Insiders Guide to Becoming a Pre nicorn

All right, let's continue the conversation. I'd love to hear what Benareski from DigitalOcean says. I met a bunch of people here who love DigitalOcean and maybe passed on the deal and now it's an epic company. So is Ben back there? Do we have him?

All right.

All right, let's welcome Ben from DigitalOcean. Thanks for coming, man.

Definitely, definitely.

Yeah. So does any of this conversation resonate with you or do you just don't care because you're just beyond all of it?

Yeah, I wasn't listening to a single thing.

You couldn't hear anything.

I was backstage pitching the company.

So let's talk a little bit about DigitalOcean. Let's tie it into the larger conversation. Right, so when was DigitalOcean founded?

We founded in 2011, but incorporated in March 12th.

Okay, so in DigitalOcean as its current company was in 2011 or is that sort of its prior rackspace when DigitalOcean change?

So there's a little bit of a background story. I started my first business in 2003. It was called Server Stack. We competed with Rackspace head to head. It was a good lifestyle business. Bootstrap company grew to about 20 employees, 6 million in annual revenue. And in 2011, I stepped back and said, it feels like I'm working for the man, but I was the man and this really wasn't going anywhere. And so that gave us an opportunity to really figure out what are we going to do if we actually could start all over again. And so in the first company, we learned a lot of really important lessons. I think the biggest one actually to technical and kind of developer minded people is the importance of sales and marketing. And we struggled a lot because our value proposition was support. And Rackspace owned that message in the market. So we weren't really able to make any traction. And we knew how to run the business operations. Obviously, if you're bootstrapped, you're making your bills month to month. And we knew how to run the technical infrastructure as well because we had a really high customer satisfaction. But what we didn't know how to do is actually how do you differentiate in the market? And it was a tough problem. So we turned to some really awesome books. Blue Ocean Strategy Innovators, Dilemma positioning, the battle for your mind, and really created an education around how do you, how do you market and how do you position a business? And we took everything that we knew from the first time and decided, okay, what are we going to keep and what are we going to create and what we realized.

So you said competing with Rackspace is hard. Let's compete with aws. That's easier, right?

Exactly. You got to go for number one, always. And you know, AWS is obviously a great business. I think they've done a fantastic job at promoting cloud computing, creating a new paradigm. Today, any developer knows that cloud is the way that you build your applications. And so we figured, hey, this is one of the largest markets out there. I kind of like to say if Amazon sells everything in the world from A to Z and AWS is the most profitable division, then we're obviously in the right business.

Yeah.

So we, you know, we sell cloud infrastructure just like AWS. The big difference for DigitalOcean is that we focus on the developer and the user experience. Early on we realized we're never gonna have more engineers or be able to really outdo the competition head to head. We had to get really smart. And part of that was what position is the business going to take? And we realized that by focusing on user experience and design, but not in the superficial sense. While I think the website has a great look and feel to it, it's the control panel, it's the API, it's all the documentation that we've put together that creates the value proposition, which is DigitalOcean is the simplest way to run your cloud infrastructure and actually an experience that you love. Over half of our customers come from a word of mouth recommendation because people come to the site, they're so pleased with the product that we've built, they actually fall in love and, you know, kind of. Simon Sinek has this great piece with Start. Start with why. Right. And we do it for. To allow. To simplify innovation.

Yeah, you get half your customers. So DigitalOcean is founded in 2011. Right, sorry, 2011.

I mean, 2011. 2012.

2012 gets going in 2012. And now we're sort of getting to nine figures in revenue. Right. Rough and tough. Right. You can say whether we're getting to or passed or you can smile, but any of that. But what's that?

We're in the ballpark.

We're in the ballpark. That's a pretty good ride, right? That's. That's pretty good. So briefly, because I don't even know this, but then I want to ask questions about the business quickly. Tell us your funding history so we can tie it to Monday. So 2011 evening, 2012. How many rounds? Who did it? How much?

We did three rounds. The first round was a seed round with IA Ventures in New York, which was great. That was the summer of 13.

And what'd they put in? So you self funded it or bootstrapped until then, Right?

Well, the first business was incubating DigitalOcean.

So it's this really that classic challenge of space spinning it out from an agency or a different business and. Yeah, and so let those guys run it. You let the other partners run it and you left. Or how did you manage?

Everyone was in the same office.

We were all the same.

DigitalOcean was just another managed customer of the first business.

Okay.

And our CEO.

But that funded the enterprise up until iAventures invested.

Yeah, exactly. And iA, you know, I think astutely said, you either have to sell this company or we need to merge it because your attention is 100% focused on DigitalOcean. And it was impossible for us to sell the business because so much of the resources were pooled together. And so we decided to merge the two businesses together.

Got it.

So we raised a 3.2 million seed round in 13. Then nine months later we closed a 37 million round with Andreessen Horowitz. And last summer we raised an 83 million Series B with Axis Industries.

Yeah, okay, so it wasn't even on my question list, but when I hear it that way, it does sound a little breathtaking, doesn't it? So what are. And you never raised capital before this, right?

I mean, I didn't need to had a profitable business.

What were the. Any quick. And I want to ask some specific questions, but what are the Zen learnings from that process? Right, from the fundraising process.

Yeah, I'd say, you know, for us what was great is it was a tough pitch to deliver. What I mean by that is very few investors were able to believe the story and the vision. And so those that believed signed on and we knew that they trusted us. They believed in everything that we stood for. And we were like joined at the hip. And Peter Levine has been a fantastic board member. Really strategic, really helping us out. And that's the thing is you don't have to question their loyalty because we got rejected. They're like, developers are going to love your product. You're selling it to developers and you're going to compete against any Amazon. This is like the exact thing that you don't, you know, venture doesn't invest in. This is. This is a horrible business. And so those that can actually see the other side are great partners.

Yeah. And so. Yeah, for sure. And so talk a little bit. We had echoes of this conversation yesterday. We had Lou Cerny from New Relic. And then we had Jay from Atlassian talking about it. Yep, you've kind of had a similar path, maybe even faster from an AR perspective. So you've gone from a self service product that people love, right? I mean, first time I heard about DigitalOcean is we have a little bit of software at Saster and our developer said we're using digital. I never heard of DigitalOcean. And he's like, no, we're just using. You don't have a choice. And I'm like, all right, when I hear that, I hear that. That's when we switched to new relic from our own hack. There's something cool going on here. Right, but now you've got bigger customers, right? And now you're building your first sales team right now at nine figures in revenue. So tell us a little about going up market, so to speak.

Yeah, it's a new beginning, It's a new journey for us. Initially when we started it was all about a land grab kind of strategy. Let's get out there and self service on demand, let customers sign up. We're doing nearly 1,000 new customers a day at this point, right?

A thousand new customers a day. Yeah, yeah. That's a lot. Right.

But it's the individual developer that it's an account, they choose it because it's the simplest way to run cloud infrastructure. And every company here needs to run their application somewhere. So AWS was a standard. Now there are alternatives and it's great. And what DigitalOcean allows you to do is we just let you do it faster.

Right?

Let you close that deal faster, earn your commission faster, develop your app faster. Because what you don't need to spend time doing is figuring out how am I gonna manage all this stuff. The interface makes sense. The API is super simple to integrate. One click, I'm sorry, one call API for creation, snapshot, launch in a new region, backup, whatever you want. It's like stripe for cloud infrastructure. It's just beautiful. So what we saw is we had this great organic traction and customers, ideal customers were signing up and spending tens of thousands, if not hundreds of thousands of dollars per month within two or three months of signup. And so we realized, wait, there's a huge market out there that we haven't even begun to penetrate just yet. And what we have is the brand loyalty of the individual developer that works at these companies that we can trade on by saying, you know, you already love this for your personal use, let's get serious. And is DigitalOcean ready for your production use? Case and that's what we're developing. Our product roadmap is to bring out all the features that larger production apps need like storage and advanced networking and metrics capabilities and really growing into the infrastructure as a service provider that we started out on. But because our initial MVP product droplet was so successful, we were heads down, scaling, growing the company to 600,000 developers to date over the last several years. And now we're finally matured our supply chain processes and really figured out let's focus on the future. Right, because everyone wants that 10x. So the next 10x is, you know, let's do a billion in revenue. We figured a sales team was a.

Good way to get that.

And then we called up Jason like, hey, what should do we, we do about this sales initiative?

Let me ask, I wanted to ask different questions, but let me get one more question and then let's bring out Owen from Intercom and let's come back to some questions. But when I hear the story fresh and I think about the time, it sounds like a Cinderella story, right? I go off, I build this bootstraps competitor and then I figure it out and then boom, I go from nothing to nine figures of revenue in a couple of years. But what were the two biggest couple biggest bumps that you really saw? What were the moments that were the hardest things that you had to learn to scale a business?

I think growing as a leader was the most challenging thing. How do you act and be as a CEO for a 200 person company and growing? But I'd like to almost shift that question a little bit and share a little bit of wisdom with the audience. I think what allowed us to really grow that quickly is counter wisdom in some ways. It's contrarian. We created a lot of constraints. We said we have to go away from a sales model initially and allow the product to sell itself. How do you do that? You have to be extremely differentiated in the market where your position allows it to be sold on its own. We wanted to keep the recurrent revenue dynamics. We wanted to stay within an industry that we knew and we wanted to be able to grow at more than 100% year on year. So when you look at all those things, you have four or five different constraining factors. And then ultimately we said, if our position is simplicity, who will that actually ring true with developers? That's a niche. So the tighter that you can get your focus, the smaller the market segment that you actually attack, the greater your likelihood for success. And now our story is, hey, we're Beginning to move up market. And you know, we have Atlassian and Salesforce and Zendesk as customers of DigitalOcean. Sure, they're not running their entire enterprise workload, but they're beginning to tinker and seeing where they can deploy it.

Yeah. And when you. So now that you can just squint and start thinking about that crazy billion dollar number and you talk about having little silos at Atlassian Salesforce, do you want to do what Atlassian talked about yesterday and stick to your knitting and not try to go more enterprise, or do you want to do what we talked about and you want to go in and like take all of the new enterprise? What's that?

Developer is the new enterprise. So it's all right.

I like that. I don't know what it means, but I like it. What I mean is I hated D2D. Like I'm DD Investments, but I like developers. A new enterprise, Salesforce.

No, software. Well, who builds the software? It's developers. And they're all about cloud. Cloud is all about developers. And so developers are making the infrastructure decisions, they're making the application decisions. It's not the CTOs, the CIS, that are necessarily controlling that spend. And that's what we're seeing is this organic penetration into the enterprise by developers that first start out with a weekend hobby project and then they come to work and they're like, oh my God, it's gonna take me a week to provision a system over here. I'm just gonna sign up for this $5 droplet instead.

That's what we did. But eventually it's okay to take a week. Right. Because it takes Salesforce's thing in terms of years, Right. In terms of their infrastructure, sure, yeah, sure.

And we just have a few developers from there. It's not like the entire.

But do you want them all?

Of course. But we want to win.

It'll be an evolved company at a billion to each get all of them rather than to get a couple of guys.

I think our philosophy is actually really simple. We want people to choose the right tool for the job. And as large as that market is, and we believe that developer market is just enormous in size. And so we feel it's a great bet. It may actually be. Look, the enterprise bet, most likely, if we're being real, is a larger market pie. But developers is what we're about. And those developers are the ones that are actually building applications. And those applications run on DigitalOcean faster and better, and that's why they choose us.

That's cool. All right, let's keep the conversation going, but I want to make sure we get some time for Owen 2 and Tiago, so thank you. Ben, let's slide over a little bit and then we'll try and have some joint conversations together. So, I mean, guys, seriously, if you don't go from 0 to 100 million in like three and a half years, it's okay, right? It's okay.

All right.

Owen, are you back there? All right, my good friend, Owen McCabe, CEO of Intercom. All right, let's welcome here.

Thank you.

All right, how many of you guys use Intercom? Anyone? Show of hands. Raise. All right, I think we've got about, I'm guessing 15% penetration. 12%.

That works.

It's pretty good.

Yeah.

Right side still. So couple things I want to ask, but first of all, Intercom. Tell us a little bit about what Intercom really does, because everyone's heard of it, but not everyone uses it. So give us a little background. Sure.

Pretty straightforward. We set out to solve the set of problems that you might put in a bucket called customer communications. We sell it to Internet businesses. And so really, anytime an Internet business would want to connect with their customers, whether it's for customer support or marketing use cases for selling purposes, for product feedback, we are there to try and better solve those problems. And so we have a set of products that work together seamlessly together on this Intercom platform, with the primary goal to create this one place to connect with your customer base as opposed to using these separate, disconnected, siloed, kind of old school enterprise software tools.

Yes. So the magic. So Intercom's the 11,000th tool to communicate with your customers, right?

Right.

Yes. But what's the. And everyone builds great software, right? I mean, not everyone, but we can. What's the magic? Just to help people. Because. Because Intercom's one of those ones, DigitalOcean, for me, I hear that my team uses it. Intercom is a little bit different. I turn around and everyone's using Intercom. What is. Honestly, what's the secret sauce? Right.

I think very. Really what we set out to do was never to create a better help desk or a better email marketing product or a better live chat product. We took a couple steps back and said, can we think about this a little more holistically? And the conventional and traditional way that businesses will talk to their customers is that the sales team will have their set of tools here and the support team will have their set of tools here, the marketing team and the product team, et cetera. No One really on the same page about the one customer, one customer base. And so the magic of Intercom is that. And there's a lot of great things about Intercom, but ultimately it's that these products all work together. Everyone is on the same page. There's one view of the customer such that you can provide a far more wholesome, holistic, seamless experience to that customer.

Okay, couple things I want to dig into before we do. Let's see what we do with Ben. Remind me what's the. Because it is Monday. What's the funding history of Intercom?

$66 million raised.

When was the first. So did you start here or were you in Dublin when you came?

I was in Dublin the first five, six, seven years of my career. Moved here right before.

Before at Intercom. But you started Intercom here? Yeah, yeah, yeah, yeah. Okay. And then you raised 700 million. How much?

I mean, I banged my head against the wall for five months and scraped together 500K.

500K. All right. Good old fashioned angel round.

Someone else showed up and gave us another 500k and that turned into a million dollars. And that was the first seed round.

Okay, so that was a classic seed round at a standard valuation. Right. And then what happened? Who invested next?

Was it we add a little more to that seed Then Mamun Hamid from the Social Capital Partnership invested in our series A, Ethan Kurzweil from Bessemer invested in our Series B. Matt Jacobson from Iconic invested in our series.

How much was the. Just a ground focus, I think.

Was it 6, 23 and 35?

6, 23, 35. Okay. And so from my perspective, Intercom went from a great founder who came here, struggled to put together a seed round, and then from an external perspective, you blink an eye and this company's super hot. It's raising at. At impressive valuations. Right, so what happened? What made the. And let's use this as a case study. What made the company hot? Right? I met you the first time and I'm like, this is an amazing CEO doing something interesting. I don't even know what it does exactly. I mean, I know Intercom, but then what made it blow up From a.

Money perspective, I think, you know, the story isn't that instructive for most folks, I don't think. Yeah, I'm happy to share it. But hopefully will, from a marketing founder.

Perspective, what made you hot.

But I think it hopefully will add a little more like reality to the situation here. The truth is, I mean, what is hot? Hot means that you're on. People talk about you. Specifically people in this industry are talking about you right in this echo chamber. And so if you sell to the estami industry and you have thousands of customers in the estami industry, this industry is going to be talking about you. If we sell to the fucking plumbing industry, maybe they would be talking to about us, but we would not be hot in this community. So, you know, just like us and Stripe and Slack, we sell to the folks that talk about us who are the people that investors invest in and talk to and listen to. That's how you get hot in this industry. Yeah, so that's not actually that instructive. That's the way it went down.

I mean we actually use Intercom early on as well and I think it's speaks to the fact that the digital market is so complex. Right. I mean that in the most broadest sense of the word. And like you're saying you're able to build a bridge between kind of, you know, sales teams and marketing teams and customer support teams and you have everything in a kind of integrated environment. But yet you're also able to maintain real time communication with a customer, which is really difficult to achieve. The problem for us is we were getting so many users that we actually had to remove intercom and just said look, this is not a scalable strategy for us at this point when we were unable to really differentiate our cohorts early on. But we loved, we loved the product because of its, you know, deep integration and allowing you to bridge that complexity gap. I think it really resonated in many ways with the way that DigitalOcean looks at.

Nice. Thank you. Yeah, yeah, thank you. I think. I mean look, we bought, we built a damn good product. We're really getting started. There's so many things we need to fix. But the point was that what we built was popular in this industry. And if you're going to look at this industry and say what. What's talked about, the things that they are familiar with and that they use.

Yeah, couple things. Just want to touch on one. When we were, when we were chatting a little while ago, I guess it's obvious, but I hadn't thought about it. Is you. We're talking about timing. Right. And it seemed to me that intercom. I think it's true of DigitalOcean roll back too many years. It doesn't make sense. Right, right, right. I sort of got it and I kind of, I kind of ascribed it to markets. But you made an insight which it was really like Zendesk and Marketo that blazed the path for you and that if Zendesk and Marketo people didn't know to search, wouldn't have known to search for a next generation product. So what are your kind of Zen learnings to founders here?

Yeah, I mean I think, you know, if you study the concept of like positioning, when people talk about positioning they, you know, they talk about positioning things or products or brands against other things. There needs to be some starting point, some foundation. You need something to grab onto first. And so, you know, Intercom was only relevant in the context of the things that previously existed. You know, we were a better solution for talking to customers relative to the previous incumbents. And if those things didn't exist, then we didn't have the foundations to position ourselves against. So I'm not saying that we had expert messaging and marketing, we actually didn't and don't. But the product itself was in contrast to what previously existed. So, you know, a big part of this is, you know, it kind of cuts both ways. I wanted to say a big part of this is knowing what came before. You need to be kind of a student of the landscape that you play in, the world that you play in. You need to be a student of that. And if you look at, if I look at some of my heroes in this space, the Marin Levies and the Patrick Collisons, they're very much historians of technology. And then at the very, very same time, which goes in direct contrast to this first piece of advice is that if you're too bogged down and here's how these things work, you don't get the opportunity that naivety provides which is like let me just solve this from scratch, let me solve it from first principles. So I think, you know, our story was one where, whereby we looked at the pre existing tools. We previously ran another SaaS business and we had the problems that we set out to solve. We said these tools suck, we want to do better, we want to solve our problems. And then as we kind of matured and got traction and we started to grow up, I learned more and more about the landscape such that I was able to position us against what exactly.

Yeah. So let's talk about. We've had an interesting thread of sort of product centric companies. We've had New Relic, we've had Atlassian, we just had DigitalOcean and we've heard. And then we had Dharmesh from HubSpot yesterday who talked about all the dumb non obvious things he did. I mean dumb was in quotes and he had the funniest one, which was stick with SMBs. Everyone. He went to raise money, everyone told him that he had to go enterprise and they didn't. And we chatted about that and why. You're selling initially to developers, product folks and more. And you're in this weird quadrant. You're doing SMBs at a low price point and now you've added sales to the mix. So of the two by two matrix that VCs don't like, you're even worse than HubSpot. Right. So. But you're killing it. So what are the, what are your learnings? And Ben's gone up market. He's just started, he's. He's done it organically and now he's doing strategically. How have you made a low price point with human beings like work for you? Why does it work?

There's a couple components. One is like, let's talk about how is that even a viable business independent of like sales and marketing economics. And then we'll talk about the sales and marketing component. The first is the market for software is just bigger than ever before.

That's the shocker, right?

Yeah, it's just fucking massive. Just so big. Bigger than when even HubSpot Mark and.

I did not know in Palo Alto in 06 the market for software would be quite this big today. Maybe you knew. I did not know. Right.

It's just so damn big. And specifically, if you want to like look at, if you want to like see the future, there you look at the new generation of Internet businesses. Who are the SMBs, the SMB space, even before they mature into mid market, the SMB space has just exploded. And internationally too. Yeah, you know what I mean? Like only half of our customers are in North America. So all over the world people are much more easily starting what we would call an Internet business and their SMBs and whatnot. So first of all, that market's just pretty damn big and it just wasn't viable a market before. That's the first component. Then the second component is that I don't know that it was ever the case that selling with humans to SMBs wasn't ever not viable. It's just that no one ever really tried it. So if you think about it, SMBs are going to spend less. But in this, this new generation of product first business, product first companies, you're creating high quality products for product first folks. People who are actively looking for new products. They're literally on websites called Product Hunt, they're hunting for products. So they're actively Coming to you, grabbing stuff, trying stuff. It's all inbound, all inbound.

Almost all the leads are free. They come from the brand. Yeah, they're free.

But you know, I say free because really you're going to invest a lot more in your product in these circumstances. So already the economics start to really help there. But they're being acquired by the end user. So they're kind of like product savvy. They know what they want and so they need substantially less help. Or put another way, they are very much, they're very much pushing themselves into the company as opposed to being needed to be pulled in by a sales team. So when the tables turn there, you get folks who are coming to a company or a product like Intercom or Stripe or Slack, where people know the product is interesting and hot or maybe better or different than the others. They're already ready to try. They go to the sales team and say, hey, I want to try it. Hey, I want to buy this. In the old world, the salesperson would say, hey, so we know you're an Internet business. You probably have this, this and this problem. Let me tell you about our solution. Very fucking different. So half the battle is already done, if not 80% of the battle. And then at some point where you do have humans involved, these humans are going to be working faster with a lighter touch. You've got very short sales cycles.

What's the sales cycle?

30 days. The average 30 days around a month. And it's like I said, far more lightweight. It's substantially less games of golf and a lot more chatting on the.

And what percent. And then just two questions and then let me bring Thiago out so we get more questions for the group. But what percent of the revenue today goes through Touch, goes through human beings?

It's now 50, 50 and that's been expanding rapidly. I think, you know, we're figuring out we've cracked the kind of uni economics there such that we can afford to send a lot of people to sales. And my vision for sales is that we have, we're there, there available to talk to everyone. You see it as very much a value add function. Part of what you buy into with Intercom, if you're working with our salespeople, is, is smart, high EQ humans who can understand and listen to your problem. You can frame the product in a way that is going to get you most value, who can point you in the right direction. You know, they're there to serve you, not to shove shit down your throat. You know what I mean, so it's very, very, very difficult.

Leads come in. A lot of those deals are like 4k, 5k ACV, effectively. A little less, a little 3k.

Right.

Which is at the edge. But it's a demo. Not even demo discussion. A demo. And then a close. And they're going to close 10, 10, 12, 15 deals a month, something like that.

Completely. And a lot of them. A lot more.

Yes.

It's super, super high volume. Yeah.

And so last question on this. Just so now you're doing tens of millions in revenue. Right. We don't need to get to specifics, but 10. So you're thinking out at 100. At 100, how much of this revenue goes to human beings?

Right.

Is that 50 become 70, 30, 80, 20.

I think it gets even higher than that.

Even higher, yeah. So you're gonna have hundreds of sales reps in 24 months.

And there'll be like a along the full gamut of reps and individuals. It'll be folks, they're available at the very low end to just answer simple questions, point you in the right direction. Chat online, they're chatting with multiple people at the same time. We will never force anyone to talk to sales, give or take. But we will always be there and available. We make ourselves very available. You can always hit the little chat finger and just start a conversation.

Part of the DNA there.

Very available.

All right, Owen, this is amazing. Thank you very much. Just slide down and we'll have one more conversation, then we'll open up. All right. Thiago, are you here? All right, our final preorn. Welcome, Mr. Forbes, fortune 30 under 30. Thiago paiva, thank you for coming.

Yeah, exactly.

Thiago found a talk desk. And I want to do a little bit different conversation here because Thiago graduated. So last year you were here at our Hack Together event, which was pretty fun. And you were on our 20 percenter group, right. Which was companies going from 1 to 10 growing 20% ish. Month over month. Right. I mean, we gave a little latitude, but hyper growth. Right. And now you're in. You're like, Owen, you're into the tens of millions in revenue and you're squinting and seeing 100 million. Right. So what's changed in the last year? Right. So last year, how many employees did you have 12 months ago?

12 months ago we had 15. 20 employees.

15 employees, right. And you're doing. I don't. I'm going to make it up 3 or 4, 5. 5 million or something. How many employees do you have today?

Almost 200.

200. Okay. And you started in Portugal, right? And what's the US Portugal ratio now?

Almost 50. 50, 50, 50.

What's it in at Intercom own? How many you got in Dublin?

50. 50.

50, 50.

Yeah.

I see a pattern for some people. All right, so what are the biggest learnings? Becoming an aprinacorn. Right. What's changed the most in the last year? What were the biggest challenges?

I think last year the biggest change we had in the company was we went from selling mostly to SMBs to now sell more in market enterprise. And once you do this, you have to change a lot of things in the company. Not only the product, but also the leadership. And you actually have to hire people that have different skills that can actually sell and go into these bigger accounts. So to do that, we had to hire new people, we had to change teams, we had to change how we go to market. We had to change pretty much everything we do in the company.

Everything.

Pretty much everything.

It's a fast change. Right, so let's go back. Let's go back through the history of the company. So you come out of the Twilio hackathon. You get. I can help a little bit on this one because I know it. You get. You get a little. You get. You're in 500 Startups. You get a couple nickels from 500 Startups, some good money. I mean, thank you, Dave and team. And then you get like a half million from an angel off angel list.

Right.

Did you ever meet him in person?

Once.

Once. All right. Yeah. Bless angel list, Right. So some billionaire great guy who I talked to in London found Thiago off angellist and just wires you half a.

Million dollars after one Skype call.

After one Skype call. One Skype call. This is a good story, right? Yeah, I like that one. Right, yeah.

I'm not sure if we should be applauding or concerned. Right, Concerned.

Right. So you take that half million, right, and you treat it like the last drink of the night and you get the company up to about a million something in revenue on that cash flow positive. Right. It's the hard way. You're the VP of Sales, the CEO. VP of customer success. Every single customer knows Tiago personally and he's visited them in person. Right. And then you raised 3 million. Right. And then you go on and then you raise 22 million from DFJ and Salesforce. Right. So that's the funding history. And you kind of did it in a middle path, which is you took a modest amount of Dilution. Right. And I do think, I'm sure that Markus, every share does count. Right. And so it does add up. So what are your learnings on the middle path? Right. You've taken a modest amount of dilution. You could have raised 100 million. Right. 50, 80 million. You could have raised zero. Because you're cash flow positive, you go, you're kind of the middle path. And when does that work and when does that not work?

So the way we saw it was we could have raised much more money than we did. But we were very lucky that our customers, most of them pay up front and they have one year contract. So we have a lot of cash coming in every single month. So that allows us to be not cash flow positive anymore, but very healthy.

Yes.

So what we decided was let's take less money now and it will last us for 18 months, 24 months if things go go south.

Yes.

And, and then after a year, a year and a half, then we'll go back and raise the next round. And that allows us to every single round have less dilution and be able to, to raise more and more money. The disadvantage is if things go really bad, then you are in trouble because you don't have enough money. So there's all this risk in doing these middle, middle paths. It worked out for us so far, but it's not necessarily recommended for everyone.

So talk about. I think probably when you and I first met, I'm guessing talk test was something like 15 or 20 bucks a month. Right. For a cool product that had a limited functionality set. Right now you're doing six figure deals with $100 a seat per month. Right. That's a lot of change in like 18 months. And you go from no sales. How big's the sales team altogether?

45 people now.

45. And what do you want it by the end of the year?

125.

125. Okay. So Ben's going up market now at 100. Owen came into the decision, he wanted to have a sales team. Right. And you embraced it once you'd proven it yourself as a founder. Right. So what's your. But everything has to change. Right. And so now you've gone through two different segments of customers. So how do you focus?

Right.

You started off with pretty small and techy. Right. And then you have classic SMEs and now you're enterprise. How do you know how to focus on which of these segments?

I guess like our customers just took us up market.

So when we started, customers dragged you.

When we started I was in Portugal and I was the only salesperson so I had no choice other than sell to small companies with two, three people. I mean honestly I couldn't sell to any big companies at that point. Even though we got a few big customers very early on. And then once these customers they grew, they started growing and some of them went from four people to 200 to 300 and they kept using Talkdesk and we had to evolve as a company to support them. And then we just very early on we just realized where we are going to actually build the big companies on these bigger customers. So we just focus on, we never focus on the bigger ones, we focus on the middle tier. So now we have a lot of SMBs. We still have a team that handles SMB, we have a support team but our focus is on the mid market. We also have enterprise customers but our focus continues on the mid market. Once we know that mid markets we actually can take let's say everything and we can actually become the number one on the mid markets then we start focus on the enterprise. So it's like step by step and the customers will drive you to more and more markets.

Yeah. So one interesting thing about talk to us, let's go back a little more than a year when you're in the 20 percenters. But my 20,000 foot story of DigitalOcean is it's like me as a customer, cool customer, developer uses it, goes up market people love it. Right. Intercom combination of product focused folks and looking for a next generation product. Talkdesk. I mean God, another call center software. I mean good God, like we've been doing call center software for so long. Right. And how the heck, what was the magic of TalkDesk getting you to a million. Right. Because you actually don't have 100 competitors. But if you think about the space broadly it seems big, a lot of folks kind of boring. Like what's that, what's the secret sauce that got that created that, that, that revenue.

So what we realized very early on is that yes, there's a lot of competitors. I think we have 200 or 300 competitors.

Yeah.

But if you think about it like when you are thinking about the mid market and the SMB there's really nothing there. It's everything is very difficult to use, very difficult to install and very expensive. So when we came to a market in the SMB at that point that you could actually set up a call center in five minutes you'll sign up on the website much like Intercom and.

Salesforce and but it's more than just ease of use. Right. Because everyone here, it's 20 Lou Cern. Cerny was talking about yesterday. In 2007, you can have new relic be as easy to use as the iPhone. We all kind of get that now. Right? So I agree with you. But it's more than that. Was the magic, the integrations like Slack or what was the magic that made these customers trust some guy in Portugal they'd never met before. Right. That had never done this.

The integrations and easy to use were definitely the two integrations that drove everything.

Yep. Yeah. And what was. And what do you. Maybe you don't even know because sometimes we don't know. What was not obvious about it was the fact that you wanted these seamless integrations to work or what was the piece that you either saw or stumbled into? Because we sometimes we stumble into it. That sock desk or rock desk or schnockdesk didn't see. Like what. Because there's a lot of great entrepreneurs out there. Right. What was that connection?

I believe in the beginning, what we realized was when you come into an old market, an old market, like the call center market, and come with something new, people will just love it. And when we launched everything being web based, we were the first call center. Actually. Everything is on the web.

Everything on the web.

You don't need hardware, you don't need phones, you don't need anything. Plus integrating with everything from Intercom, Salesforce, Zendesk. And you get all that information when you are making a phone call and you are receiving a phone call. That was game changer for. For most of these small companies that had access to nothing back then.

I gotcha. So one thing I want. Let me dig in just a little bit more and then let's open up the discussion. We've got Owen from Intercom which has stayed stubbornly SMB and it's killing it. Right. We've got Ben, whose customers took him up market as they just deployed more and more software and used more. Now he's doing it strategically. Right. You did it aggressively. Right. And you drove Your price point up 4 or 5x in the course of 12 months. How do you do that? Right. Leo from Buffer downstairs was yesterday was saying do that when you add functionality right. Randomly adding pricing can work, but bring out new functionality. What did you learn? How do you 5 everyone would love to go and quintuple their pricing tomorrow. That's the easiest way to hit the plan.

Right?

Let's just go. But it's not that simple. What enabled you to quintuple pricing in a year?

I think adding functionality was definitely something we had to do. So the product evolved and then once you start having the functionality that other players in the enterprise space have, then you can start matching their prices. Got it.

So you had competitors that were much more expensive, so you started off cheap and your goal was to not be cheap once you closed feature gaps, right? Correct. Okay, that's one thing.

And the second thing is actually when you have the demand from the customers to do this and that, you can leverage that to increase the price. And then you try with a few customers and if it works with a few, you'll work with a few hundred as well. And that's how we probably going to increase the price sometime soon, in the next couple of months. So it just keeps going. And as you keep adding more value to the customer, they will be willing to pay more. And especially when you are selling something as critical as Talk Desk, price becomes an issue most of the time.

So have you gone from a semi mission critical application to a truly mission critical application? Is that part of it being the heartbeat of a company?

We are completely critical. We cannot have one minute of downtime. Not one minute of downtime, not one minute of downtime. We need to be 100% up. We need to have backup servers, backup telecom servers. We need to have backup for everything. Which is. Which is a big challenge last year as well.

It's a big challenge. But you can charge for it.

We can charge for it, Is that right?

You can charge for it if you have a solution. So good. So we're over on all of it, but I want to. Let's open it up a little bit to the team. Mark, you got any. What do you think about the prenet corns here? Do they look good? Will you do most of them at 700 or 900 pre? What are you thinking? What'd you say, 3.5 per deal when we started?

My capacity for great questions has gone down dramatically. Where the lady keeps filling these appletinis? No, I mean, I would just say hats off.

Huge congratulations.

Just hearing the stories are phenomenal. I just have to blame all of your investors for not calling me harder early on. Although Roger Ehrenberg's always gone on and on about you guys, so I knew about you guys early.

I tried my best to get a meeting with Mark for that first 500k.

He wouldn't even get about you. All right. It happens because how many people read that blog? I'm guessing you get A little bit of inbound is that.

Yeah, it's hard, it's hard to manage like 400,000amonth. But no, I just, I love hearing all the stories. I love seeing you guys go from early stage companies now getting traction. I guess I would just ask after having raised all this capital, what kind of pressure are you now feeling at the board level? What kind of scaling up or leveling up of your teams have you done?

Yeah, yeah, that's a great question. I think for us, while we have a tremendous amount of capital, $123 million that we've raised to date, it only helps to underscore really the market opportunity that we see AWS nearly a $10 billion annual business that's growing nearly twice in size year over year. And so that just speaks to the ability for us to see an even larger, well, a large market for us to really own. And so we feel actually well equipped with the capital that we have on hand. Also, while we do a tremendous amount of R and D and software development, we also run the infrastructure. So there's a very heavy capex component to the business, but we don't use any equity dollars towards that and have structured debt to take care of the servers that we've deployed. And as I said before, the investors that have come on board for DigitalOcean really see the vision for the business. They believe in the developer ecosystem. So we're not necessarily feeling pressure, but instead are all excited about the opportunity and how do we move faster, the same way that we enable developers to build faster with DigitalOcean, how can we grow our company?

What have you done with executive team? Was there a challenge that once you have this capital, the challenge for capital is once you get a large amount of money, they expect faster growth. They want you to keep your foot on the pedal. What has that done for company culture? Team?

Yeah, I think the company culture has remained consistent throughout it. Although this year my primary focus is to continue to build that senior leadership team. So I think obviously your point is very valid. I'd say that the business is going through a transition from that startup early stage environment into now a growth company. We have a really solid revenue base from which we can begin to work on and at the same time there are new avenues and new opportunities that we're just opening up like with sales and then once again the products that are coming out of the pipeline this year will begin to accelerate it as well. But so we're hiring like five senior people to the team this year we've done all of this without a VP of engineering or a CTO at the business. I'm fairly technical myself but certainly looking for some help there. Same with sales and marketing as we look to take it to the next level and even with product, my co founder and brother Moisey who has the strategic vision for the business, we're looking for a really strong operator help mature the team. We have 10 product managers, I think a really healthy ratio between PMs and engineers. But we don't necessarily have been there and done it. How do we continue to scale that ENG team alongside?

I would just point point out one thing and this is the area that I struggled with the most because I'm a startup guy, I'm not a scale scale up guy. And you go from a world in which you've got tacit knowledge, you know how to sell, you know how to objection handle, you know what the competition is, you know how to price. Once you start adding 10, 15, 20 reps, once you start adding product management, once you lose complete grip on the roadmap because it's being driven by so many people, it's important to bring in really process minded people and often the people who start companies are not those people. And so a that's a big challenge. I ran into it and I sucked at it and I still suck at process. And two is it really starts to change the culture. And I would just say as a small bit of advice is pay attention to the culture change and invest in culture. Because you get the old guard who feels like things are different than they used to be around here and there's a lot of angst that goes with that. And then you can also run the opposite problem which is the new guard comes in and they want to do everything like big co and you start getting big co behavior, everything from travel policy expenses over paying salaries and all that stuff. So I just.

But Owen, you've had that experience recently, tried to bring in the next level and learned about that transition.

Yeah, I think so. Kind of the first thing is like self awareness is kind of like a superpower for founders and CEOs in that growth stage. If you're not aware about the things you don't know, you're liable to either continue to try and do those things you're not good at and fuck them up and then additionally probably not hire the people that are going to be better than that and you know, help support you. So self awareness is like the first step. And you know anyone who thinks that they're self aware, they're probably definitely not self aware. We probably could be all a little more self aware. But just learning more about your strengths and weaknesses is like step zero in this whole growth phase. Then when it comes to actually bringing in new people, I think a lot of people try and like, you know, find a silver bullet. They try and skip a step. They try and like take, you know, multiple steps in one go. We've always had a philosophy of just taking the next logical step. Building the teams up slowly, partnering with leaders early, growing those leaders. If you try and bring in that all singing, all dancing, svp, sales, cmo, cfo, early days, you're going to get exactly the experience you're describing, which is that you've got a new guard and there's a step change. I don't think that there needs to be a step change. I think when you do this well, you like, you know, take baby steps towards improvements rather than try and, you know, fix things overnight.

Can I ask both of you guys to talk about distributed teams? Because that's something that's really tough. We have a number of companies that have US and Europe where a lot of R and D and product done in Europe, a lot of sales and marketing done in the us. Like how are you guys dealing with that issue?

So it's a challenge as the team grows. It's a challenge, a communication challenge mostly. And so right now we have 80 something people in Portugal and they are mostly engineers and we have the product team, the sales team, the marketing team, everyone in the us. So what we are trying to do and we haven't completely solved that issue, is we try to have the management team next to me. That's something definitely needs to happen. The director of engineering, the VP of engineering. And then we are hiring a strong management team in Portugal and for that we bring people from the us, we bring people from Berlin, we bring people from the UK and then we try to fly them one side to the other as much as we can. I try to go there every six weeks. The directors and managers come here every couple of months. We haven't figured out the solution, but it's definitely improved. With all these things we have put in place last year, the one that.

I find the hardest is the product here as you scale and get more enterprise. But the engineering is 11 time zones away. Right. Do you have any of that, Owen?

We have product and engineering together. We've had two offices from the start, which is a little weird. So we grew up with two offices. Big part of the secret sauce there is that we had strong leaders from the beginning and in fact I was like a remote CEO for a while and three of my co founders were in Dublin. So we kind of like grew the offices together, which is the first component. We didn't have to open a new office, which is like a big experiment and a risk. You know, what we've tried to do is never split either individual teams. So don't put engineering in two places and keep the teams that need to work most closely and intensely together and in an ad hoc fashion in the same physical location. Kind of a no brainer. I think that the big thing here is if you're going to go into this thing, this idea of remote offices or remote people which basically everyone is going to like, there's very, I actually don't know of a tech company, especially a SaaS company which is simply based here. I just don't know them. Does one. But when you want to get to like 100, 200 people, I think it get, I think it gets hard, let's see, it's not impossible, but it gets really, really hard. But I think what you need to do, if you, if you, if you're, if you're going aggressively into it, go into it with eyes wide open. No, it's going to be so hard. There's going to be real problems. And I think really lean into it and try and find what are the things that, what are the magical benefits this is going to bring and how do you embrace the fact that yes, we are one off, one company over two offices, but they are different offices, different cultures, different places, different functions and can we celebrate what's different about the offices? You know, so really lean into those problems and embrace them early on. It's just going to, it's going to be a pain in the ass. But I think anyone who does it, they agree it's a net benefit over time because of the talent that they can get.

Yeah, can I jump in with a question please? So there's been a lot of discussion. I know that you guys are pre Nicorns, so you don't have to technically think about this yet, but a lot of discussion about if these unicorn companies should be going public. And I'm just curious, what are you guys doing as CEOs of these companies now to prepare for that possible eventuality? I mean, maybe it's still way out in the future, but are there things you're doing now yourselves to kind of keep that option open and be prepared to lead at that level if that's where you're headed.

Yeah, I think that's the job of a CEO is to keep as many options open on the table. And so we're constantly maturing and growing the business. We just switched to a big four auditor specifically so that if we do want to go down the IPO route, it's available to us. I think our revenue allows us to really make that a consideration. On the other hand, I think when you build a really strong business model, there's actually less pressure to, to go into the public market if you can generate actual profits from the business that creates the healthiest type of company. And you know, I think being based in New York City, we kind of deal with that reality a little bit more so and have never been ones to create these kind of fantasy revenue models or let's drive up our user count and then figure out how to monetize later on. I mean we had a very pragmatic approach to pricing the product. We actually didn't even look at the competition and just focused internally what would it take for us to deliver this service, Created a healthy margin and now we know that, hey, every single unit that we sell is fundamentally profitable to the company. And I'd like to sell as many units as possible. The surprising thing is that when you introduce rapid growth, you can actually dip into working capital and not perhaps be able to meet month to month obligations. Especially if you're billing in A, arrears rather than upfront. And B, you say hey, everyone is billing the first of the month because it's, you know, I think reflective of our value around simplicity. And so you have a real cash shortage by the end of the month. And, but, and that's why you bring on board world class investors because you need some help.

I think for my part, I have been trying my best to learn from the recently public SaaS companies. You know, there's a lot of lessons to be learned some of them especially around the expectations that they set with their staff as they're bringing them on. It's very, very tempting to paint these pictures about the 50, 100 billion potential opportunities you pick your, you know, favorite company, not most of them are not going to be SaaS companies and paint this bigger, this bigger idea of what the outcome could look like. And a lot of recent publicly SaaS companies, I think they're now suffering the consequences of their employees having certain expectations about what the stock could be worth and pitching people very aggressively on stock. It is part of the way that this world works. I'm a big believer in everyone In a company sharing the wealth that is created. But that's something that's on my mind again. A lot of the recently public SaaS companies, they have some disappointed is probably the mildest way to put it. Employees when they're thinking about, you know, this isn't really what I signed up for.

So let me ask a variant. Let me synthesize Mark and Danielle's question. I think the average pre money, the last round of the panel, without disclosing anything, let's call it 500 pre. Okay, so I think if you're raising it 500 pre, you're kind of saying we're going to build a $5 billion company. Right. You don't have to. I mean, you do the best you can and these are great cos. But. And then we look and, you know, HubSpot's worth 1.3 and box is worth 1 and we can go down the list. So how do you know you're building a 5 or $10 billion company when there are two SaaS companies worth more than 10? There's Salesforce, which is what, worth 40 billion, which would all be a great outcome. But it's not Facebook. It's not 500 billion. Workday's worth teens. So how do you guys know that you've already built a 3, 5, $10 billion company?

I think while the ground is shifting beneath our feet, no one knows what we're building.

Yeah, but there is an implicit promise, right? And there is whatever was said in the all smiles meeting that you got to at least go to. You have to prove you're going to try to build a $5 billion company.

The only thing I would say to my earlier point is that software is bigger than ever before.

Yes.

300 is the new 100.

I like that.

You can get to three, $400 million there or. Yeah, you can have a very valuable business in any market.

So, Thiago, you got to be one of the most driven CEOs I know. How do you know you've already built a $5 billion company? How do you know that in your heart and soul already? Right. Mark and I are all worried about, oh, you raised at 300 pre. Oh, my God. I got to deliver. We were founders a generation ago. This stuff stresses us out, man. But no one up here is worried, so. But you know, you know, you, as crazy as it sounds, you know you've built a 3, 5, 10 billion dollars. How do you know this? Right.

I think the first thing is we focus very little on valuation. For us, that's okay, we only are when we are fundraising. That's an important thing. After that, that moves on. So when you think you are building a business for 10, 20 years and you know you need to execute to actually accomplish that goal, it doesn't really matter how the markets are now or what the VCs think now or what they will think in six months. If you keep building the business, if you bring to $1 billion in revenue at some point you'll have a 10, 20, 30 billion dollar business. So I think it's about focus. It's not something about. For me it's obvious. I see it, I see that talkdesk will be a billion dollar revenue company sometime in the future. I just need to execute and prove everyone that I'm right. I think that's, that comes down to that. And focus on that. You build a great team, you build the right leadership in the company, which is I think the most important thing. It's the right leadership at this point and big markets, great product, right leadership and you will become 10, 20, 30 billion dollar company magically.

Could I jump in with one thing, Jason, which is a little bit self serving, but not just for self serving reasons. On my blog, both sides of the.

Table, if you go there.

I linked to a really good article two blog posts ago written on TechCrunch which showed one really important thing is in the last few years the enterprise value on a go forward revenue multiple got completely out of whack with any both public valuations and historical norms. I think two years ago it went up to like 12 and a half times forward sales. And the gentleman who wrote about this on TechCrunch that I linked to on the blog basically said on Black Friday you had a reversion to the mean. A reversion to the mean meaning like if a data point ends up higher than the kind of historical norm that eventually it comes down to the mean. And what he was saying is that forward revenue, if you look through history on average is about four to four and a half times next year sales.

Yeah.

So I have a very easy question for you. How do you get to a $4 billion market cap? Do a billion dollars of fucking revenue, right? Like that's the answer. And so you have to ask yourself, are we building companies capable of doing a billion dollar revenue? And if you have a large enough market and you can grow into that market, you can build that size company for sure.

Yeah, yeah, you can grow into it. All right, cool. I think we're just about out of time. Any last burning question. You got Danielle or are we good for today?

You nailed it.

All right. I think this was epic. Like, let's thank. This is the A list we got here, right?

Thanks, guys.