Saturday 23 June 2018

Build it (in Cork) and they will come

Teamwork.com doesn't need to move to the US to grow, or to take a penny in VC cash co-founder Dan Mackey tells Adrian Weckler

Teamwork co-founder Dan Mackey says its new Belfast office is a big step. Photo: Michael MacSweeney/Provision
Teamwork co-founder Dan Mackey says its new Belfast office is a big step. Photo: Michael MacSweeney/Provision
Adrian Weckler

Adrian Weckler

The first thing you see when you walk into Teamwork's Cork office is a huge video screen with a big number on it - $25m annual revenue.

"That's our target," says Dan Mackey. "It's our single focus. We're on track to do it this year."

Mackey has greeted me in cargo shorts and a branded T-shirt. He's dressed a little like a roadie.

The office he's showing me around is right out of Silicon Valley, too. There's wood panelling everywhere, comfy couches, an extensive, well-equipped roof garden, superhero art (DC is favoured over Marvel) and even a series of human slides between floors. (There's only been one injury on these so far, he tells me.)

But while the Blackpool headquarters looks like a typically transplanted Californian tech hub, there is one big difference between Teamwork and virtually every other fast-growing tech firm in Ireland and the US.

The indigenous Cork startup, which now has some of the world's biggest companies as customers, is completely self-made.

Almost uniquely among today's crop of young tech companies, there isn't a penny of venture capital in here. Or debt. The whole thing is self-funded and 'organically' grown by co-founders Mackey and Peter Coppinger.

On its projected $25m (€21m) revenue this year, it expects to make around $5m (€4m) in profit. Based on the popularity of its software, it now employs 200 high-end engineers and sales people and is opening new offices all over the world. This month it announced a new office in Belfast, where it plans to hire 85 people.

"If it continues the way it is now, we'll hit $450m revenue within 10 years, which is our goal," says Mackey.

So far, there's no reason to doubt it. The company is growing at 40pc a year, says Mackey, and has been for several years.

Its client list includes Disney, Netflix, Spotify and many other big names.

For those unfamiliar with what it does, Teamwork makes project management, customer support and work communication software. It's typically used by teams within companies to track work and projects of various shapes and sizes.

It competes with giants such as Atlassian and Zendesk, names that may not be familiar to the average person but are billion dollar companies with global recognition among enterprise businesses. Slack is also increasingly a competitor.

Its key component is that it's one of the new breed of 'software-as-a-service' companies, meaning most or all of the functionality comes from logging in and using it online.

Teamwork isn't a new company. It's been around since 2007, with Mackey and Coppinger having worked together (building websites) in Cork since 1998.

As Mackey tells the story, they just got sick of trying to organise projects using higgledy-piggledy resources. So they decided to make a decent one.

"We threw it out one night online and we just got customers right away," says Mackey. "We did no sales, no marketing. It sold just on the strength of the product."

They carried on in this vein for a couple of years, with little thought of building out a traditional-looking business, until they started to see a serious uptake of the product.

Fast forward to 2018, where Teamwork has 22,000 paying customers with over 10 times that number using its software. It is now one of the fastest-growing tech companies in Ireland (Deloitte ranks it 12th out of its top 50, though many of those ranked above it in the growth list aren't profitable).

Having now filled up its building (and part of another one) in Cork's Blackpool retail centre with new employees, Mackey and Coppinger have purchased a large multi-acre site next door with the aim of constructing its own building in the next couple of years. (Possibly with more slides.)

This is a daunting project and one that will likely cost a minimum of €25m to €30m.

But a couple more years of Teamwork's growth will see its cash pile hit this level, possibly enabling it to be paid for without borrowing anything.

If and when this happens, Teamwork will be on its way to being one of the country's biggest home-grown software companies, following in the steps of newly-minted 'unicorns' such as Intercom.

But they will have done it without getting the hundreds of millions in venture capital that forerunners such as Intercom and Stripe have.

"It's very important to us that we have grown based on not taking investment," says Mackey. "Sometimes when we're in a room with other growing companies that are all funded, we do think "Jesus, what if we took, say, €30m and pumped it into the machine and got results that way? But then we think, hang on, we're actually profitable here. We have a plan. We don't really need that money right now."

But aren't they in a hurry? For all the solid growth and sales success Mackey and Coppinger are enjoying with Teamwork now, wouldn't it be able to scale that bit faster - to catch up with the Zendesks and the Atlassians - if they did take that €30m or €50m jetpack?

"It's always something we'll wrestle with," says Mackey. "And yes, we've done that analysis. We looked, for example, at the likes of Atlassian and the investment they took and the breaks they made with their company. We might yet look at something like debt as an option as opposed to giving away a whole chunk of the company, because we could probably achieve the same goal that way.

"But we'd be reluctant because the way we've gotten here is a big thing for us and something we're proud of. Right now, we have a 10-year vision of getting to $450m [annual revenue]. We're growing at 40pc year-on-year. That has been consistent in the last few years and it's all profitable growth. We've a profit rate of about 30pc to 40pc. But we're constantly reinvesting it back into the business. If we continue on our plan for 10 years, we will hit $450m."

Looked at it this way, why would Teamwork change its funding philosophy?

Other lessons the company quickly learned was that pricing is a nominative discipline in the world of online software.

"We learned this the hard way," says Mackey, when I put it to him that companies sometimes take a vendor more seriously if they add a zero on to their asking price.

"Absolutely. We found it made some of the bigger clients feel secure, that a higher price can give people confidence that it must be a better product. Now to be fair, you add on things like dedicated account managers, encrypted databases and things like that. But what you have to understand is that you're often dealing with people in bigger companies who have been tasked to go and find a solution. And it's the company's money. When Disney came to us, they wanted an enterprise offering. All we had at the time was a maximum of $250 per month. When they went back to their managers and told them it was $250 instead of thousands of dollars, we weren't taken seriously. You can't get in there with a low price point. With Disney, we got our first $100,000 per year deal recently. That was based on a per-seat price, which influenced it. Before that, our software-as-a-service model was hard to anchor so we changed all our pricing to be per seat."

So far, it's businesses that come to Teamwork looking for their product rather than Mackey and Coppinger having to go and pitch to big companies. This is one of the side-effects of 'software as a service', Mackey says. It's also one of the reasons that the company doesn't feel the need to open up any kind of major office in the US, where most of its customers are.

"It's not needed at all," he says. "Even with our customers being predominantly located in North America, we have no physical presence there. We have a support team that works '24 five'. If we ever put boots on the ground to really target enterprise, we would have to open an office. But it wouldn't be anywhere near Silicon Valley. In my view, we'd look at somewhere like Boston because it's closer to here. Silicon Valley is never a goal for us. There's no need for us to be there."

The opening of the Belfast office is a new step for Teamwork because it's the first time, Mackey says, that it will have a proper team outside Cork.

"Before we'd have three- or four-man teams working on it in Buenos Aires or Barcelona. With Belfast, this is our first time where we have a new team building a core product."

Mackey and Coppinger appear to know what they want. They also appear to have the money to finish the job themselves.

Name

Daniel Mackey

Age

39

Position

Co-founder and chief technical officer, Teamwork.com

Lives

Cork

Education

Cork Institute of Technology

Previous experience

Application developer, Digital Crew; website developer

Family

Wife and two children

Pastimes

Film fan, DC superhero fan, enjoys business books

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