Zendesk CEO Says Company Had Multiple VC Suitors

Zendesk CEO Mikkel Svane says he had five term sheets and countless VCs interested in funding his company, which makes a Web-based help desk service that cuts the cost of customer support.

He ultimately chose Benchmark Capital, which led a $6 million Series B round with return backer Charles River Ventures. Benchmark partner Peter Fenton will join Zendesk’s board, and the company is moving from Boston to San Francisco, its second move in just a few months. (Zendesk started in Copenhagen and relocated to Boston earlier this year).

Svane says that he hadn’t intended to seek funding so soon. Zendesk raised its first round in April, and he expected to hold off on new money until sometime next year. But he explains that Zendesk was getting a lot of attention, and he chose Benchmark because of its success in funding companies in “crossover industries.”

Customer support and help desks have traditionally been run either by expensive enterprise software packages or whatever businesses can cobble together out of Microsoft Excel or other more general software.
Zendesk doesn’t even have an outside sales force. The company’s software is sold and maintained over the Web — two new products will sell to small businesses for $9 a month or to enterprises for $39 per agent.

“It shouldn’t be more complicated for companies to start to use Zendesk than to buy a book on Amazon or start using iTunes,” Svane says.

As for the move to San Francisco, both investors agreed it would be good for Zendesk because the tech community is so much bigger on the West Coast, he says. “In San Francisco, we’ll be closer to the action.”

One of Zendesk’s fastest growing customers is Twitter, another Benchmark company. The DDOS attacks that briefly shut Twitter down this month also generated lots of requests for customer support.

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  • Like the concept. Concern is the exit for this company at a needed valuation to make it a good ROI for investors. $39 month fee requires HUGE economies of scale and critical mass. Not sure this can be achieved.

  • It isn’t just economies of scale as much as the per-unit economics at the margin that will determine success or failure here. But just look at Solarwinds or Salesforce.com for examples of folks who have figured out successful sales/marketing strategies at disruptively low price points.

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