Startupland

How Three Guys Risked Everything to Turn an Idea into a Global Business

Mikkel Svane, Carlye Adler

• Publisher: Jossey-Bass
• Year: 2014
• Print ISBN: 9781118980811
• eBook ISBN: 9781118980866
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

The real story of what it takes to risk it all and go for broke.

Conventional wisdom says most startups need to be in Silicon Valley, started by young engineers around a sexy new idea, and backed by VC funding. But as Mikkel Svane reveals in Startupland, the story of founding Zendesk was anything but conventional.

Founded in a Copenhagen loft by three thirty-something friends looking to break free from corporate doldrums, Zendesk Inc. is now one of the hottest enterprise software companies, still rapidly growing with customers in 150 countries. But its success was anything but predestined. With revealing stories both funny and frank, Mikkel shares how he and his friends bravely left secure jobs to start something on their own, how he almost went broke several times, how they picked up themselves and their families to travel across the world to California and the unknown, and how the three friends were miraculously still together for Zendesk's IPO and (still growing) success.

Much like Zendesk's mission itself—to remove friction, barriers, and mystery in order to make customer service easier and more approachable— Startupland removes some of the myths about startups and startup founders. Mikkel's advice, hard-won through experience, often bucks conventional wisdom and entrepreneurial tropes. He shares why failure (whether fast or slow) is awful, why a seemingly boring product or idea can be the most exciting, why giving back to the community is as important as the bottom line. From how to hire right (look for people who are not offended by swearing) to which personas generate the highest response rates, Mikkel answers the most pressing questions from the perspective of someone still in the trenches and willing to share the hard truth, warts and all.

While there are books by consultants who tell you how to build businesses, or by entrepreneurs now running billion-dollar businesses, there are few books from people still in the trenches who acutely remember the difficult daily decisions, the thrill (and fears) of the early days, the problems that scale with growing a business, and the reason why they all went on the adventure in the first place. Startupland is indispensable reading for all entrepreneurs who want to make their ideas the next big thing. The book will inspire and empower you to follow your own dream and create your own story.

Chapter 1
The Honeymoon

Believing that what you're doing is great and knowing nothing of what's to come

In March 2014, most of the publicly listed high-growth technology and Software-as-a-Service (SaaS) companies started to experience large pricing corrections. Some stocks lost 25 percent in value in a matter of weeks. Some lost 50 percent. The media was reporting “Valuations Will Be Cut in Half”¹ and calling it the “Twilight Zone of SaaS.” Mad Money and Squawk on the Street host Jim Cramer famously yelled, “The software-as-a-disservice to your portfolio days are upon us.”² In Silicon Valley, people were drawing parallels to Sequoia Capital's famous “R.I.P. Good Times” milestone presentation from October 2008.³ All of the analyst's models were ripped apart. Things were messy for tech startups and SaaS companies.

At the exact same time we were in the final stages of preparing Zendesk for going public on the New York Stock Exchange. Once again, our timing was not the greatest.

But let's start with the start.

The IPO and everything that came with it were all vastly different from everything that had started less than seven years before, working in Alex's tiny loft in Copenhagen, arguing about everything, and trying to turn an idea into a reality. The fact is, most of the time my entrepreneurial adventures hadn't gone very well, or at least they hadn't gone according to plan.

I'm not just talking about Zendesk. I'm not a big fan of being called a serial entrepreneur. Call me old-fashioned, but nobody brags about how many broken marriages they have behind them. However, for better or for worse, I was no stranger to startups. For most of my working life, I never had a real corporate job. Although Copenhagen—a city of about a million people, in a country with the smallest private sector in Europe—isn't exactly the epicenter of the startup world, it was what I knew.

Beautifully Simple, Round One

After I graduated from business school in the early 1990s, right when a recession hit, job opportunities were scarce. I hardly even looked for employment. Instead, I pursued something I was interested in—making things on computers—and started a small graphic desktop publishing company. At the time, I was fresh out of school, and 3D Magic Eye books, with illusions that allow you to see 3D images by focusing on 2D patterns, were the fad. I created an algorithm to create these types of 3D images or visual illusions called stereograms. I had serious headaches while working on this, but I loved being able to adjust my eyes to see the 3D element instantly. Then I turned that into a computer software program that made it easy for users to make these complex illusions.

This was my first formal foray into software, but the “software industry” was in such a different state then and had little in common with what we know today. Consumers and businesses had not begun to use the Internet, and software was kept on disks and used on desktop computers. There weren't any best practices for how to distribute software, and I was a one-man software shop figuring it out along the way. I took the packages to little computer shops to stock and sell. Customers sent me orders, and I shipped out the disks myself. I worked out of a teeny office space in downtown Copenhagen. It had low ceilings and crazy crooked floors. There were parts of the office where I couldn't stand upright. There was barely any room for me, let alone space to navigate large piles of inventory.

This effort didn't make me rich, but I didn't lose money. And although it was a terrible business in that it was very labor intensive, without much monetary payoff, I also found it was very satisfying to build a product. I loved creating something and having people use it. I was eager to read the reviews and talk to users. Most of all, I loved that I had taken something that was hard and made it easy for people.

This work led me to write a book that taught people how to create these complicated images.⁴ The book, which was released only in Danish, was sold in bookstores. People bought it and learned how to make these seemingly complicated images rather simply and quickly. I designed the cover for the book: it was a computer monitor with two eyeballs poking out (you know, 3D!). I rendered everything in a pirated version of Strata Studio Pro, and I scanned the iris from the cover of The Cure's Kiss Me, Kiss Me, Kiss Me album (I was a big fan of the album).

Importing the Internet from America

Although I was fascinated by computers and grew up using first a Lambda 8300, a ZX-81 clone with 2 KB of memory, and later an Amstrad CPC464 (with a built-in cassette tape!), no one would call Copenhagen a technology haven at that time. In the early nineties there were only metered, very expensive dial-up connections and only one internet provider. And there were very few people on the Internet.

This was the early days of Netscape Navigator, and the Web was just becoming searchable, but I certainly didn't know where the Internet was headed. However, a trip to San Francisco in 1995 made everything more clear—it was going to change everything.

In San Francisco, everything related to the Internet was being totally embraced. Everything was about the Web. Billboards advertised companies with “www” addresses. My San Franciscan friends ordered food and DVDs online. The Internet was a part of their daily lives. Everyone communicated saying, “Send me an email,” and everybody had an email address. I experienced emailing between Copenhagen and San Francisco and having these messages arrive instantly. I couldn't believe how much smaller the world was, now that it was connected by the Internet. It was completely fascinating. And I couldn't help but notice the significant gap between how technology was adopted in San Francisco and how it was integrated into our lives back at home. (It wasn't.)

Mostly what I took home from San Francisco was the sense of being at the start of something big. Today, technology is so extremely refined that it often seems to work by pure magic—you look at your iPhone and it's hard to distinguish from the supernatural—but back then it was possible to understand the web protocols and learn how to write HTML and have an idea of how to participate. You could see the path to being a creator in this new world. I felt a little bit like I had found oil on a nearby property, and I understood there was immense value in drilling it out of the ground.

There were so many things to be inspired by in the United States that I wanted to take everything I saw and bring it back with me. And that's exactly what a lot of us did.

When I returned to Denmark I was obsessed with what I had experienced in California, and I wanted to recreate it. I built a portal, a website that brought information together from multiple diverse sources—this was all the craze back then—and called it Forum.dk. Initially it was almost impossible to buy domain names for a new web service. The Danish system was extremely restrictive, requiring you to document that you owned the name already. It made everything slower and more complicated than I had anticipated. Further exacerbating matters was the fact that there were still so few people on the Internet in Denmark.

Still, we started toying around with the portal, researching how we could produce and gather content. We struck up a partnership with a source to distribute news for free. We also went outbound and created our own content: I had guys pick up flyers from dance parties and raves, and we put the events in a database so people could see where the best ones were happening. We added community elements and chat rooms (one of the first chat rooms in Denmark). The site gathered users, and although it was not our original intention, it became very popular with teenagers.

I kept a small office in the old part of Copenhagen, known for its cobblestone streets and little cafés and shops, and I worked with people who wanted to help out. They were not real employees. After all, there was no real way to pay them. It was hard to monetize this endeavor. Advertising hadn't really moved to the Internet in Denmark, so that wasn't an option.

Still, making money wasn't the main point; that was secondary. It was the potential that we were pursuing. (To deal with the more pedestrian matters of making money, I did a variety of unglamorous jobs, including waiting tables and cleaning houses. Living the dream!)

Though I had no clue how to make money off this project I loved, an opportunity came along and solved that problem for me. A newspaper offered to buy Forum. We sold off the actual service, and what we had left was the software. Now, instead of being a community portal that didn't charge anything for its services, we became a software company with products to sell.

The Danger in Riding Market Waves or Going Kaput

Soon I discovered that there was a real market for this software. Companies wanted to have their own websites and provide community services for their users and visitors online. We rebuilt the entire product portfolio in J2EE, the most interesting and forward-looking software framework at the time, but also the most expensive in terms of software stack. We sold it on top of BEA WebLogic and Oracle RDBMS and primarily into large media companies or web properties, but all kinds of organizations including financial institutions became customers. Soon this remnant of our original service turned into a real business.

We named the company Caput, which means “the head” in Latin. And of course it also sounds like kaput—or “no longer working,” which was kind of cute in the beginning (kind of), but in retrospect of course it's a terrible, terrible name. But we were growing this in the halcyon days of the Internet. Things were both promising and exciting—everything was working.

At the same time, I was always working. I had no personal life whatsoever. From the time I woke up in the morning until I went to bed, all I did was work. The company was financed by a few angel investors, but it was funded mostly by selling the software. The dot-com boom that had swept the United States had now hit Copenhagen. We benefited from the hyper-frothy interest in all things Internet-related. I saw something that had the potential to become something much bigger. It was a lot of work, and it was also a lot of fun.

And then, quite suddenly, it wasn't. The dot-com crash of 2001 came as fast as the crest had. Our software was sold primarily via value-added resellers (VARs), and these companies were hit hard by the change in the tides. Media companies, a big customer base, were also brutally affected. They couldn't pay their bills, including ours. We struggled and suffered for a year as customers fell by the wayside.

Relying on sales to grow our business, and without a reserve, we had no way to cushion the impact. We had to let a lot of people go. It was really tough to have to do that to people and to go on the next ...

Table of contents

• Cover
• Title Page
• Copyright
• Dedication
• Foreword By Alexia Tsotsis
• Introduction: The Pursuit of Happiness
• Chapter 1: The Honeymoon: Believing that what you're doing is great and knowing nothing of what's to come
• Chapter 2: The Salad Days: Keeping it together when things should be falling apart
• Chapter 3: Going for Broke: How to turn down money and keep your company (and your soul)
• Chapter 4: The Bubble Redux: Battling circumstances beyond your control
• Chapter 5: The Game Is Not Over: Getting investors and getting along with your partners
• Chapter 6: Coming to America: Chasing the dream—and dealing with the reality
• Chapter 7: Go West: Leveraging location and upending our lives
• Chapter 8: Growing Up: Going from building a product to building a company—and messing up along the way
• Chapter 9: Innocence Lost: From idealist to realist, and the uncomfortable journey in between
• Chapter 10: Going to the Show: Becoming a public company and remembering where we came from
• Epilogue
• A Few More Thoughts: It's all about relationships
• Acknowledgments
• About the Authors
• More from Wiley
• Index
• End User License Agreement