Zendesk CEO explains Smooch, its latest acquisition

$9.6 billion customer service tool Zendesk just bought Smooch, a tiny startup that lets customer service teams continue conversations across multiple different messaging platforms.

Zendesk and Smooch have partnered for a while, and new integrations will roll out over the next year.

Zendesk CEO Mikkel Svane said Smooch is exactly the type of acquisition he wants to make on the path to his multi-billion dollar revenue target.

Smooch has good technology and a strong team which could transform the DNA of Zendesk, Svane said.

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Zendesk CEO Mikkel Svane is on a mission to hit billions of dollars in revenue, one tiny acquisition at a time.

The latest target is Smooch, a Montreal-based startup with a product lets customer service teams seamlessly talk to customers across consumer messaging apps like WhatsApp, Apple's iMessage or Facebook Messenger, via a private and secure company channel. It's an approach referred to in the industry as omnichannel messaging.

Zendesk has partnered with Smooch for several years now, and early access to integrations between the two will launch this week and roll out over the next year.

“Now that we've acquired them we feel like we've taken the relationship to the next level,” Svane told Business Insider.

A small acquisition could lead to big changes

Zendesk, which builds tools for customer support desks, company, is publicly traded with a market cap of $9.6 billion. The company expects to hit $800 million in revenue in the 2019 fiscal year, and reach its first year with $1 billion in annual revenue in 2020.

Smooch is comparatively small. The company has fewer than 100 employees and has raised less than $8 million in seed funding since it was founded in 2016, according to PitchBook. The terms of the acquisition weren't disclosed.

While it's not bringing much by the way of revenue onto Zendesk's balance sheet, Svane believes it's the type of acquisition that can transform Zendesk for long-term success.

“This is very much a technology and team hire,” Svane said. “We want great talent and we want great technology. But we also want the DNA of people, like in the case of Smooch, who have been eating and drinking and sleeping with this for many years, and this is their work.”

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“We want to bring that DNA into the company to help grow and evolve the company. That's very much how we think about acquisitions,” Svane said.

Like past acquisitions

Svane compared Smooch to Base, the sales automation tool that Zendesk bought last year.

“We could have built our own sales product, but getting 100 people into the organization that have been living and breathing this for so long is incredibly important for the evolution and the diversity of your business,” he said of the Base deal.

As to how Zendesk looks five or ten years down the road, Svane said the only guarantee is that things are going to keep changing.

“Ten years ago we were three guys in a kitchen,” he said. “What really gives us a lot of confidence, and what we feel very privileged about is, we're in a place right now where customer expectations are changing almost daily. Things that used to be fantastic yesterday are pretty mundane today.”