One thing is that a higher price can give people confidence that it must be a better product. 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. Sometimes you can’t get in there with a low price point We learned that the hard way.
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?
There may be another reason that Mackey and Coppinger are reluctant to part with equity. Between them, they only own 80pc. A third shareholder, New Zealand-based Sam Kidd, owns the remaining 20pc.
Kidd worked with Mackey and Coppinger on their Cork-based consultancy firm, Digital Crew, from 2007. He had joined the duo to help deal with some of the work they were getting from customers.
Soon after, Teamwork emerged as a product to help with some of the services that the consultancy was offering. As Kidd had equity in Digital Crew, he also owned part of the shiny new product emerging from that.
While retaining this equity, Kidd now works in New Zealand where he has a legal software startup.
Even though there appears to be no rancour over the split equity, Mackey says that it’s something that he and Coppinger have “learned” from.
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.