not good for anybody. I think what you should be doing instead is finding, yes, somebody who compliments you and is good at doing some of the things that you don't like to do as much but are really important for your company or you're not as good at or as experienced at. Find someone who can spread out on the playing field with you like that, but also someone where you have some amount in common. And so if you could imagine like a little Venn diagram, rather than sitting like here and here with your coo, you want to be in a place where there's some. Some level of overlap. And so for me, when I was looking and met Owen McCabe, the CEO of Intercom, I realized that we had exactly that, the ability to spread out on the playing field. But what we had in common was we're both product people. We both care very deeply about customer experience, we both care less about preserving the status quo and very much about building a very special business.

Okay, so you heard it from Karen. Conventional wisdom is totally wrong on COO spec, which is quite interesting. What about stage for when someone should think about bringing on a coo? Is there a right size or stage or scale? If Intercom had tried to bring you on three years ago, would it have been too early and would it have failed? Was there maybe not enough for you to do when you came on? And waiting two more years could have been the right model. How should people think about when to bring in that experienced senior executive to help the great founder culture?

Yeah. So I think that all very much depends. But one thing that is certainly true is don't bring on a COO until you are. Are ready for that person to drive the bus while you drive the bus as well? So just making sure that. Don't be in a situation where you're both kind of like trying to pull on the wheel. Do it at a time where you feel like there's enough complexity in your business that that person. You need a senior leader to run and operate one part of the business while you're operating it as well. So where there's enough complexity that you need like, two senior leaders both driving.

Okay. And that actually feeds into this notion of stages. As a former entrepreneur myself, and having spoken with a number of the founders in the room, so much of the focus is on these round numbers. This notion of, okay, I'm at a million now, I've, I've sort of made it, but if I can just get to 10 million, then everything will be good and the world will be fine. But oftentimes we actually find that people cut some corners or perhaps don't get to 10 in the right way. So even though they hit what they thought was that next great milestone, they plateau. And so many times businesses will be on this rocket ship ride and then stall out. What should founders think about to avoid those mistakes? What have you seen in terms of words of wisdom for this scaling challenge, specifically in that 1 to 10 journey?

Yeah, so that's a great question because it's very tempting to focus on those numbers. Like I'm at 1 million, I just want to get to 10 million and now I want to get to 50 and then 100. And the fact is, the more you focus on revenue, the worse off you will be. And that actually, I know it's kind.

Of the irony of focusing on 10 million means that you won't get there.

So what you need to, if you focus on revenue, that's actually the last thing that you should focus on. And what you should focus on first is value and engagement. And so I can talk a little bit about both of those things, tell you more about what we're doing at Intercom there too. So focus on value. And this is specifically really deeply understand the value that you're providing to your customers, make sure that you are clear on what that is, make sure it's super compelling to your customers, measure it and get better and better at doing that. And then on the engagement side, make sure that people are actively using your product and make sure that kind of every constituent, if you're in a marketplace, make sure you've got both sides using your product or service. So value and active engagement. And I can tell you then for Intercom, because I always think the theory of these things is very different than the actual. And so it's helpful to hear a specific example, I think. So for Intercom, what we focus on is on the engagement side, tracking both how much people are using our product and how much they're using our product to touch and help their end customers. So if we start with the first one there, how much they're using our product. So we track active use. And Today Intercom has 91% of our customers who use the Intercom product and platform every single business day. So really strong engagement there, really good about that. And in terms of how much they're then touching their end customers. We're now at a state where we've got 500 million messages that our customers send to their customers every month. So 500 million messages every month. And we track that very closely and that's been doubling year over year and we expect and hope for that to continue to double. So that's kind of the engagement side then the value side. And this is something that we've only recently gotten a lot better at tracking. So we're very clear for each of our products and for each of the use cases that we solve for our customers on what that value is. So for example, one of the things that our customers buy us for is to help them take visitors to their website and turn those folks into qualified leads, get them to the right folks, whether it's on the sales or support side, and then convert those customers into paying customers. And so across that, the key benefit metric that they're really looking for is driving up conversion rates, like more customers faster. And so we track exactly that. How many customers are our customers converting because of using Intercom? And we find that our customers who touch their customers with Intercom actually end up converting at 83% higher. And so that's awesome results. 83% lift in conversion is something that we would all sign up for every day. But we seek to keep getting that better and better. And so our product team very much focuses on and all of us really focus on how can we keep driving that benefit higher and higher. So my advice to all of you would just be super clear on exactly what is the benefit that you are giving to your customers. Make sure it's something that they really value and be really crisp on that and then figure out actually how to measure that and how to get better and better at delivering more and more of that value over time. And then revenue will come.

Interesting. So then sort of the paradox of overly focusing on revenue first can drive wrong behavior as opposed to usage and retention will take you on the journey.

That if you just focus on the revenue side, you can end up in kind of a hamster wheel situation where you're just trying to do everything to kind of squeeze a little bit more water out of whatever situation you're in versus actually focusing on the long term growth driver which is around value.

So you're a math major, so the metrics side may come a little easier to you.

I do.

But for founders in the room that maybe aren't as quantitatively oriented, can you talk about the role of data and metrics in the business and in particular, for earlier stage businesses, when you're talking about the importance of usage and retention and these elements, obviously there's a metrics component to it. How do you introduce that discipline in your business early on, but in a balanced way, so you're not overly focused on a scoreboard versus, you know, building the platform of the business in the right way?

Yeah. And I think that there's always kind of the art and the science to everything that you do, kind of the quantitative and the intuitive. And so it's really important to have both of those in everything you do, but behind kind of. And you have to start with the intuitive and the leap of faith and the problem that you're solving. And then from there you want to figure out how to hold yourself really accountable to that. Like, am I really solving that problem? Well. And you could come up with a hundred different metrics and ways of measuring that. And that's why I would suggest pick like one way of measuring the value that you're providing and then one way of looking at your funnel and assessing how you're doing at attracting your customers, turning them into buyers, and then you can look at your revenue from there, as well as things like retention. So just a very, very simple dashboard to start with. But I actually do think that every company really at every stage needs at least a very simple dashboard. But that is not at all at the expense of focusing on what first matters, which is really understanding the product, understanding the problem, having that inspiration and that intuition which really kind of fuels the ideas that you then measure.

And a lot of that touches on this elusive notion of product market fit, this idea that we're all chasing this interplay between the right product for the right set of customers that will put you into the vortex of sales adoption, maybe going back also to your intuit days and your work advising startups. What has worked for you and what are some of the important factors in finding this perfect market vortex for that storm that you want of sales and adoption?

Yeah. So I have to say I've learned a lot from Scott Cook, who's a mentor and friend of mine. And some of the mantras that I take and I share going forward are, number one, to fall in love with the problem, not the solution. And I'll talk a little bit about what that means, and then to watch what people do, not what they say. And I'll share with you a story of when I didn't do that. And hint, spoiler, it's not gonna work out well and what happened. So a few Years ago, when I was at Intuit leading product for QuickBooks, was out talking to customers. It was an incredibly successful product, hundreds of millions of dollars in revenue around it. People loved it, high net promoter score. And folks were telling me Things like, wow, QuickBooks is great, but the one thing it really needs, the one thing it's really missing. And I'm like, yes, what is that one thing? Is budgeting. Okay, tell me more. And so we learned about budgeting. We learned exactly what it was that people wanted to do in their budgeting. And we built a cool budgeting product and we brought people into usability studies and we made it better and better. And they really liked that budgeting tool. And so we launched it. And you know what happened is almost nobody ended up using it. And that's because budgeting is tomorrow's problem, not today's problem. Budgeting is something that you're going to do tomorrow and for many people, that tomorrow actually never comes. So we went back to the drawing board because we knew there was something there. People were really passionate about, about it and were asking about something. And so we realized what we had done was fallen in love with the solution. The solution that customers had said they wanted, the solution that we had then built and fallen in love with ourselves. And so we stepped back and spent time thinking about what the problem really was. And we spent time watching what small businesses actually spent their time doing today. And we realized that the real problem was cash management. And the real problem was I can't pay my bills. I need to figure out how to get my money in line so that I don't lose this partner relationship that I have. So it's really all about cash management and having enough money to pay the critical bills when they were due. So as we deeply understood that, we were then able to build out a very different type of solution which is a very lightweight cash management solution. We built that, we launched that, it was very successful and now 100 of thousands of small businesses use that.

Excellent. So it's the aspirin versus painkiller versus.

Vitamin, vitamin versus painkiller. So you'll always do better in a situation when you are selling something that's really mission critical and necessary versus something that's kind of a nice to have and aspirational need.

Interestingly, sometimes customers themselves may not know that difference and the aspirational them may be different from, from the day in, day out pain that they're feeling. And that's part of the product true north the company has to have.

I see that's exactly right.

Yep.

Nobody ever asked for an iPhone. Right. Or at least 10 years ago they didn't, now they do.

So that's the kind of a medium to long term view in terms of building a company to last and from platform. But do you have any quick hit advice for the audience here? If you were to join them in a boardroom or an executive team off site, is there a low hanging fruit that operators today could implement that you've seen from your years of experience?

Yes. And so I'll share with you one of the first things that I have done in literally every business that I have run over the years and it has always worked. So I'll share with you guys because I bet it'll work for you as well. And that is to focus on that magical time when a customer first comes to you or a prospect first comes to you and is interested in learning about what you do and thinks they might want to become a customer. Focus on that onboarding process for new customers and making that experience amazing, making it very clear what the benefit is that they're going to be getting like we were talking about in terms of value and then streamlining and speeding people through the process as soon as possible. And there's a phrase that the Mint team developed that I really like. So Mint, for those of you who don't know, is basically a personal financial management solution. And the first thing you do when you start using Mint is you basically plug in and connect your different bank accounts or credit card accounts. And then what happens once you plug those in and get those all hooked up is it creates a pie chart. And that pie chart is a distribution of all the things that you spent on and it's done all sorts of cool things behind the scenes of the machine learning to do different categorizations and auto categorize things. And it shows you here's where your money is going and then it gives you recommendations and a lot of other things from there. And what the Mint team discovered is that for customers who get to that pie, they have this aha moment. Like you literally see people's eyes light up the very first time they see where their money is going. And then that aha moment and that pie leads to much higher engagement down the road. And so, so my advice to both myself that I take and to all of you is to figure out what is your pie in your product or service? What is that moment that when customers get to that their eyes light up and they say, yes, this is the thing that I wanted this is why I bought the product and why I did all the work that I was doing. So figure out what is your time to pie and then figure out what is your pie and then figure out how you can make that time to pie as fast as possible and just lightning speed through there. That's one of the areas that I've focused on, as I said, in every business that I've ever run. And it always leads to good short term results. And I think along the way there, interacting with customers during that magical time when they're first considering your product being as real time as possible also changes things in a big way. So. So as much as you can reach out to customers with your sales team, within a minute of a customer coming, who's the right type of customer for your product, as much as you can reach out the second somebody has a question, answer that instantly. We have seen this is one of the things that the Intercom product actually helps you do. And frankly one of the reasons why I was so attracted to and joined Intercom to begin with is I saw the value firsthand. Is the ability to interact with customers in a real time way during those magical moments can massively change the trajectory of customer adoption. We've seen customers who have grown their conversion rates by as much as 4x when they interact with a customer right at that point of need, within a minute of that customer needing that. So figure out how and figure out how you want to interact with your customers. But figure out how to do it as real time as possible and you will see great results.

What about building on that? A lot of times in this journey marketing budgets open up for the first time for these founders. And so how do you think about marketing spend and resource allocation? Maybe in that real time construct, but life hacks and quick hits for that lessons learned perhaps and stumbles to avoid.

Yeah, absolutely. So I can share with you a story of the very first VP job I ever had which was the VP of marketing. And I was leading Intuit's payroll products $800 million business, big business, very successful and my first VP of marketing job. And so I got into the role and I spent about a month talking to customers, learning the product, checking out competitors products, looking at our metrics, talking to an, learning from everything that everyone had kind of already in their brains in the business. And after that time I made my first decision and my first kind of big kind of bet. And what I did is I took a big chunk of our marketing program spend and I used it to fund hiring an Engineering team to focus on onboarding and first use. So you'd like literally putting my money where my mouth is here.

You voluntarily redirected your marketing budget to engineers.

Exactly.

And my couple said, no CMO ever, by the way. I'm impressed.

Well, that was the thing. So that basically the CMO crew came to me and they were like, whoa, careful here. And literally my peers, the other VPs of marketing, running others of these multimillion dollar businesses, multi, hundreds of millions of dollar businesses, came to me and they're like, you know, I know you're new to being a VP of marketing, but we don't do that. Don't give away your money. Your money is your power and that is what helps you achieve the goals that you're signed up for. So, like, don't give you, like, we'll just give you this advice. This was like behind the scenes conversations, people truly trying to be helpful. And so I listened, I asked a few questions, and then I said, you know what? I am directing this money to what I think is going to lead the best possible customer acquisition results. I'm doing exactly what I think is going to be the best possible investment that I could do, and I'm sticking with it. And it turned out to be. And actually at the time I said, I'm sticking with it. And in fact, I think this will be the best investment that I make this year. And then I said, and actually I think it's going to be the best investment that any of us make this year. And you know, I got a few smiles on that one. Like, oh, yeah, we'll see. And that's actually exactly what ended up happening. It was the best investment that I made. It massively increased the conversion rate, which increased all of the different effectiveness of all of the rest of my marketing spend. My cost of acquisition went down dramatically and the next year everybody else did the same. And so my point, there is not a don't spend in marketing. My point is make sure that you really deeply understand the customer experience and then the funnel that you're bringing people into and think about the best possible ways that you can invest. Not just the things that are kind of within your functional area, not just the things that everybody else does. But think about what's really going to drive a difference in that customer experience and really drive rapid growth. And when you're to the point that your funnel is actually pretty strong and it doesn't have to be perfect, you don't have to wait 10 years. So your funnel is like a shoot Which I've never even seen one of those. Maybe one of these years we're still.

Looking for one too.

Exactly. You don't have to wait till it's 100% perfect. But when you feel like it's a strong funnel and you can acquire customers and cost effective way, by all means amp up your marketing at that point. And then at that point there are three things I think about wanting my marketing spend to do. I want it to increase brand awareness and purchase consideration. I want it to have some direct results. And you know, those might be two different buckets of spend, but I wanted to have some of it have some real clear direct results. And I want to be investing in all, always learning and trying new things so that you get better for the future. So when you're ready, absolutely, go ahead and amp up your marketing spend. Just make sure you've got the right funnel in place to do that.

Great. And that's particularly relevant for the audience members here, founders and CEOs with that full company view. Because not all VP Marketing or CMOs will be that visionary, I have to say. And oftentimes it takes the full company perspective to go through that resource allocation to do what's right for them, the company. And maybe building on that in other surprising ways. Is there advice that you would give startups that is counterintuitive or that may surprise them, distribution oriented or otherwise?

Yeah. So one of the things a lot of startup founders like to talk with me about or have on their mind is what should I focus on? There's so many things that I could be doing. Where should I be spending my time, where should I be spending the company's resources? And oftentimes it'll be kind of a story of, well, I could focus on this, which is my core product and my original idea, and has some various promising things that we're seeing there. But on the other hand, there's a big company out there that's got a big name and a lot of customers and they're really excited about what we're doing and they're saying that they could actually sell this product to all of their customers. Where do you think I should, you know, what do you think I should do? And I would just say do not pin all of your hopes and dreams for growth on a partnership with a big company. Now, I'm not saying don't ever partner with a big company. I'm just saying go in eyes wide open and test first. So at Intuit, we had a number of partnerships. Let me give you an example on both sides. For example, email marketing. I had this great idea within QuickBooks, we would tie together the data in QuickBooks of the customers and what they purchased then with email marketing and you could do targeted campaigns out to folks. And we built something super cool and a startup that we partnered with. Invested a lot, and we invested a lot and guess what? Nobody bought it. And what I realized is we could have tested that with like an hour of work. So figure out how to do the lean test to see whether anyone's even interested. So I'm not saying don't partner with a big company, but go in eyes wide open and lean test as you go. And Intuit's had a lot of very successful partnerships, for example, on the financing side and other places. But test first.

Yeah, maybe just to double click on that. Nine and a half years ago, Bessemer released our first 10 Laws of Cloud computing. And one of those laws had to do with this notion of channel dependency and how hard it is to get channel partners to sell cloud software because services attach rates are lower and the hardware attach rates are non existent. Do channels ever work in cloud 10 years later?

So they do sometimes work. One of my favorite examples from the Intuit days is around financing small business financing. I think if you pick a product that is adjacent enough so really, really close to what the customer is already doing, where you're selling to actually the same person, not the same customer company, but the same person. So for example, with QuickBooks you're selling to the bookkeeper. The bookkeeper or owner is often the person who's also thinking about lending selling to the same person and where that person's in that same mental space to buy the other product, it can work if both companies are really motivated to do that. So for example, through QuickBooks there's been about, I think it's 800 million loans today gone through third party partners, folks like On Deck and Fundbox and others. So it can work, but just be careful.

All right, Karen, so last question, Mark Benioff and many others have been on record about this cloud unicorn trend and companies staying private longer and have essentially come out and said, grow up already, why don't you companies go public? This whole nonsense of billion dollar plus private valuations is really manipulating the market, I think, or even some terms used.

Yeah.

So when will Intercom go public? Or why haven't you gone public yet? What are you waiting for? And what advice do you have for people in the room on that point?

Yeah, so having sat on both sides of that running run a large P and L in the public eye with responsible for quarterly earnings gotten to play on the private side, which is so fun. I would just say that going public to many people can feel like it's a finish line, right? You are a founder and a CEO of a public company. You and and your whole team are soon thereafter liquid, like amazing, right? Incredible finish line there and I would say definitely an incredible milestone and unbelievable success. However, that is very much just the starting line. And it's the starting line to a whole new race with a whole new set of characters and stakeholders who care very deeply about different things than what you're used to caring about and car very much about things like quarterly earnings. And it's very easy to get distracted and spend a lot of time trying to like, micromanage your quarterly earnings and forget about driving massive innovation, trying breakthrough new things that might work and might not work and really driving value. And if you end up getting to be so focused on your quarterly earnings, what'll happen is you will turn into one of those companies that you seek to disrupt. So it's, I think, very important to wait and only go public when you are really ready and you have the discipline to be able to hit those quarterly numbers and have the ability to think big, to innovate, to focus on value, and to do all of that together. So I think waiting as long as possible is good. There's plenty of ways to get large amounts of funding in the private markets today that you never used to be able to, used to only be within, used to only be available if you go public. So take advantage of those things. And then when it's time and when you're ready to go public, we all here wish you all the best.

Well, you navigated that one pretty well. Maybe a future in politics after this tech stuff's over.

I doubt that. Definitely not. That's not going to happen for me.

Please join me in a big round of applause for Karen.

All right. And thank you, Byron.