Zendesk co-founder Mikkel Svane on why taking a company public should never be an “end game”

If your startup’s big hairy audacious goal is to list on the Australian or even New York Stock Exchange, Zendesk co-founder and chief executive Mikkel Svane thinks it might be time to pick a different goal.

Speaking to StartupSmart in Melbourne last week at a company event, Svane touched on the process and experience of listing customer support giant Zendesk on the NYSE way back in mid-2014.

At the time, the company had around 500 employees and had been operating for seven years, coming from what Svane calls a “kitchen counter” beginning. Zendesk now has over 2,300 employees and revenue of more than $US500 million ($684.2 million), along with a $US7 billion ($9.5 billion) market cap to boot, and Svane says he wouldn’t change a thing.

“I don’t think about the company when we were a private company. Being a public company is in our blood,” he says.

“Being a public company makes it easier for us to do a lot of things, though it comes with a lot of work, [like] the compliance, controls, quarterly reporting.”

However, Svane believes if Zendesk was still a private company today, he would have implemented his own internal framework for those sort of obligations, as he believes organisations need “discipline and cadence”. However, going public was a far easier option than designing such a framework, he claims.

“Is there a better way of doing [compliance]? Probably. Do I want to innovate and invent it? Hell no. I want to run my business,” he says.

Companies “will fail” going public too early

It’s clear to see that far more startups choose to list in the US compared to Australia, something Svane puts down to the more mature and larger startup scene that exists right across the US. He says listing on a small market, such as Australia, makes little sense and questions what startups are actually hoping to gain from that listing.

Svane thinks many startups view going public as an “end game”, a view he entirely disputes and blames on over-eager investors and stakeholders who are keen for an exit. It’s an “immature conversation”, he says.

“There’s a fundamental thing about going public: it can’t be like an end game. You go public to start next chapter of company’s life,” he says.

“There are definitely investors and stakeholders who are pushing startups to go public for an exit, which doesn’t make any sense. Going public has to be a beginning of a new chapter for a company.

“If going public doesn’t mean you start that next chapter, it doesn’t make sense to go public. And that’s why you will fail.”

These comments come in the wake of a number of Australian startups that pursued a listing and were then burned after regulatory and compliance issues caught up with them. This includes logistics startup GetSwift and online video producer Big Un, which yesterday called in administrators.

Zendesk growing along with local startup scene

Zendesk first opened its Melbourne office in 2013, which has since “grown like weeds” from just 40 employees to well over 200. Svane reflects that as the Melbourne office has grown, so has Australia’s startup ecosystem, which he believes has seen “a lot of disruption in the past five years”.

The company has been growing 40% year-on-year along multiple metrics, including staff and revenue. This has required plenty of changes in management and structure for the company, which Svane says has been simultaneously “amazing” and a “pain in the ass”.

“We grow very quickly and plan to continue to grow at this pace, so when you get to around 2,000 people and you continue to grow 40% year-on-year, it’s a lot of moving parts,” he says.

“I recently appointed a chief people office whose job is just to mature the organisation so we can grow towards 5,000 people, while continuing to be innovative and fast-moving. It does require a lot of investment in people.

“Running a global company is a pain in the butt, and it means a lot of early morning and late night meetings for everybody. But that’s the price of having a global business.”

NOW READ: Mikkel Svane’s nine lessons in building a “unicorn” billion dollar business: The Zendesk story