Intercom, the story behind the business messaging platform
Part of a series of essays written for Building The Tech Startup
It is often argued that it is hard to succeed in the startup world without a disruptive idea or a product that belongs to a new category, however, it is sometimes enough to capitalize on better solutions for an existing problem and Intercom did just that. Known for its iconic 49$/month blue button that sits on the corner of more that 25,000 websites, Intercom has pioneered the business-to-client messaging business, providing live assistance via chat to the customers of multi-billion companies such as Yahoo!, Hootsuite and InVision. Intercom managed to find a single product that satisfies both businesses and their customers, providing clients with a simpler, faster and more approachable way to communicate with the seller and providing businesses with an easy-to-install add-on that enables them to skyrocket their conversion rates and sales while gathering data and analytics on their customer base. However, Intercom’s story is a long one and it starts back in 2011 with four Irish founders and a coffee shop.
Eoghan McCabe, Des Traynor, Ciaran Lee and David Barrett are the four co-founders behind Intercom. Interestingly enough, all four are engineers with an experience in the start-up process through their previous company “Exceptional” which provided bug tracking to website owners and was acquired for an undisclosed sum that they invested in Intercom. Meeting at their favorite coffee shop in Dublin, the four co-founders came up with the idea for Intercom by observing that the coffee shop’s owner “knows all of his customers’ preferences” [1] and that the internet did not provide the same level of business-to-customer interaction yet. In fact, even today, the internet still suffers from mass-emailing, ticket systems (where the customer is reduced to a mere ticket number) [2] and long FAQ pages made in an effort to avoid customer emails. In Eoghan McCabe’s words, “It was and is the most impersonal and disrespectful thing you could do to your customers”[3]. The four co-founders have already encountered the same problem with their previous business (Exceptional), and solved it with what they called “an in-app chat” solution [3] that they eventually decided to further develop and commercialize as Intercom.
Later that year, McCabe, convinced that Silicon Valley is the de facto place to learn about turning startups to multi-billion dollar companies, decided to visit the US to both learn more about the startup scene and seek seed funding for his young company. McCabe remembers the company’s first outside investor, Biz Stone (Twitter co-founder), as the first name that came to his mind when he arrived at San Francisco. Being the overly optimistic and determined founder that he is, McCabe “took a guess at Biz Stone’s email address and mailed him” [1] which led to a meeting with all of the Twitter co-founders and, eventually, to a large investment from Biz. In their first pitch deck (Figure 2.), the founders sought a $600k convertible note (a short-term loan convertible into equity)[12] for an 18-month development and research period. Convincing investors that direct competition is virtually non-existent (Figure 3.), their first seed round concluded in January 2012 and brought the company an astounding $1M of capital from a list of 17 key angel investors and venture capitals[4]. Six months later, the company received a second round of seed funding capital of $750K from two CA venture capitals “Freestyle Capital” and “500 Startups” (one of the investors in the first seed round) [5].
Having developed into a more structured company following the recruitment of several key figures including Facebook’s global head of brand design Paul Adams, Intercom went on its first major funding round [6]. Led by Social+Capital Partnerships and listing investments from David Sacks (Paypal COO) and Freestyle Capital (a previous investor), the Series A yielded $6M in capital. Six months later, the company sought a second major funding round in order to expand the company’s market and hire key figures to help with the expansion. The Series B, led by Bessemer Venture Partners and followed by Social+Capital (a previous investor) raised $23M in capital [7] for a total funding of $30M. During this funding round, Intercom appointed Mark Woolway as COO given his experience as a Vice President of Corporate Development at Paypal. It was not long before the company concluded its Series C funding of $35M from ICONIQ Capital [8] which allowed it to double its employees from 140 to 280 people.
During the first three major funding rounds, Intercom grew exponentially[9] from $1M in annular recurring revenue to $50M in three years. During this period, Intercom had more than 400 million conversations on its platform, launched a product that aims at the education market and built a portfolio of 17,000 paying clients. In McCabe’s words, the company was “trending aggressively towards profitability” [10]. Although the company was confident that it would not need more capital to become profitable in 2017, just a month ago, Intercom concluded a Series D funding round raising $125M led by Mary Meeker at Kleiner Perkins (a previous venture capital investor). However, in a letter directed to its customers [11], Intercom explained that most of the funding will go towards Research & Development in order to improve their existing products and develop new solutions based on automation and Machine Learning, a highly anticipated direction given the recent growth and interest in Artificial Intelligence technology.
All in all, there is no denying that Intercom’s story is a story of success: The company’s growth rate has been exceptional and its management and key decisions have been remarkably faultless. With great ambitions, unique execution, and perfect-fit hires, Intercom was able to grow into a $1.3 Billion company with offices in Dublin, San Francisco, Chicago, and London! The company’s new interest in machine learning solutions to further assist customers online are well directed and will definitely allow it to set even higher barriers to entry, effectively monopolizing the online customer service business while helping it achieve long overdue profitability.
References
[1] Pamela Newenham. “Four Irishmen on a mission to build a billion-dollar company”, The Irish Times, 23 Jan. 2014. Retrieved April 28, 2018 from www.irishtimes.com/business/technology/four-irishmen-on-a-mission-to-build-a-billion-dollar-company-1.1664244
[2] Alex Konrad. “How The ‘Silly’ Irish Founders At Intercom Built One Of Silicon Valley’s Fastest-Growing Businesses”, Forbes, 1 Nov. 2016. Retrieved April 28, 2018 from www.forbes.com/sites/alexkonrad/2016/11/01/inside-intercom-fast-growth-out-of-ireland/#dd47ea769680
[3] Eoghan McCabe. “Ask Me Anything: Intercom CEO and Co-Founder Eoghan McCabe”, Intercom, 29 Dec. 2015. Retrieved April 28, 2018 from medium.com/intercom-inside/ask-me-anything-intercom-ceo-and-co-founder-eoghan-mccabe-92a8bc0f5711
[4] “Seed Round — Intercom — 2012–01–25.” Crunchbase, www.crunchbase.com/funding_round/intercom-seed--676ef11b
[5] “Seed Round — Intercom — 2012–08–01.” Crunchbase, www.crunchbase.com/funding_round/intercom-seed--30a2059b
[6] Anthony Ha. “Customer Communication Startup Intercom Raises $6M Round Led By The Social+Capital Partnership”, TechCrunch, 19 Jun. 2013. Retrieved April 28, 2018 from
techcrunch.com/2013/06/19/intercom-series-a/
[7] “Intercom Raises $23 Million in Series B Round Led by Bessemer Venture Partners”, MarketWired, 22 Jan. 2014. Retrieved April 28, 2018 from www.marketwired.com/press-release/intercom-raises-23-million-in-series-b-round-led-by-bessemer-venture-partners-1871289.htm
[8] Eoghan McCabe. “Intercom raises a $35M Series C”, Intercom, 13 Jul. 2016. Retrieved April 28, 2018 from blog.intercom.com/35m-series-c-funding/
[9] Julie Bort. “How drinking Guinness with Biz Stone launched one of the fastest-growing startups in the Valley today”, Business Insider, 22 Feb. 2017. Retrieved April 28, 2018 from www.businessinsider.com/intercom-is-on-track-to-be-one-of-the-fastest-growing-startups-2017-2
[10] Eoghan McCabe. “Vanity metrics, the future, and 100,000 thank you’s”, Intercom, 9 Oct. 2017. Retrieved April 28, 2018 from blog.intercom.com/vanity-metrics-the-future-and-100000-thank-yous/
[11] Eoghan McCabe. “An open letter to our customers”, Intercom, 27 Mar. 2018. Retrieved April 28, 2018 from www.linkedin.com/pulse/open-letter-our-customers-eoghan-mccabe/
[12] “What is a convertible note?”, FundersClub. Retrieved April 28, 2018 from fundersclub.com/learn/convertible-notes/convertible-notes-overview/what-is-convertible-note
[13] Eoghan McCabe. “Intercom’s first pitch deck!”, SlideShare, 27 Dec. 2011. Retrieved April 28, 2018 from www.slideshare.net/eoghanmccabe/intercoms-first-pitch-deck
