Zendesk is a cloud based customer support system. The platform allows customers to interact with a company’s customer support team via web forms. You can think of it as customer support in the cloud.
Like most cloud based systems they have an affordable pricing method that scales up in price as the company grows. The makes startups an ideal target for them. But Zendesk has raised a lot of money recently, their last round was for $60M and the total amount of capital raised has been nearly $90M. Raising that much capital means that investors are expecting a big exit, likely a IPO.
To improve their prospects for an IPO Zendesk needs to become a global business with strong sales throughout the world. Japan is one of the markets they hope to grow in, during a recent visit to Tokyo I was able to ask the founder some questions about their business.
1. Why did you start?
When we founded Zendesk in 2007, customer service software was complex, expensive and ugly. It also was only available to the largest companies who could spend the time and money to implement something complicated. We wanted to change that. We wanted to create simple customer service software that people actually love to use, and we wanted to make it available to any company.
Today, we have 30,000 companies worldwide using Zendesk and they have served more than 200 million people through Zendesk. It’s been amazing for me to see that original idea turn into something so popular.
2. Why is Zendesk important?
Zendesk is important because it’s bringing great customer service to more people and building better relationships between companies and their customers. For too long, only the largest companies could implement customer service software, and even when they did it was built around internal processes and not for the people using it–the support agents and customers.
We built Zendesk to be completely cloud-based and designed for how real people want to manage their work and interact with customers. Then we made it easy for anyone to try and buy. You can get started right on our website without talking to a sales person. In fact, we grew to 10,000 customers without having any sales team.
More importantly, half of our customers are new to using any type of customer support solution. They typically were just using email or spreadsheets to manage customers. That means we’re making great customer service accessible to more people, and that’s been exciting to watch.
3. How did you raise money?
We started Zendesk in Copenhagen, but then in 2009 moved to San Francisco. That move made the big difference in our ability to raise money. We were suddenly exposed to a community of other entrepreneurs and investors willing to take risks with startups like ours at the time. Since 2009, we have raised a total of $87 million across four rounds of fundraising. Our investors now include Benchmark Capital, Charles River Ventures, Matrix Partners, Redpoint Ventures, Index Ventures, GGV Capital and Goldman Sachs.
4. What was the hardest part of building the company?
The biggest challenge continues to be simply keeping up with our growth and making sure we are building great teams that can serve all of the new countries we’ve been entering. It’s a good challenge to have but it’s also the hardest. Last year, we raised another $60 million, and a big reason for that was to hire more great people to build our international teams. That’s helped us grow our presence in Japan and countries around the world.
5. What was the most important step to growth?
Moving the company to San Francisco in 2009 was the most important step we took. We were growing nicely before then, but the move allowed us to go a new level of growth. Because the city is such a hotbed for startups, we were able to learn from other entrepreneurs and to get connected with talented engineers and other employees who’d been through our type of growth before. Within about the first year of the move, we grew from 1,000 to 5,000 customers and raised our first few round of major funding.
6. What do you wish you could have done differently?
We are where we are today because of our actions, including our successes and our failures. We have worked hard and have been very fortunate, but we have also made many mistakes. You cannot move a company quickly forward without stumbling from time to time. But we have embraced our mistakes and failures and learned from every single one. That also extend to our customer service and our customer service philosophy. Even though you strive for complete customer satisfaction, you will nonetheless run into situations where customers are unhappy or unsatisfied. You will not be judged based on your ability to avoid unfortunate customer experiences but on your ability to embrace and manage these experiences.
7. How do you view the Japanese market and what are your Japan plans?
Japan is one of the most important countries for us because it’s known for its exceptional customer service and the adoption of the best technologies for business. Those characteristics make Zendesk a great fit. Actually, Japan ranks higher in customer satisfaction and first response times than 90 percent of all other countries, based on our data of companies using Zendesk.
Japan is our fastest growing country, and we’ve signed on such customers as SanSan, Cerego Japan (iKnow), Talknote, Moshimoshi Hotline, and Midokura. Earlier this year in March we officially launched our KK (Kabushiki Gaisha) in Japan and we have a dedicated country manager in out Tokyo office. We plan to hire additional people for the Japan team over the next year and to keep growing our presence.
8. What makes your company different from similar companies in Japan?
We don’t see companies that are similar to us in Japan when it comes to our focus on putting customers first in our software. Japanese companies have often adopted CRM, and those traditional CRM systems have focused more on the needs of sales people, not on the needs of the customer. We’re changing that with Zendesk. CRM tools focus on helping sales people fill their pipeline with leads and manage mainly business relationships. Zendesk focuses on making it simple to interact directly with customers to solve their issues and build meaningful relationships with them.
Of course all markets are different and what makes a company successful as a global operation isn’t its ability to convince the market to buy into their way of business, but for their way of business to adapt to the local market.
Customer support in Japan is very much a high touch industry. In fact, Japan is globally known to have the best customer service in the world. So if Zendesk can adopt some of the best practices and uniqueness of customer support from Japanese culture into its product they will be an amazing success. If they however try to dictate a western approach in the Japanese market, they will face challenges.
From what I can see from Zendesk’s slow approach to entering the Japanese market I believe they will be able to grow and adapt and similar to Evernote while taking some valuable lessons from the Japanese market that can be applied to the rest of the world.