Intercom's fresh funding brings the customer engagement startup's valuation to $1.275 billion

Key Points
  • Intercom considers itself the "next-generation Salesforce," offering a digital take on a timeless problem: improving businesses' interactions with potential or existing customers.
  • McCabe and the rest of the Intercom team are looking to push the startup as far as it can go, including tackling artificial intelligence, before they explore other long-term business options.
Intercom COO Karen Peacock and CEO and Co-founder Eoghan McCabe pose for a portrait.

Intercom announced $125 million in Series D funding on Tuesday, bringing the customer messaging startup's valuation to $1.275 billion.

Kleiner, Perkins, Caufield and Byers led the round with contributions from Google Ventures, as well as investors from prior rounds of funding. Kleiner, Perkin's Mary Meeker will also join the Intercom board.

Founded in 2011 by Eoghan McCabe, Des Traynor, David Barrett and Ciaran Lee, Intercom boasts more than 25,000 customers in 117 countries, and has been growing at a steady clip. Intercom's platform supports about 500 million conversations per month – between people, not bots – and has historically seen the number of supported conversations double year-over-year. Since 2016, the messaging platform has almost doubled its staff, and now counts 500 employees across five offices.

Intercom considers itself the "next-generation Salesforce," offering a digital take on a timeless problem: improving businesses' interactions with potential or existing customers.

"If you think about how you connect in any kind of digital or virtual way with anyone in your life, it is through a messenger," McCabe said. "Messengers are simply the default standard, the expectation for consumers, and we are certain that all businesses will use messengers to connect with their customers in the very near future. Intercom has been very much creating and pushing that trend."

Intercom helps internet-based businesses connect with customers via messenger-first products, similar to Facebook Messenger or Whatsapp, from the businesses' own websites.

Intercom's chat products can help companies attract new customers, keep old customers and streamline support and site feedback. Some tools are automated, which can help with tasks, like qualifying new customers before connecting them with people and coordinating marketing campaigns. And Intercom also offers a customer-facing data management platform to help businesses store data on customers to provide more personalized interactions in the future.

Ever visited the websites of Shopify, Expensify or Trunk Club? Chances are you've had a run-in with Intercom.

When McCabe and his co-founders launched Intercom in 2011, he said they focused their efforts on small internet companies. They hoped to help these online-only businesses feel more like brick and mortar businesses to their customers.

In fact, McCabe said he was inspired to start Intercom by a great experience in a pricey Dublin coffee shop.

McCabe described 3FE, for Third Floor Espresso, as the first "hipster" coffee shop in Dublin. He and his colleagues developed a relationship with the owner, Colin Harmon, and kept coming back, despite the pricier brews.

"It became so starkly obvious how this relationship we had with this guy Colin had us coming back more, referring friends, giving feedback. I'm sure we paid way more for his hipster coffee than we would have if we didn't like the guy — and we wanted that for our business too," McCabe said.

"We described our mission as being to make internet business personal," he added.

In 2011, McCabe and his co-founders launched Intercom. He maintains that there must have been something in the air that year that inspired multiple companies to take on the task of making-over messaging.

"The fascinating thing is that we launched our messenger in the same 12 months in 2011 as iMessage...Facebook Messenger, Snapchat, Wechat -- a whole bunch of companies at the same time," McCabe said. "There was clearly something in the air, something about that time that had people wanting to reinvent how people connected."

When Intercom launched, the founders initially targeted small, innovative companies. Many of Intercom's first customers fit into the Silicon Valley geek/early adapter categories — over 84 percent of Y-Combinator companies that use any type of messenger product use Intercom, its promotional materials proudly boast. But since then, Intercom has grown in popularity and now attracts more traditional clients, like Sotheby's, which wanted to add "white glove service" to its site, McCabe said.

ProsperWorks, a company that provides customer relationship management solutions to clients, like Google and Lyft, has been using Intercom for three years. The company first added Intercom's messaging to enhance sales and marketing, then adapted it for other uses, like notifying customers for other releases.

"We were looking to increase engagement on the website and vying to pass off qualified leads to our sales team. Getting a valuable lead in front of sales at the start of their evaluation is a driving force in converting them to customers," Kyle Bastien, director of sales training at ProsperWorks, wrote in an email.

When used alongside forms offering a free trial, Bastien credited Intercom with generating 25 percent more leads, creating 19 new opportunities and adding $36,000 in annual recurring revenue.

Intercom is hoping to keep up the momentum with this new round of funding. But even as recently as December 2016, McCabe didn't think the company needed more investment.

After Intercom closed a $50 million round of funding in 2016, McCabe told CNBC the startup would not require additional funding. His thinking has since changed.

"One of the things that really has blown my mind over the past few years is seeing how far Intercom can get, in terms of revenue, and valuation, number of customers, even adoption — and still be so early in its mission and its venture," McCabe said.

"In 2011, I thought that 6.5 years in we'd be bored, the company will be big and bloated — you really wouldn't guess you'd get to do so much of the fun stuff we were doing in the early days," he added.

McCabe and the rest of the Intercom team are looking to push the startup as far as it can go before they take the company public or explore other long-term options. And they've got a few tricks up their sleeves for the coming months.

Although McCabe remained intentionally mysterious, he hinted that Intercom would be taking on one of Silicon Valley's darling projects: artificial intelligence. He said it's likely the first of those projects could emerge within the next few months.

"Whenever I talk about this, I try my very best to avoid the trap of cliches that sound like 'our best days are ahead of us,' or 'we're only getting started,' but that's actually kind of true," McCabe said.