Zendesk Announces Major Product Launch and a $60M Financing

In the face of the largest product launch in the company’s history and a sizable financing, I thought I’d share some thoughts on why we love this portfolio company and why we believe Zendesk to be one of the most important businesses to be built in this generation of SaaS companies.

Product First
SaaS founding teams can broadly be put into two categories: (i) product driven teams that find a great product market fit first, or (ii) sales and marketing driven teams that execute their sales strategy with vigor, while they get the product in order along the way (Salesforce.com). While big businesses have been built using both of these strategies, companies that are product first are generally more capital efficient, have lower customer churn and ultimately become superior businesses.  Zendesk is certainly one of these product first companies. From the early days of a small team in Copenhagen, Denmark, the Zendesk team avoided building sales and marketing capabilities and instead put all of their energy into building the best product that would grow organically.  The strategy worked and the team built up to seven figures of monthly recurring revenue with nearly no sales and marketing employees.  It was from these roots that the company then began to build out the world-class sales and marketing team that is now coming together.

Social Meets Enterprise
In today’s socially connected world, businesses cannot afford to relegate customer service to a cost center, where you are focused on keeping call handling times and cost per contact as low as possible. The irate, miffed, confused, sometimes irrational, myriad of customers now take to Twitter, Facebook, web forums and more to express their dissatisfaction. They expect to be heard, which can be catastrophic for companies who don’t take their questions, concerns, and even their emotions seriously.  The Zendesk team recognized this sea change early and became one of the first companies that built a truly social enterprise software company.  The subtle but critical innovations included enabling businesses to convert tweets into customer service tickets, enabling businesses to set up customer service pages on Facebook and being first to market with mobile applications that allow you to manage customer service from anywhere at any time.  We are still in the early days of social-meets-enterprise software, and I’m sure we will continue to view Zendesk as one of the thought leaders.

An Iconic Brand
It is rare that an enterprise software company has a particularly recognizable brand and even more rare that an enterprise software company is loved by its customers.  Zendesk has done just that and it’s no accident. From the very founding of Zendesk, it has been an incredibly well articulated and managed brand.  The name of the company, the likeable mascot, and the consistent tone and messaging (“love your customer”), paired with an elegant product and thought leadership has allowed this young company to build a uniquely adored and respected brand.  Having backed dozens of successful enterprise software companies in our history at Matrix Partners, never have we had a portfolio company who, at this age, has such a recognized brand and whose customers publicly declare their love of the company when you ask them.

Bright Future
Today, Zendesk unveiled the next generation of its customer service software, the most significant product enhancement the company has ever made.  The new Zendesk is a poster child for the consumerization of enterprise software.  The product interfaces are simple and elegant, user productivity is substantially improved and the product is an even greater pleasure to use than it was yesterday.  The Company additionally announced that itraised $60M in new capital and welcomed a host of world-class investors to the team.

The future is bright for Zendesk.  Beautiful products, a great brand and customers that love you are a formidable triple threat.  Congratulations to the Zendesk team on their continued success.  We are glad to keep doing what we can to help here at Matrix Partners.

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