11 ms·

Zendesk S-1 filing

82 points by mikeknoop 13y ago

Oculus 13y ago
I was expecting an acquisition of Zendesk by Salesforce more so then an IPO.
- jw2013 13y ago
  They want an IPO. Following is from techcrunch Sep. 2012: Zendesk founder and CEO Mikkel Svane sat down with us to talk about the funding, explaining that the new round will be primarily used for international expansion and product innovation. The company is also preparing for an IPO in the future, but doesn’t yet have a timeline for the offering. “An IPO is the goal,” says Svane. And monthly recurring revenue has grown five-fold since 2010 for the company. While Zendesk’s bread and butter has been catering to small to medium sized businesses, of late, the company has been pulled into a number of large enterprise deals, Svane says.
- jaytaylor 13y ago
  SalesForce already acquired Desk.com and Service Cloud which are both direct competitors of ZenDesk.
  - pbreit 13y ago
    Yep, Salesforce bought its way into the mark with the Desk.com (FKA Assistly) acquisition at the ridiculously low price of around $50m. It looks like Zendesk is going to start trading north of $1b. Talk about inequality!
bevenky 13y ago
- Acquired Zopim in March 2014 Revenue - 2011: 15.6M, 2012: 38.2M, 2013: 72M Losses - 2012: 24.4M, 2013: 22.6M Seems like going IPO with losses is the new trend
- wslh 13y ago
  Seems like going IPO with losses is the new trend My concern is how a company can compete in this scenario without VCs? I am not talking about the technical side of competition but about deploying an army of salesmen. At some point can this be seen as a new kind of dumping?
  - opendais 13y ago
    Ya, intentionally running in the negative for years on end should be considered dumping. Maybe a rule if you IPO you can't be in the negative for the previous two years? That might help.
- jasondc 13y ago
  An IPO is a fundraising event, companies usually go public to raise money (very few are profitable at IPO). If they are already profitable, what is the main benefit of going public, increased scrutiny, lawsuits, and quarterly expectations?
  - gamblor956 13y ago
    Liquidity for shareholders. A private company's shares are in most instances essentially worthless or are substantially discounted because the "value" of the shares can't meaningfully be converted into cash (because there is either no market or a very limited market for those shares). A public company's shares are highly liquidable.
- pbreit 13y ago
  Please find me a time when it was common to IPO with profits. Here's a hint: you won't find such a thing. IPOs are fundraising events. High growth companies are almost by definition losing money. The idea is to raise money in order to fund expansion. Companies don't even attempt to be profitable during this phase.
  - wslh 13y ago
    Microsoft? Intel? Google? I think there are a lot of examples.
lucasjans 13y ago
Those large enterprise customers are expensive to acquire. Zendesk spent 37M on sales and marketing, with 9M going towards commissions. As they push into the enterprise more, the cost of sales went up. They increased their sales and marketing expenditures by 65%. Contrast this with Atlassian, which has offices here in Vietnam and the Philippines - which keeps engineering costs down - and who doesn't have an expensive sales force. Ripe for disruption: changing the way companies sell to enterprises - or changing the way enterprises buy products. Possible?
- sdesol 13y ago
  I've been studying Atlassian for some time and I really admire their approach to enterprise and this is why I think they have been successful so far: The majority of their tools can be installed on site. SAAS for enterprise is a lot harder to sell. Most of their tools are built with Java so things are self-contained which makes it easier to install. Also their installations will most likely not need root access. Anybody who knows enterprise knows root access is usually clamped down in enterprise. Their pricing model encourages a bottom up sales approach. Traditional sales channel for enterprise is top down where you go after execs, senior management, etc. and work your way down. IBM, Microsoft, Oracle, etc. can afford the top down approach. For most startups, this would be impossible. By making it very affordable for disgruntled employees/departments to use their product, they are able to create internal advocates for their product if it does make their life easier. tldr; Don't make SAAS. Try to make your tool installable with non-root/admin access. Make it very affordable for individuals and small teams because they will become internal advocates if your product is good.
  - seeingfurther 13y ago
    Agreed. But is there a magic number that small internal teams can afford to put on the company expense monthly and have it pass.
  - malkia 13y ago
    I had to install JIRA trial on my Windows, and decided to give it a go on a debian-vm through virtualbox. It was smooth - downloaded ~200mb bin file, ran it (not root), and installed it. Then all other updates (as you've said) came as .jar packages and installed them while it was running. As a C/C++ programmer I felt impressed :) Oh and there is lovely API to talk to the system (unlike say... other systems that I won't name here for which you have to spent 10K only for the API).
beachstartup 13y ago
founder mikkel svane owns 7%, founder alexander aghassipour another 7%, no numbers on 3rd cofounder peter fenton (individual VC partner) owns 20% devdutt yellurkar (individual VC partner) owns 25% dana stalder (individual VC partner) owns 9% and the actual VC firms basically own the rest of it.
- nrao123 13y ago
  If you are suggesting peter Fenton & not benchmark owns the shares - that's probably not correct. Footnotes in page 120 imply that are representing the VC firms holdings
  - beachstartup 13y ago
    my main point was that venture capitalists own the vast majority of the company, and the founders own a comparatively small fraction. i think we should be moving away from this model. zendesk isn't even profitable.
    - spullara 13y ago
      The fact that Zendesk isn't profitable is related to the ownership. Growing as fast as you can often involves spending more money than you make. VCs can trade you that money for equity. The old saying goes that 100% of a small company isn't worth as much as 10% of a huge company.
    - 001sky 13y ago
      The seems the money spent, more than anything But: Enterprise is hard, bootsrap even more-so.
    - pbreit 13y ago
      I don't know why I continue to be amazed at how pathetic the analysis of things like IPOs and venture investing is here on HN. OK, I'll bite...what sort of model would you propose?
      - 13y ago
flavmartins 13y ago
If I read this right, they lose money...every year. Is this discouraging to anyone looking to start a SaaS-based startup? You imagine that your new service will make money, but in reality sales and marketing will cause you to have to chase funding constantly just to stay alive. Thoughts?
- sunir 13y ago
  We just did the annual summit at http://www.thesmallbusinessweb.com http://www.thesmallbusinessweb.com and I looked at the industry landscape with Bjoern Hermann of Startup Compass. http://blog.startupcompass.co/2014-saas-market-outlook http://blog.startupcompass.co/2014-saas-market-outlook Basically my assessment is that we are blowing out brains out doing enterprise sales for low ACV sales. It is hardly the promise of subscription software as a money machine. The problem is that there is not very well organized distribution channels so we all have to spend huge sums on acquisition. Compare Zendesk's total account book size (40,000) to Intuit Quickbooks (5 million they have claimed). That's what I would like to help fix with the SBWeb, our trade association. Tough problem though. Lots of things have to change first.
senthil_rajasek 13y ago
Anyone know how these guys compare to Freshdesk ?

Zendesk S-1 filing

82 points by mikeknoop 13y ago

Oculus 13y ago

I was expecting an acquisition of Zendesk by Salesforce more so then an IPO.

jw2013 13y ago
They want an IPO. Following is from techcrunch Sep. 2012: Zendesk founder and CEO Mikkel Svane sat down with us to talk about the funding, explaining that the new round will be primarily used for international expansion and product innovation. The company is also preparing for an IPO in the future, but doesn’t yet have a timeline for the offering. “An IPO is the goal,” says Svane. And monthly recurring revenue has grown five-fold since 2010 for the company. While Zendesk’s bread and butter has been catering to small to medium sized businesses, of late, the company has been pulled into a number of large enterprise deals, Svane says.
jaytaylor 13y ago
SalesForce already acquired Desk.com and Service Cloud which are both direct competitors of ZenDesk.
- pbreit 13y ago
  Yep, Salesforce bought its way into the mark with the Desk.com (FKA Assistly) acquisition at the ridiculously low price of around $50m. It looks like Zendesk is going to start trading north of $1b. Talk about inequality!

bevenky 13y ago

- Acquired Zopim in March 2014 Revenue - 2011: 15.6M, 2012: 38.2M, 2013: 72M Losses - 2012: 24.4M, 2013: 22.6M Seems like going IPO with losses is the new trend

wslh 13y ago
Seems like going IPO with losses is the new trend My concern is how a company can compete in this scenario without VCs? I am not talking about the technical side of competition but about deploying an army of salesmen. At some point can this be seen as a new kind of dumping?
- opendais 13y ago
  Ya, intentionally running in the negative for years on end should be considered dumping. Maybe a rule if you IPO you can't be in the negative for the previous two years? That might help.
jasondc 13y ago
An IPO is a fundraising event, companies usually go public to raise money (very few are profitable at IPO). If they are already profitable, what is the main benefit of going public, increased scrutiny, lawsuits, and quarterly expectations?
- gamblor956 13y ago
  Liquidity for shareholders. A private company's shares are in most instances essentially worthless or are substantially discounted because the "value" of the shares can't meaningfully be converted into cash (because there is either no market or a very limited market for those shares). A public company's shares are highly liquidable.
pbreit 13y ago
Please find me a time when it was common to IPO with profits. Here's a hint: you won't find such a thing. IPOs are fundraising events. High growth companies are almost by definition losing money. The idea is to raise money in order to fund expansion. Companies don't even attempt to be profitable during this phase.
- wslh 13y ago
  Microsoft? Intel? Google? I think there are a lot of examples.

lucasjans 13y ago

Those large enterprise customers are expensive to acquire. Zendesk spent 37M on sales and marketing, with 9M going towards commissions. As they push into the enterprise more, the cost of sales went up. They increased their sales and marketing expenditures by 65%. Contrast this with Atlassian, which has offices here in Vietnam and the Philippines - which keeps engineering costs down - and who doesn't have an expensive sales force. Ripe for disruption: changing the way companies sell to enterprises - or changing the way enterprises buy products. Possible?

sdesol 13y ago
I've been studying Atlassian for some time and I really admire their approach to enterprise and this is why I think they have been successful so far: The majority of their tools can be installed on site. SAAS for enterprise is a lot harder to sell. Most of their tools are built with Java so things are self-contained which makes it easier to install. Also their installations will most likely not need root access. Anybody who knows enterprise knows root access is usually clamped down in enterprise. Their pricing model encourages a bottom up sales approach. Traditional sales channel for enterprise is top down where you go after execs, senior management, etc. and work your way down. IBM, Microsoft, Oracle, etc. can afford the top down approach. For most startups, this would be impossible. By making it very affordable for disgruntled employees/departments to use their product, they are able to create internal advocates for their product if it does make their life easier. tldr; Don't make SAAS. Try to make your tool installable with non-root/admin access. Make it very affordable for individuals and small teams because they will become internal advocates if your product is good.
- seeingfurther 13y ago
  Agreed. But is there a magic number that small internal teams can afford to put on the company expense monthly and have it pass.
- malkia 13y ago
  I had to install JIRA trial on my Windows, and decided to give it a go on a debian-vm through virtualbox. It was smooth - downloaded ~200mb bin file, ran it (not root), and installed it. Then all other updates (as you've said) came as .jar packages and installed them while it was running. As a C/C++ programmer I felt impressed :) Oh and there is lovely API to talk to the system (unlike say... other systems that I won't name here for which you have to spent 10K only for the API).

beachstartup 13y ago

founder mikkel svane owns 7%, founder alexander aghassipour another 7%, no numbers on 3rd cofounder peter fenton (individual VC partner) owns 20% devdutt yellurkar (individual VC partner) owns 25% dana stalder (individual VC partner) owns 9% and the actual VC firms basically own the rest of it.

nrao123 13y ago
If you are suggesting peter Fenton & not benchmark owns the shares - that's probably not correct. Footnotes in page 120 imply that are representing the VC firms holdings
- beachstartup 13y ago
  my main point was that venture capitalists own the vast majority of the company, and the founders own a comparatively small fraction. i think we should be moving away from this model. zendesk isn't even profitable.
  - spullara 13y ago
    The fact that Zendesk isn't profitable is related to the ownership. Growing as fast as you can often involves spending more money than you make. VCs can trade you that money for equity. The old saying goes that 100% of a small company isn't worth as much as 10% of a huge company.
  - 001sky 13y ago
    The seems the money spent, more than anything But: Enterprise is hard, bootsrap even more-so.
  - pbreit 13y ago
    I don't know why I continue to be amazed at how pathetic the analysis of things like IPOs and venture investing is here on HN. OK, I'll bite...what sort of model would you propose?
    - 13y ago

flavmartins 13y ago

If I read this right, they lose money...every year. Is this discouraging to anyone looking to start a SaaS-based startup? You imagine that your new service will make money, but in reality sales and marketing will cause you to have to chase funding constantly just to stay alive. Thoughts?

sunir 13y ago
We just did the annual summit at http://www.thesmallbusinessweb.com http://www.thesmallbusinessweb.com and I looked at the industry landscape with Bjoern Hermann of Startup Compass. http://blog.startupcompass.co/2014-saas-market-outlook http://blog.startupcompass.co/2014-saas-market-outlook Basically my assessment is that we are blowing out brains out doing enterprise sales for low ACV sales. It is hardly the promise of subscription software as a money machine. The problem is that there is not very well organized distribution channels so we all have to spend huge sums on acquisition. Compare Zendesk's total account book size (40,000) to Intuit Quickbooks (5 million they have claimed). That's what I would like to help fix with the SBWeb, our trade association. Tough problem though. Lots of things have to change first.

senthil_rajasek 13y ago

Anyone know how these guys compare to Freshdesk ?