
Zendesk S-1 filing - mikeknoop
http://sec.gov/Archives/edgar/data/1463172/000119312514137878/d665368ds1.htm
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lucasjans
Those large enterprise customers are expensive to acquire. Zendesk spent 37M
on sales and marketing, with 9M going towards commissions. As they push into
the enterprise more, the cost of sales went up. They increased their sales and
marketing expenditures by 65%.

Contrast this with Atlassian, which has offices here in Vietnam and the
Philippines - which keeps engineering costs down - and who doesn't have an
expensive sales force.

Ripe for disruption: changing the way companies sell to enterprises - or
changing the way enterprises buy products. Possible?

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sdesol
I've been studying Atlassian for some time and I really admire their approach
to enterprise and this is why I think they have been successful so far:

The majority of their tools can be installed on site. SAAS for enterprise is a
lot harder to sell.

Most of their tools are built with Java so things are self-contained which
makes it easier to install. Also their installations will most likely not need
root access. Anybody who knows enterprise knows root access is usually clamped
down in enterprise.

Their pricing model encourages a bottom up sales approach. Traditional sales
channel for enterprise is top down where you go after execs, senior
management, etc. and work your way down. IBM, Microsoft, Oracle, etc. can
afford the top down approach. For most startups, this would be impossible. By
making it very affordable for disgruntled employees/departments to use their
product, they are able to create internal advocates for their product if it
does make their life easier.

tldr; Don't make SAAS. Try to make your tool installable with non-root/admin
access. Make it very affordable for individuals and small teams because they
will become internal advocates if your product is good.

~~~
datasage
While I do think being installable on site helps, I don't think that is the
primary advantage Atlassian has over other software companies.

In my opinion it has everything to do with the market. They build products for
a market which likes good tools, has no problem putting them into their
workflow, and telling all their peers about how awesome their tools are.

Contrast that to Zendesk which is largely a customer service tool. In a large
company, customer service is largely run business majors who are more
concerned with risk of process changes, than they are with (potential) cost
savings from better software.

~~~
buster
Nahh, there are PLENTY of enterprise customers who will never move to the
cloud with sensitive data. So software installation at the customers site is a
must for many of them, especially the larger enterprises. Sure, the small web
startup of 10 people doesn't care where their employees data is, a 100k
employee enterprise very well does.

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bevenky
\- Acquired Zopim in March 2014

Revenue - 2011: 15.6M, 2012: 38.2M, 2013: 72M

Losses - 2012: 24.4M, 2013: 22.6M

Seems like going IPO with losses is the new trend

~~~
pbreit
Please find me a time when it was common to IPO with profits. Here's a hint:
you won't find such a thing.

IPOs are fundraising events. High growth companies are almost by definition
losing money. The idea is to raise money in order to fund expansion. Companies
don't even attempt to be profitable during this phase.

~~~
wslh
Microsoft? Intel? Google? I think there are a lot of examples.

~~~
pbreit
PayPal, Ebay, Yahoo, Facebook, Amazon, Priceline, Salesforce, Twitter, Yelp,
etc. What's your point?

~~~
wslh
_Please find me a time when it was common to IPO with profits?_

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flavmartins
If I read this right, they lose money...every year.

Is this discouraging to anyone looking to start a SaaS-based startup?

You imagine that your new service will make money, but in reality sales and
marketing will cause you to have to chase funding constantly just to stay
alive.

Thoughts?

~~~
sunir
We just did the annual summit at
[http://www.thesmallbusinessweb.com](http://www.thesmallbusinessweb.com) and I
looked at the industry landscape with Bjoern Hermann of Startup Compass.

[http://blog.startupcompass.co/2014-saas-market-
outlook](http://blog.startupcompass.co/2014-saas-market-outlook)

Basically my assessment is that we are blowing out brains out doing enterprise
sales for low ACV sales. It is hardly the promise of subscription software as
a money machine.

The problem is that there is not very well organized distribution channels so
we all have to spend huge sums on acquisition.

Compare Zendesk's total account book size (40,000) to Intuit Quickbooks (5
million they have claimed).

That's what I would like to help fix with the SBWeb, our trade association.
Tough problem though. Lots of things have to change first.

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Oculus
I was expecting an acquisition of Zendesk by Salesforce more so then an IPO.

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jaytaylor
SalesForce already acquired Desk.com and Service Cloud which are both direct
competitors of ZenDesk.

~~~
pbreit
Yep, Salesforce bought its way into the mark with the Desk.com (FKA Assistly)
acquisition at the ridiculously low price of around $50m. It looks like
Zendesk is going to start trading north of $1b. Talk about inequality!

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beachstartup
founder mikkel svane owns 7%, founder alexander aghassipour another 7%, no
numbers on 3rd cofounder

peter fenton (individual VC partner) owns 20%

devdutt yellurkar (individual VC partner) owns 25%

dana stalder (individual VC partner) owns 9%

and the actual VC firms basically own the rest of it.

~~~
nrao123
If you are suggesting peter Fenton & not benchmark owns the shares - that's
probably not correct.

Footnotes in page 120 imply that are representing the VC firms holdings

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beachstartup
my main point was that venture capitalists own the vast majority of the
company, and the founders own a comparatively small fraction.

i think we should be moving away from this model.

zendesk isn't even profitable.

~~~
pbreit
I don't know why I continue to be amazed at how pathetic the analysis of
things like IPOs and venture investing is here on HN.

OK, I'll bite...what sort of model would you propose?

~~~
beachstartup
the one where companies make money.

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senthil_rajasek
Anyone know how these guys compare to Freshdesk ?

