The Exchanges

Q well, is like, as a mostly kind of bootstrapper at heart, which I, I think we have a quote in this, uh, you announced on Medium in March of 2015. I'm a bootstrapper at heart, but you raised a twelve million dollar Series A from Foundry Group. That is a very large amount of money. What was your thought process there? You know, what, what made you decide to raise?

A I actually want your take on this, too, because we were building horizontal SAS at the exact same time, right? You were building Drip. We were building Help Scout, and I remember having a conversation with you at MicroConf where you were just like, man, it was such a grind trying to reach that next level of growth. I just never felt like I could fully capture the opportunity, and I felt exactly the same way, right? The company was growing like gangbusters. We were profitable. Took us about 18 months before we were profitable, but then we were sort of maintained a sort of ramen profitable business where we were just hiring as fast as we could, deploying all the profits as fast as we could to try to keep growing the business. And about four years in, I had a friend that had taken money from Foundry Group. So Foundry's based here in Boulder. Brad Feld is an absolute legend. Their firm is, is absolutely legendary, uh, in so many ways, and I just felt a sort of alignment with the way that they operated. They were not hands-on. They were pure capital, gave founders a lot of freedom and, and, and respect, and so Foundry Group just felt like, you know, if I, if we were going to go chase a much bigger opportunity, which is effectively what we were signing on to, It was like, hey man, like, is there potential for this to be a hundred million dollar business? If we think there is, then we…

AI assessment note: “if the business's potential is to be a hundred million dollar plus business”

Q I was going to ask you, does that, that seems like that's a headline, but tell me about the, the original vision was no one else doing this. Cause it sounds obvious now, but like, I don't, I don't know that anyone had done this, right? Because it was like Zendesk and a bunch of crap. Crap, I say. My words.

A That's basically the case. Yeah, so we, I, we had spent, uh, so I had been working with my co-founders for six years, and we had done the playbook that so many successful bootstrap companies had, had done at that time. We start by doing client work and building things for clients, and then on the side we start to build products, right? So we work on our craft and learn to build things for the web and try to get paid for it. And then on the side, we're like grinding away on software products, and so the dream was always to do that, and so we had spent six years building together, and one of the products that we had built didn't make a lot of money, but it actually got a lot of traction. It had like 200,000 active users, this little product that we built, and it was enough such that we had a customer support problem, and so I wasted two weekends trying to set up Zendesk. I just thought it was far too complicated for The business that we were trying to run. I tried a bunch of other products. I actually ended up thinking about this space for a couple of years. For some reason, I was just obsessed with this particular set of problems and doing customer support. And I just felt like, man, there's gotta be a better way to do it. And basically I just wanted to remove the system in the middle, right? A lot of ticketing systems or customer support systems Always had this system in the mi…

AI assessment note: “That's basically the case. Yeah... I wasted two weekends trying to set up Zendesk.”

Q out. You sell your shares as a founder, such that of a fifteen million dollar round, a portion of that goes to the co-founders. They actually, you know, just sell some of their equity. But my question for you is, you raise a lot of money, the business is doing well, would you do it differently if you could go back? Would you still raise? Would you raise as much?

A I would do it differently. That's kind of hard for me to say, because along the way, we did business with extraordinary investors. I actually have no complaints with the investors that we worked with, with what I, to use your words, signed up for, because I absolutely signed up for that journey. But now that I've seen that side of it, now that I kind of leaned into the discomfort, and I got an understanding of what it is to Run a business like that where, like, there's never an amount of growth that's enough, right? If you double the business, you look up, I gotta double the business again, right? I mean, you just, the growth expectation is, and I, I was really trying to do my best to lean into the tension between trying to craft something really beautiful, because I'm not really motivated by the size of the revenue number. I think of success in a much broader sense, but Investors don't, right? It's not actually their money that they're deploying, right? They have a job to do. And I was trying to lean into that tension, and I thought that it would bring out my best and the company's best. And I think in many ways that it did. But for me personally, looking back now on a 15 year journey, yeah, I would have done it differently. I wouldn't raise money.

AI assessment note: “I would do it differently... yeah, I would have done it differently. I wouldn't raise money.”

Q And then, you know, you already mentioned it, in late 20 25, you stepped down as CEO, you became chairman of the board. It sounds like it was time. I mean, is that it? I was gonna say, why, you know, why did you decide to leave that role?

A You know, I, upon reflection, I, I was, I was having a really tough time leaning into that tension and trying to thread the needle between being a bootstrapper at heart, really being committed to Building products in a certain way and operating businesses in a certain way and delivering on an outcome that would make my stakeholders very happy, right? So like trying to thread that needle for 15 years, really like 11 years funded was incredibly challenging for me and draining. And so I sort of picked my head up and I said, what if I'm just not the guy anymore, right? Like what if, what if the journey from Forty million to a hundred million. It's just somebody else. And when I asked myself that question, I'll be honest with you, Rob, a weight lifted. And I was like, well, well, then that would enable me to actually go do what feels true to me as an entrepreneur, just no compromise, no tensions, like what feels absolutely true to my core and my values. I still have another rep in me. I still have more time to build one more thing. Like this is the opportunity to go build that thing and not have any of those tensions. I've experienced it. I've seen that side of it. I'm not doing that again. So I really felt like it was just the right time.

AI assessment note: “what if the journey from Forty million to a hundred million. It's just somebody else”

Q pricing overhaul in November of 2024 of you guys moving from per seat to per contact. That feels like a really bold, like a big move after 13 years with thousands of customers, and then you're like, we're gonna do it by contact. Talk me through, were you the first to think about this? Had other competitors done it? Why you made that switch? And if it worked or not.

A We were always thinking about pricing and packaging from, I'd say, 20 17 on. We had a team and I was on that team of people that were always thinking about pricing and packaging, always optimizing and testing and moving the ball forward with regard to that aspect of our strategy. And so very early on with these tools, as I mentioned, we were building a lot with AI. We realized, wow, like we're going to be able to create a lot of value for our customer that doesn't tie back to a seat. And generally, you could sort of see, like, hey, if you fast forward this 10 years, my sense is that a lot of businesses that are per seat today are not really going to make a lot of sense per seat tomorrow. I felt like, if you've read any Clayton Christensen, like, I felt like we were about to live an innovator's dilemma, where the incumbents were going to be, there was new technology coming in, the incumbents were going to be at a strategic disadvantage, they weren't going to adopt this new technology fast enough, And there was going to be an opportunity for a little guy like Help Scout, still like, yeah, you could say like tens of millions in revenue, but we're actually still the little guy. There's an opportunity for us to outmaneuver the competition. And so I felt like it was, yes, it was a massive swing, but I felt like customer support is moving away from seat-based pricing. It's just not th…

AI assessment note: “we're going to be able to create a lot of value for our customer that doesn't tie back to a seat”

Q I'm sure the internal, your, your, Team members. What was your approach? Like, what, how did you use AI? There's a couple obvious ones, right? I, I want AI to like scan through stuff and like, uh, create a first draft of the ticket response, right? So that I can, you know, did you do that? Did you do more than that? Just talk me through how that played out.

A Yeah. So before LLMs were a thing, there were several AI hype cycles and customer support. Customer support is traditionally seen as a cost center. And for that reason, there's a lot of people that have tried to build tools that make it so that you don't have to have as many humans involved because humans are the biggest expense in that cost center. And so look, we like back in 2017, there were AI chatbots. Right. But they were built on these like machine learning models where we actually did the math. We investigated these tools. We tried to build some of these chatbots and we realized they were really poor customer experience. And ultimately, like less than five percent of our customers had enough data to really like for a machine learning model to even be useful to them. And so it wasn't the right time for us. So when LLMs came along, I was psyched. I mean, Rob, you and I are builders. Right? Like, we love to build software, and for that reason, I was psyched about these new tools, because I've never had so much fun building in my life. I had no idea what was to come, but basically, when we first learned about ChatGPT, which I think was in late twenty-twenty-two, we did a hackathon, much like a lot of other companies, just to explore these tools and see what was possible, and so right away, we built a tool to summarize conversations. We built a tool to To draft responses, an…

AI assessment note: “we built a tool to summarize conversations. We built a tool to To draft responses”