Saturday 25 June 2016

The billion-dollar tech prospect that's on message and right on time

With hundreds to hire and an IPO in the post, Eoghan McCabe's Intercom looks set to be the next billion-dollar tech company. He spoke to Adrian Weckler

Published 24/01/2016 | 02:30

Eoghan McCabe of Intercom
Eoghan McCabe of Intercom

David Drumm's old Anglo boardroom is not what it used to be.

While the brooding banker waits in a US jail for extradition proceedings to begin, his old St Stephen's Green headquarters is a changed place with changed tenants. Where there were shredders and confidential binders, there are now iMacs and a pool table. The iconic office block has become home to Intercom, Ireland's biggest indigenous tech startup, the software firm.

Run by Eoghan McCabe, the customer communications outfit has gone from 88 to 200 staff in the space of the last 12 months with "hundreds" more on the way. It has also raised over €50m in two years and, thanks to 9,000 paying companies on its books, has grown its revenue 20-fold in the same period.

Intercom is now a referenceable name in the tech industry. The guy who co-founded Google's Android Wear now works there. So does Facebook's former worldwide head of brand design. And with an IPO on the distant horizon, the start-up is Ireland's most likely next tech 'unicorn' (a firm valued at €1bn-plus).

"We know that we're going to be a six-, seven-, eight- or nine- hundred person company," says McCabe, Intercom's co-founder and chief executive.

"We finished last year having grown our revenue nearly 100 times since our first institutional funding round. There's nothing else like our product in the field."

An increasing number of Silicon Valley's heavyweight peers agree. Intercom was one of just two Irish-related companies (with Stripe) namechecked in Mary Meeker's influential Internet Trends Report last year. It is also now regularly referred to as an emerging industry standard for company-customer communications software. The calibre of its US backers (Bessemer, Iconiq and Twitter co-founder Biz Stone among them) is another clue.

So it appears to stand apart from the flood of loud startups who boast of "disruptive", "game-changing" or "revolutionary" products without much real impact.

The reason for its success, says McCabe, is that it spends most of its time, money and effort on building its product, not marketing or selling it. And it's doing this with peers like Stripe's ultra-successful Collison brothers in mind. It wants people like them - engineers and coders - to love and rate the product. That's a high bar.

"Last year, we hired almost 120 people," says McCabe. "Typically what happens at our stage of company growth is that the emphasis on selling takes over from R&D. On average at our stage, companies spend 30pc of their revenue on R&D. We're spending about 85pc of our revenue on R&D. Intercom is still one of the fastest growing startups of its generation but it's propelled by the product, not by marketing."

Sales and marketing are things that McCabe and co-founders Des Traynor, Ciaran Lee and David Barrett have to get around to at some stage. As they weigh those things up, though, they look set to soon go on another hiring blitz. Scaling up again will be a "rapid" process, says McCabe.

"We need to build out a recruiting team because we've so many hundreds of people to hire," he says. "Now that we know that we're going to be a nine-hundred person company, it's time to plan for that future. So we're starting to invest in things for when that happens. We're also hiring a lot of young folks, people early in their careers. We're going to invest in those people."

Intercom's set-up is a 180-degree reversal of what normally happens with tech companies that straddle Silicon Valley and Ireland. Its entire research and development team - the braintrust of the company - sits in Dublin. The non-technical bits, such as sales and finance, are based in San Francisco. Usually, it is exactly the opposite arrangement for high-end tech companies in Dublin.

But McCabe has placed a big bet on Dublin as the future of European technology.

"I'm not really a cheerleader for Ireland for the sake of it," he says. "But I don't think there's a European city that has the degree of talent that Dublin does. Definitely not London. Paris is one of the bigger ones and maybe Berlin. But if you're going to develop software in Europe, Dublin is now the place.

"In the next five or 10 years, you're going to see some flavour of what you saw in San Francisco. Tech will start to become a dominant industry here in Dublin."

Intercom, he says, is playing its part in helping to spur this on.

"We have one of the best software teams in the world here," says McCabe. "That's a fact. Right here in f***ing Stephen's Green. Some of the best minds in technology. This team can stand up to basically every single software development team in the [Silicon] Valley."

He namechecks some of his software stars.

"You get to work here with people here like Paul Adams, our VP of product and a very influential former employee of Google and Facebook. And the former Google guy [Emmet Connolly] who invented Android Wear in his 20pc time. These are important Valley guys."

So how do they like working in the old Anglo headquarters?

"It should be kind of profound, right?" he laughs. "But that stuff doesn't really resonate with me. The building itself is kind of shite. But it's in a great, great location. The fact is that there's not a lot of space to be had in Dublin."

They may not be in St Stephen's Green for too much longer, though. Rocketing staff growth means that they're just about to fill up the last remaining desks for their maximum space of 132 people. And, thanks to the glacial pace of planning officials and the Irish legal sector, they'll need some considerable luck finding somewhere nearby that can accommodate new recruits.

Right now, McCabe doesn't seem to be too worried about it. Life is moving very fast. Like other tech founders of his generation, the 31-year-old has found that there isn't time for much sleep. Life has become work and vice versa.

"The concept of work life balance doesn't even usefully describe the way I live my life," he says. "There isn't a separating line anymore, it's all blended in. I mean, this is my life, I love it and it's very fulfilling and I wouldn't rather do anything else - but it's not going to be sustainable for decades. It requires a lot. Life gets put on the backburner."

But this is not a totally dry, office-based existence.

"A lot of professional life in tech is around alcohol and drinking," he says. "'Meet for a beer or a coffee' is a phrase. But very busy people don't have time to meet for a coffee during the day. So whether it's hiring or fundraising, you're meeting folks for drinks quote 'often'. For me, most evenings I'll be meeting folks for drinks or taking someone out to try and close a deal or whatever it is."

It doesn't look like there is to be a let-up on this expansionary phase any time soon. McCabe describes Intercom as being still at an "early" phase in its product cycle. At some point, he says, this is likely to end in an IPO. But not for "years".

"People expect that it takes about seven years these days for a software company to go public," he says. "And we're about four and a half years in, you know what I mean? So that's the kind of timeline that is in people's minds."

Intercom could, he insists, stay private for quite some time and still remain successful.

"We could stay private forever," he says. "All of these companies could. But at some point they want to get liquidity for their investors and their staff. It's not much good incentivising your staff with stock if they can't do anything with it. So at some point in time you do want to go and get liquidity for those staff. And the easiest way is through an IPO. But I'm not trying to sell. I'm not trying to get out anytime soon. We're in this to go as big as we possibly can. We have a lot more room to grow."

It's just as well McCabe feels this way. The public markets have been a no-go area for tech companies over the last 12 months with several firms stalling flotations because of poor prospects. Others, such as Box and Square, floated at well below their pre-IPO valuations. In all, 2015 was among the leanest years in recent times for tech IPOs.

Going public creates other issues, too. Michael Dell recently expounded on his relief at returning to private ownership to avoid the hassle of endless public investor dissection of his company's business affairs. Right now, Intercom appears to be a company still in a pre-corporate mode rather than one with power suits, compliance specialists and analyst conference calls.

Like other tech firms, it has its own cultural quirks. Colleagues are called Intercomrades. There are company-branded t-shirts and fleeces (one of which McCabe sports during our interview) which are presumably worn as a chirpy uniform. There is an occasional nod to stereotypical startup-land, too, with a pool table and an in-house bar in the St Stephen's Green headquarters. (Neither facility appears to be especially well worn.)

McCabe says he is not into a lot of the "bullshit" around start-up culture, especially that which is "pushed from the top down". On the other hand, he says it's a little too easy to make snarky remarks about t-shirts and pool tables.

"All companies have rituals and traits," he says. "Some are conventional, some aren't. You can totally criticise it, you can poke holes in it. But these rituals are the things that bind people together. They help maintain solidarity between thick and thin. Frankly, they also make it a little bit more fun."

It comes back to people's own determination of a work-life balance, he says.

"People who work at start-ups, especially the good ones who could work at any company, are investing their own lives and careers in these firms. So they often want to show off that bet that they've made. There's pride there. Companies that would require these things or push them on staff, I'm not into that. It just feels icky.

"But what Intercom has always done is gently to facilitate the excitement that people have for this company for this mission that we're on. And sometimes that does mean spending too much money on Patagonia fleeces."

Fleeces or no, McCabe and his 200 Intercomrades may be onto something big. It can be hard to distinguish the wannabes from the genuine contenders. Bit players often pull off funding rounds or see out a trade sale for several million euro, all the while shouting loudly about it.

But in a sea of rah-rah merchants, Intercom appears to be on the cusp of something bigger than we're used to seeing. It may soon be the Irish tech start-up you automatically think of.

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