From making a product to building a company – and messing up on the way!
In an exclusive extract, entrepreneur Mikkel Svane reveals the growing pains behind Danish software start-up Zendesk’s meteoric Silicon Valley rise
This is the first of three excerpts from Zendesk founder Mikkel Svane’s new book Startupland, the story of how three guys risked everything to turn an idea into a global business.
From starting in Denmark to raising venture capital and a $100m IPO on the NASDAQ stock market, Svane kicks off with the trials he endured and the tips he learned going from creating a product to building a team fit to scale the business fast!
And for those who want to read more, Startups.co.uk readers can buy a copy of the book with a 30% discount here using the code VBK10.
As we started hiring in San Francisco, we probably felt more comfortable hiring engineers and technical people than we did for other roles.
The technical side was our turf; for that, we mostly knew what we were looking for. But when it came to other roles, we didn’t know what we were doing.
Design and marketing were areas that we cared about profoundly. But we had very little experience hiring product designers or marketers, and we had a hard time framing what we needed.
The world of product management was an issue in itself. I think we didn’t intrinsically understand that the people spec’ing and defining the product were a separate species from the people building it.
In hindsight, it was impressive how little we knew about building up an organisation – and how forgiving the people that we met were with this fact.
Building a product is so different from building an organisation and a company. We relied a bunch on recruiters and consultants and on their advice, but in truth most of our hires were completely hit or miss.
Some tricks on how to hire people who can do what you can’t
Things weren’t easy, and Peter Fenton quickly convinced me that a lot of the pain of running the organisation would go away with a professional and experienced VP of engineering.
He said we needed somebody who was used to building out engineering teams and driving efficiency and – not least – shipping. We needed this expertise, but when you haven’t hired for this role before, it’s hard.
And it was even harder because Morten and Alex technically would have to report to that role. We needed someone who could manage that relationship properly.
We had a long search, working with Riviera Partners, an executive search firm for VC-backed companies, which did a fantastic job. I also enlisted Nancy Connery, an HR and recruiting professional who was an early hire at salesforce.com and worked closely with Marc Benioff to help me with the interviews and assess the candidates.
Our finalist was Adrian McDermott, who was the first engineer on the original Plumtree Software team and worked there through the IPO and the acquisition by BEA, before it was sold to Oracle.
Adrian had passed all the tests – which mostly meant having conversations with Alex and Morten about random things – and people really liked him. But in what was becoming an annoyingly familiar story, he wasn’t completely sold on joining us.
We agreed to meet for (another) dinner, and it became a very late evening where Adrian introduced me to a number of San Francisco bars I didn’t know existed. I got so drunk that when I finally made it home I couldn’t get my shoes off. But I did remember that the last thing we had done before separating was to shake hands and agree on Adrian’s joining Zendesk.
I happily informed our recruiter, and the very same morning he sent an email to Adrian saying, “Congratulations on your new job.”
I don’t think Adrian really remembered that much from the evening, as he responded, “I beg your pardon?”
Clearly, negotiations weren’t really over, and Adrian probably hadn’t involved his wife Cindy in the decision. Peter stepped in and helped us get to the finish line. Very fittingly, he sat in his car outside RN74 in the pouring rain and convinced Adrian that his current job trapped not only him, but all of the people who had pledged their loyalty to him. Ultimately we did formally agree, and Adrian joined our team. Today Adrian runs all of engineering, product, and technical operations – a team of more than 300 people distributed all over the world.
Adrian was a very significant hire not only because of his much-needed expertise but also because he was the first person we hired who gave me the feeling that this was really truly a person who was both way smarter and way more experienced than me.
And that left me with a new kind of role and relationship. I realised that I wasn’t supposed to manage a guy like Adrian. This would be teamwork, and Adrian wouldn’t just run his organisation but would also have an impact on the entire strategy and ultimately the destiny of the company.
Hiring people who are way smarter than you and who have a lot more experience is actually really hard. And it’s something you have to learn. You don’t really have a frame of reference for evaluating them, and you have to perform intense back channelling to truly understand how they operate and what kind of people they are.
Ideally, you will want to spend quality time with them and get them into situations where they’re uncomfortable in order to learn everything you can about them. It’s not that different from dating.
But when you get it right, it’s transformative for the business. We would never have gotten to where we are today without Adrian. Not only with regard to getting our processes straight, our recruiting efficient, and our platform in place, but also and especially with regard to building a team.
Adrian is to a great extent a self-made man. He grew up in a small village in northern England before teaching himself to code and taking on increasingly bigger tasks with increasingly bigger companies all around the world. He sees and appreciates that “eye of the tiger” in people that defines whether they can figure things out and get shit done. We needed that spirit.
And somehow, he does it all so nicely that his team loves him – so much so that they also let him win the annual soccer tournament, his true passion.
Every little thing you do matters
We might have seemed a little disorganised in some areas, and the truth is we really were. When it came to something as core as the customer experience, we were of course all about providing a great and smooth experience, but we realised that’s also really hard to scale properly.
We learned this the hard way – by messing up on multiple occasions.
Our business was built as a self-service subscription service, so we didn’t think about ourselves as “selling” anything. Our customers bought from us on their own initiative. They could stop using the service whenever they liked, and they wouldn’t be charged any further. Based on that, we didn’t offer refunds. Additionally, we didn’t really have the flexibility in our billing back-end to provide refunds; it was always our goal to keep things simple.
But of course, from time to time, customers did ask for refunds. And normally we were good at explaining that we didn’t do them. But on one occasion a new employee was a little too blunt in the response to a customer’s request. He said something like “Sorry. No can do,” and he didn’t give the impression of trying to understand the customer’s situation.
Of course the customer got upset. And his fury knew no limit. Even as we escalated the situation internally and tried to save it, the customer was long gone and hell-bent on revenge and retaliation.
Less than six months later that same person joined a competing start-up on a mission to disrupt our business. We had probably made an enemy for life.
He didn’t prevail in that goal – we’re still here and doing well – but he did teach us an invaluable lesson. I learned that even if your intentions are the best and you are trying to make things simple, you can still destroy everything with a single wrong interaction in which you forget the basic principle for any type of personal interaction: empathy.
We still abide by our no-refunds principle, but we no longer approach the policy in the same way. Our execution varies depending on the situation. It is more mindful of the customer’s unique circumstances.
In some ways the customer relationship is just like any other relationship. You have to consistently put in effort and not rely on the past. The moment you take anything for granted and stop investing in the relationship is the moment you start messing things up. For many businesses, building customer loyalty means creating loyalty programs that reward repeat behaviour: Buy our coffee 10 times and your 11th cup is free. But are your customers loyal because they want that free cup of joe, or are they loyal because they truly enjoy your product and their interactions with you?
Companies need to face the new realities of the customer economy. Customer relationships matter more than ever, because your future revenue depends on those relationships lasting well beyond a single transaction. The voice of the customer has never been louder; your customers have the power to bring you more business – or drive it away – via recommendations or rants that are amplified by social channels like Yelp. Customer service interactions are becoming your primary means of creating true customer relationships. To be a successful business today, you must understand how relationships actually work and how to build them.
You can get your hands on a copy of Mikkel Svane's Startupland and get 30% off by using the code VBK10 here.