“The only enterprise player right now in the last probably 10-12 years is SaaS. And what’s great about SaaS is that you have to build a product that will earn your customer’s loyalty every month or every year”
Talkdesk is a call center SaaS provider that allows customers to create call centers in their browser and facilitates richer interactions by providing call center agents with all of the relevant information they need in order to deal with each customer more effectively. And it’s also a very, very rapidly growing SaaS company.
Gadi himself is a serial entrepreneur having sold his first company, TopManage to SAP back in 2002, which later became SAP’s core SMB offering, Business One. He was more recently co-founder and CEO of Magneto, the calendar upgrader, amongst a number of other leadership roles and SaaS companies.
Gadi spoke with Michael Cullen on the SaaS Revolution Show podcast, which you can listen to on SoundCloud or subscribe to on iTunes. This article is the transcript of that interview, lightly edited as a Q&A.
What was it that made you want to join Talkdesk and how has it been so far leading a company that is growing so rapidly?
There are three reasons. I think the first is that I really like Tiago, the founder and the CEO. When you’re a COO, you really need to have a great relationship with the CEO. That’s two very complementary roles and you want to make sure that you complement each other and everyone can bring their own advantages to the table. And this is the type of chemistry I had with Tiago. So probably this is my Number 1 reason.
The second is that I was really attracted to the product/market fit as demonstrated by growth. I’ve been building products for 20 years now and one thing which is really hard to manufacture is product/market fit. It either works or not. And joining a company trying to create product/market fit is almost a mission impossible. Joining a company with a proven product/market fit and trying to help it grow faster is obviously a much more achievable goal and it’s also more fun.
So I think these were the two main reasons for me. I think that if you ask me today, I would have said that I also really like the team we built here. I joined Talkdesk, we were about 30 people between Portugal and Mountain View back then. Now, we’re about 80 – 85 in the course of 6, 7 months.
So we grew, we almost tripled the team in 6 months. And we have one of the best startup teams in the valley.
How does Talkdesk achieve that unique product/market fit? Where is its competitive advantage? And what is it about the product that meets a need for its market and solves a problem for its customers?
Actually I could talk for hours about that, but let me try to summarize it. There are several reasons that contribute to Talkdesk’s growth and the product/market fit. One of them is that we almost went back full circle to phone being the preferred way to support customers and interact with your customers both if it’s inbound or outbound.
And if you think of the world 20 years ago, the only way to interact with any brand was either walk into a store or call them. There was no internet, there was no mobile. It sounds hard to believe but this is how our world operated 20 years ago.
I actually started a call center or support center in 1995 in the company called QuickSoft. And it was exclusively phone-based because most customers they don’t have access to email, and tools like Zendesk were not even in planning back then.
I think that if you look at what’s happening now and 10 years later, maybe 2005, everybody thought that call centers are dead. Now with internet and the beginning of mobile phones and BlackBerrys and things like this, nobody will ever want to go through the nightmare of calling customer service. And if you remember 10 years ago actually finding a phone number of a company was a challenge. There were startups that were designed around building websites that will help you find the best way to call Amazon.
And I think what we see now and, again, we’re going back full circle to the time where customer service executives understand that answering a customer call is the best way to interact with a customer. It sounds obvious but think of it for a second. We spend so much money trying to reach out to our customers and trying to get their attention and now we have a paying customer that’s calling us and actually we have their undivided attention and they want to speak with us. So why would we not speak with them?
It sounds so obvious when we say it this way but for many companies hiding behind email and support tickets, just feels like a better idea or safer idea, whereas the more modern and forward-thinking companies try to bring phone as the first way to interact with them because they know it’s better. Customer satisfaction is higher. The chances to solve problems are higher. Upsell or anything else.
So to summarize this long sentence, the first thing that contributed to our growth is that we’re in a really large industry. It’s a $20-billion industry. And this industry has been frozen for many years because no entrepreneur thought that call centers would ever be big again. So we’re in this re-energizing or re-energized industry and we have the most modern solution out there.
The second half of it is actually what we have built. There are several things that set Talkdesk apart. One of them is that we are 100% browser-based. So in a world where it’s so normal to use Gmail and use Salesforce without installing anything, the call center space is still… even the players that say they’re SaaS, you still have to install in the soft phone, you still have to install components on your computer to make it work. And especially with distributed call center – it’s just a nightmare.
So 100% browser-based. All you need is a headset, browser, and internet connection.
The other is that, and this is something you see a lot in our ads, you can really set up Talkdesk in 5 minutes. And we say and we really do basic setting in 5 minutes, but we have customers with 100 agents that went live a week after they signed up with us. This is unheard of and often in situations where we’re in a final bakeoff between us and a competitor and we already finished our trial with the customer. We went live for a week or two, integrated with whatever products they’re using, and the competitor is still trying to get the system up and running. So this is definitely another major differentiator.
And the third is very deep integrations with every customer-facing system that you might be using. We integrate to Zendesk, we integrate to Salesforce, to Desk, to e-Commerce systems like Shopify and Magento. We integrate to chat systems.
And the idea behind that is threefold. One is when a customer calls, you know everything about the customer. We’ll show you all the information about the customer, their title, their company, but also the entire customer journey throughout multiple systems. Open ticket with Zendesk, sales opportunity with Salesforce, so the agent is immediately informed about the customer without digging into various systems.
The second piece of it is that you could interact with all the systems through Talkdesk without leaving our UI. Talking over the phone is a pretty hard cognitive task, and just doing it plus navigating between eight different tabs almost mission impossible. So we created one UI where everything happens.
And the third is workflows. We can automatically set workflows so when an event happens in Talkdesk, for example, there’s an escalation call – we automatically create a ticket in Zendesk and send it to the escalation queue with all the information. So we don’t rely on the agent’s memory to go and set it up correctly in various systems. An event in Talkdesk can trigger any event in any other system.
Customer success is something we talk about a lot in the SaaS industry but we often think of it as very much a proactive customer engagement. What I’ve read in a few different places is that by the time a customer calls in, it’s too late. You need to engage with your customers proactively. You need to be upfront in order to upsell and to drive lifetime value.
But it seems to me that you’re kind of flipping that model on its head and you’re taking the inbound call as the center of the customer engagement rather than proactively reaching out to the customer. And you’re making sure that when that inbound call comes that you’re best prepared to deal with it. Do you think that that model for customer success is something that works and that’s something that can drive greater upsell and cross-sell to customers from an inbound call?
Absolutely. So in many cases, the inbound part is a foot in a door, although we have customers that just start with outbound, calling their customers. We do pretty well as well. We could literally live in UI of products like Salesforce. And then you can just click on any customer and call them directly without leaving Salesforce.
So we do both. But we often get in first through customer service, through customer success. And the reason is that in many cases, the need is just greater. Salespeople can use their cell phones or desk phones and they have more time to prepare. If you’re running customer support and you decide to provide phone support or you’re dragged to provide phone support, which happens sometimes, you just need a solution that will give you everything we do off the bat. So it’s a great place to get in.
And what we see when you talk about cross-sell and upsell, what we see is that we either see additional departments in larger companies just adopting us over time, or the other thing we see is additional use cases. For example, sales or sometimes billing and collection where we’re just used for vendor services.
And the third is that many of our customers grow really fast. We start with customers that might start with just 10-20 users and grow to 100. We have a lot of tech companies and a lot of forward-thinking companies and we like to think that if you really care about customer service, you also grow really fast because customers appreciate that. So we enjoy working with many, many fast growing companies.
Talking about your customer base and the growth in your customer base, how much of that growth is coming from existing accounts, coming from your own customer success efforts?
And I suppose a two-fold question, the second part being what proportion of your customers are in the tech sector, are startups like yourselves? Or how do you manage to diversify and bring older, most established companies on board?
Yes. So the answer is yes. We have a lot of tech companies. And yes, companies like DoorDash and Anki and many companies like them.
But at the same time we have companies like Pete’s Coffee and Tea and PBS, the 49ers. So we do have a variety of customers using us, both tech and non-tech. I like to think of our customers as not necessarily belonging to a specific sector but just being forward-thinking. And tech companies just tend to be, startups specifically, just tend to be more forward-thinking.
When you’re DoorDash for example and you launch a service, you have to think about what’s the best way to serve your customer and help them because it’s just part of your offering. You don’t only deliver food, you deliver a full experience and you have to think of the entire life cycle.
When you’re Anki, which is the robotic car game company, you don’t only deliver a car, you deliver an entire experience of opening the package, of starting using it, of winning the first game against the other car. And customer service is part of it because if you don’t know how to play the game, you will return it. Then obviously Anki will lose a customer for life so they understand that if they want to earn this customer for life they have to provide customer service as much as they have to provide a great service and a great product.
Now, for your first question, the answer is both. Most of our growth is coming from new accounts. We’re still in the stage where there’s this huge industry – and again, when you’re in a $20 billion company, no matter how large a revenue is as a startup, you’re still clearly not even scratching the surface – so a lot of our growth is coming from new accounts but it’s very, very common that a customer will sign up with us and double itself within 6 months.
Talking about that growth, we actually spoke recently and interviewed one of your bigger fans, Jason Lemkin. He spoke about the rapid growth from $1 million ARR to $10 million in the space of 12 months. He referred to it as being pretty epic growth rate. He also mentioned that Tiago is one of the most amazing CEOs he’s ever met, which is pretty high praise. But he also said that bringing the likes of a Gadi Shamia on board would be extremely helpful to the likes of Talkdesk.
So I’m just wondering with your experience in the likes of TopManage in SAP, Bizzy, Magneto and all these companies, what does a COO of your experience bring to Talkdesk and how have you enabled them to increase that growth rate even further?
You see, you asked me in the beginning what was the reason I joined Talkdesk. What’s it like? And as I said, I found true partnership with Tiago as a CEO and myself as COO. This is a pretty common pairing now in the Valley, which I think tells us a lot about how much CEOs and actually this industry is maturing.
CEOs 10 years ago were expected to figure out everything and manage every detail. And now I think there’s a new generation of more confident CEOs that understand that if they build an awesome product they can be good at three things and not be good at two others and hire people that will complement them. So it’s pretty exciting to work like this as a team.
And per your question, I think that one of my unique perspectives is that I constantly move between large companies and startups. I started my life in a startup. I got acquired by SAP. I spent 6 years at SAP as a VP and a Senior VP, and upscaling various products from almost nothing to hundreds of millions of revenue a year.
And doing that or being in a small company then going to a large company, then going back to a small company and going back to a large company, Adobe in this example, gives you this perspective of the speed you can drive things in a startup plus the scale you can imagine in a large company. I think these two married together are really, really effective. And a perspective I believe I have is what’s important and what’s not.
So I think if you always work in a large company and never work in a startup, you tend to fall in love with all the processes, because all of them seem important. Everybody follows all of them and they’re all part of the fabric that makes a large company tick.
When you go back to a small company, you tend to actually say, oh, I have no processes because I don’t need processes. We are 10 people here growing really fast. We’re exactly at a stage in between where we need to implement processes but we need to implement the most important ones first. So there’s no point to create an employee handbook with 700 pages because nobody is going to read it.
It’s important to actually say what enables Sales to sell faster? I guess it’s onboarding or a process to hire and onboard people is the most important thing for Sales right now. Let’s focus on that. Because this process is life and death for us. Release processes are life and death for us right now. Hiring processes are life and death for us now. So let’s focus on these processes and slowly add the ones that can be second tier and third tier.
So this is an interesting perspective that I bring to the table.
If you ask me what I’ve done in this last 6 months that I’m most proud of is helping Tiago build this awesome team. Building a company is not just hiring people, it’s hiring people and architecting the organization in a way that will be effective and hiring the right type of people, the right managers, creating the right teams and sub-teams.
When I joined Talkdesk, we were three different types of people. We were Sales, Support, and Engineering. And obviously the company grows, now we have customer success and we have a Product Team, we have Design, we have Marketing. And designing it and working alongside Tiago and the other executives to hire the team was probably the most important thing we’ve done this year.
You’ve obviously tended towards Software as a Service companies in the past. From our listeners’ and readers’ perspective, what is it about the SaaS industry and about building and growing SaaS companies that interests you so much and excites you so much?
So I think at first I like Enterprise software. And I just described it yesterday. I’ve been in Berlin on Friday and I met two great customers of ours that are part of this amazing SaaS software or startup ecosystem in Berlin. And I usually spend the first 30 minutes with a customer just understanding their business.
It was a quick déjà vu to my first days at TopManage where I probably met a thousand customers in my first 2-3 years there. And I called it my crash course MBA because you literally go through 1,000 case studies of how to build a business. And every business had different experiences and different things they measure and different things they focus on.
So the first thing that excites me is really building Enterprise products because at the end of the day this is what drives the economy. We know we all make money and earn a living because there are good companies out there that build good products and make good profit. So I really like Enterprise and I think the only Enterprise player right now in the last probably 10-12 years is SaaS. And what’s great about SaaS is that you have to build a product that will earn your customer’s loyalty every month or every year depending on the term of contract you have.
So the standards we’re held to are much higher and led us to build different types of people, different types of models. We build better products today than we built 15 years ago because selling the product is really just 10% of the work. We added people like customer service or customer success that we never had before because maintaining customer loyalty becomes really important.
So what happened in the end is that not only we’re creating better products, we’re creating better services, better experience to our customers and this is what’s exciting. You can’t just build a great product, have a great year of sales and forget about your customers. You have to keep investing in them. And holding yourself to higher standards usually drives everybody to perform in a better way.
On that point, how have renewals and customer success and churn and those kinds of indicators been performing at Talkdesk to-date?
We’re very happy to see very little churn. Most of our customers tend to stick with us and we’ve developed long-term relationships. We have some customers that occasionally will go out of business. Unfortunately, we just lost one big tech company that was our customer at the end of May that went out of business. But by and large, our customers tend to stay with us for the long haul. We’re trying to build stable relations with them. We’ve been, so far, very fortunate keeping and maintaining most of our customers.
Speaking of your growth again, because when you talk about Talkdesk, people start comparing you to the likes of Zenefits and Slack and the kind of growth that’s being seen and the kind of valuations that are being placed on SaaS companies in the last couple of years. But what I’d like to know is would you ever be concerned about the rate at which SaaS companies are growing and the valuations that they’re receiving? Do you think it’s a bubble? Do you think the valuations are too high? Or do you think they’re merited?
You know, I’m probably not smart enough to comment on whether the valuations are too high or not. The reason is I’m not a professional investor. I tend to focus on building revenue growth and on building great teams versus thinking about valuations too much.
My only comment is that if you see the previous generation of SaaS companies by and large end up going public and being valued for about $1.5 – $2.5 – $3 billion with some exceptions.
And the exceptions always they are companies like NetSuite that was in the $1-2 billion club for many years but then climbed up towards, I think, almost $10 billion. Obviously, Salesforce is a great example of companies that crossed this barrier of $2 billion.
But if you just look even 5 years ago, the barrier was a billion. Or 3 years ago, the barrier was a billion. $600 million was a good exit for a SaaS company. Now, good SaaS companies are traded $2 – 2.5 billion. The valuations of today do not need to match the public market of today. They need to match the public market of 3 years from now, 5 years from now.
And neither you nor I nor anyone could actually predict what this market will be. I think what investors are telling us is that they believe that successful SaaS companies that will go public in 2018, 2019, 2020 are going to roam around or hover around the $5 billion and not the $2 billion. And I think this is how I read the high valuations.
What’s in common between Zenefits and Slack and to some extent, maybe to a lesser extent, Talkdesk, is that we all work in these really, really large industries and we all grow really fast. So when you’re in this situation, one of the best things you can do is actually keep investing in your growth because you’re not trying to develop a billion-dollar market. You’re trying to develop a $20 billion market. So your only limitation is really your ability to execute and not the size of the market.
I think this is why I see so much money poured into Zenefits and so much money poured into Slack because it’s a pretty easy-to-imagine land grab where you are a successful product in a large industry and if you just invest enough, you can grab a pretty significant part of the industry.
Well, speaking of valuations and exits and all of that, what would be yours and Tiago’s vision for Talkdesk over the next few years? Would it be an acquisition play or would it be an IPO?
This is actually probably question 5 that I asked Tiago after we met the first time. And Tiago said IPO without even hesitating.
And I think I liked it a lot because I’ve been through acquisitions and I’ve acquired companies. It’s a great way for an exit, it’s a great way to take a company that could possibly grow to x and maybe grow it to 10x.
This was my experience with TopManage and SAP. SAP took a pretty small company back then and obviously gave us a platform and a canvas to make it 100 times larger. So it’s a great way to build a business and keep developing it.
But building your own company is obviously much more interesting. Again, we have the ingredients, we have a good product, we have a pretty large industry and we have the patience to build a long-term success. So at least the way we think of things right now, we want to take this company public and go all the way with it.
What kind of time period would you see that happening in?
You know, when we are good and ready.
How influential have people like Jason Lemkin been and the investors that you’ve brought on board in the past couple of years in the growth and in the success of Talkdesk?
I think Jason was a great ally for the company. He invested when the company had 6, 7 people. I think he had…
What Jason was asked the question at an LP event of Storm Ventures, and the question was how did Storm help you, and how did Jason help you? And my answer was I think Jason gave Tiago and the team the courage and the safety blanket to dare and to take larger risks. You know, people over-estimate the actual value of a VC.
Investors are great. They provide money. They provide good advice. But the biggest help an investor can provide to a company, especially in their growth stage, is just enable it to continue doing what it’s doing. Because you invest only in great companies. No smart investor invests in bad companies. Assuming that an investor will invest in a bad company and try to improve it is a false assumption.
So Jason invested in a great company. Josh Stein invested in a great company. So the only thing they can do is enable us to take larger risks, to dream bigger, etc., and keep doing what we’re doing.
So occasionally we’ll get really good advice. Occasionally, we’ll have a perspective that we don’t have, and this is something that we totally appreciate. But the biggest contribution of DFJ and Storm to our journey was just enabling us to keep growing and keep taking risks and daring more than whatever there was out there.
We’ve talked about the influential people within the company and also on the investor side. Are there other entrepreneurs, other founders and leaders of SaaS companies that you would find inspiring or that you would look to as an example?
You know, again, this is another question that I’m asked consistently for 20 years now. And my answer is that I usually have no one person. I’m trying to learn something from everyone. And they don’t have to be leaders and they don’t have to be famous CEOs. They can just be somebody running customer service for one of our clients or a partner or a Director of IT of a German customer of ours. Everyone has something to bring to the table. I try to learn from all of them.
I think that there are a lot of really good SaaS companies now and everyone is unique in their own way. I like what Nick at Gainsight, for example, did with building a brand around customer success. So I’m trying to learn from Nick how you build a company or how you build a story around the product which doesn’t involve the product.
So it’s just an example of not necessarily a company that I admire or not. I admire Nick and I admire his success so far, but what I’m trying to learn from Nick is how do you take a story of a product versus a product and make it what you lead with.
So my answer is everybody brings something to the table. If we just open our ears and eyes and learn from everyone, we’re going to be better off than to try to have one idol.
by Michael Cullen @michaelcullen87