Zendesk Scores Series B Funding and Ditches Freemium

I’m a big fan of both the Zendesk product offering, and the company. I’ve spent a significant amount of time with the Zendesk crew, written about them since the very early days and had something of an inside view of what makes them tick. In an industry that seems sadly full of wannabe prima donnas, it’s nice to experience those Zen like moments.

So I was pretty excited to get a call the other day telling me that this morning Zendesk is announcing that it’s closed a series B funding round with none other than Benchmark Capital whose portfolio really is a who’s who of business across multiple sectors. It’s only three months since Zendesk announced their series A round by Charles River Ventures. It seems their customer list which includes such big names as Twitter,MSNBC, Condé Nast Publications, Scribd, Rackspace Cloud and John Lewis Plc gets the VC crowd plenty excited.

Joining the Zendesk board will be Peter Fenton who led both the FriendFeed and the SpringSource deals (see the TechCrunch post where Fenton is called a VC rock start). Benchmark is, of course, the firm that turned a $6.7 million investment in eBay in 1997 into $5 billion by 1999. Fenton is quoted as saying;

We live in an era where great products quickly stand out–users sing their praises and the word spreads immediately. Two of our portfolio companies, Twitter and Engine Yard, raved about Zendesk, and we discovered enormous momentum around the product. Zendesk really spoke to us as a company that embraces and elegantly responds to the needs of their users, particularly when user support has been viewed historically as a necessary evil

Which is a pretty strong endorsement from such a VC luminary. The round was worth $6 million and will see Zendesk move headquarters once again, they only relocated from Denmark to Boston a couple of months ago, this time they’ll move to San Francisco.

Alongside this announcement, Zendesk is segmenting its product offering into three distinct bands;

$9 per agent/month	$19 per agent/month	$39 per agent/month
One agent only	First 3 agents $39 total	First 5 agents $99 total
Community support only	Mail support 24×5	Mail & phone support 24×5

Basically the new plans give nice price points for both existing, and new, customers. The only losers in the deal are those who were formerly on the free plan (now discontinued) – I’ve long been a little sceptical about the freemium concept – a move away from it is no bad thing as far as I’m concerned. As Zendesk themselves said in the announcement;

Our previous free version was a crippled variant of the regular Zendesk version, and it just didn’t make sense to use it in production. So why have it. The new Solo edition is as good as free, only $9 a month. And if you’re currently using a free version we will sponsor you for the next six months, giving you reasonable time to figure out whether you want to use it or not.

While I’m not sure that I’d agree that $9 is as good as free, the new Solo account makes more sense to me. Current users of the Free plan will however be credited with six months free on the Solo plan which gives them time to assess their strategy going forwards.

At the top end, the new Zendesk Plus+ version is aimed for enterprise level customers and adds functionality that enterprise customers demand;

Support for multiple time zones and end user languages simultaneously

It’s great to see Zendesk doing well – after New Zealand startups, my favorites are those from Denmark – while Zendesk has left Den Lille Havfrue behind, their ethos and way of doing business is decidedly more Northern European than Silicon Valley – let’s hope it stays that way!

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