🎧🍌 Inside Intercom’s AI Turnaround | Eoghan McCabe, Co-founder and CEO
Why all software companies must train their own models, importance of brand when building new products, how Intercom invented outcome-based pricing, and why AI gross margins are higher than you think
This was an extremely candid, two hour conversation going inside every detail of how Intercom became the first late stage software company to successfully re-architect itself for AI.
We also talk through the lessons he learned coming back to run Intercom in 2022 after stepping back in 2020, why many AI companies have strong gross margins despite the narrative, how Intercom designed AI’s first outcome-based pricing model, the challenges of buying AI software today, the importance of brand when building new products, and we get in the wayback machine, talking through the pain raising Intercom’s initial million dollar Seed round, and how venture capital has changed since then.
Intercom also just announced they’ve built their own customer service-focused AI models, and Eoghan explains why most software companies will have to do the same.
Presented by Ramp
If you're running a finance team, you know how much time gets wasted on expense management. Chasing receipts, categorizing transactions, waiting for expense reports. It adds up quickly.
Ramp handles all of this automatically. Its a corporate card and expense management platform that over 40,000 companies, like Shopify, CBRE and Stripe use to streamline their financial operations.
But here's what makes their corporate card different: every transaction gets automatically categorized and matched to receipts. No more wondering what that $47 charge was for three weeks later. You can set spending controls, get real-time alerts, and even block certain merchant categories. It's like having a finance team member embedded in every purchase.
The platform integrates with your accounting system and ERP, so everything flows through without manual data entry. Whether you're issuing cards to a few employees or managing spend across departments, Ramp gives you visibility and control without the paperwork.
Stop chasing receipts: check out ramp.com/ThePeel to get $250 and see what a corporate card can actually do for you.
Time is money. Save both with Ramp.
To inquire about sponsoring future episodes, click here.
Timestamps to jump in:
4:18 We’re at peak SaaS
9:11 Inside early days of Intercom’s turnaround
16:43 AI will beat humans at everything
21:17 Making trade-offs building AI products
24:25 Why Intercom trained their own AI models
28:33 Lessons from returning as CEO
34:19 Overcoming initial AI skepticism in 2022
40:02 Creating AI’s first outcome-based pricing
45:15 Intercom’s best-in-class gross margins
49:25 Why its so hard to buy AI software today
51:28 Unpacking AI’s negative gross margins
58:12 Being perfectly positioned for AI
1:07:01 How AI will change org design
1:09:47 Why AI products need their own brand
1:16:13 Founder CEOs vs Manager CEOs in AI
1:21:29 AI startup opportunities
1:24:57 Lessons running a team in Dublin and SF
1:28:25 How media has changed over time
1:37:32 Raising Intercom’s first $1 million Seed round
1:43:53 Why there are so many VC’s
1:47:38 Advice for investors
Referenced:
Find Eoghan on X / Twitter and LinkedIn
👉 Stream on YouTube, Spotify, and Apple
Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Eoghan, welcome to the show.
Eoghan McCabe:
Thank you. Thank you very much-
Turner Novak:
Did I get it right?
Eoghan McCabe:
You did it, yeah.
Turner Novak:
Okay, perfect. We were just talking before we started recording that I was trying to get the pronunciation right.
Eoghan McCabe:
Yeah, good job.
Turner Novak:
But I'm excited for this. You are the founder and CEO of Intercom. You're probably one of the only later stage larger software companies that has basically gone back and completely reinvented yourself to be AI first. I'm just excited to spend the next hour and a half-ish just talking about it. So going back, I don't know when you usually like to start that journey, but past couple years how have things been going?
Eoghan McCabe:
Yeah, so there's a bunch of stuff I want to give context on. One is just the general market at the moment I mentioned to you earlier, late stage software actually in trouble. Look up your favorite large SaaS business that's public and you'll see consistently declining revenue growth.
Turner Novak:
So, there are some that are declining.
Eoghan McCabe:
Well, declining net new ARR. And then, in the last quarter a number of big names went into negative net new ARR territory. So, the ARR is now decreasing. So, just to set the stage that late stage software, the wind is just not there anymore that was propelling it.
Turner Novak:
Do you know what's causing that?
Eoghan McCabe:
I actually don't. I wish I didn't bring up this topic because now I look like it fool, but I don't know-
Turner Novak:
You know that it's happening.
Eoghan McCabe:
It's happening, and it's somehow connected with, somehow SaaS and software has gone stale and the midwit explanation would be AI, something-something AI, but I don't actually see that. But there is something common amongst these companies that are not doing so well, which is that they are ... It's hard to see the relevance in the age of AI. A lot of them don't have a story for how they are relevant in the future. It's not yet the case that vibe coding has eclipsed the value of traditional software development such that all of these SaaS tools are just no longer valuable because they're commoditized? Commodified?
Turner Novak:
Commoditized? I think that's the word, maybe.
Eoghan McCabe:
Let's just keep both of them in there-
Turner Novak:
We'll roll with it.
Eoghan McCabe:
... for everyone. I don't think that's true, because vibe coding is not quite there yet. It's just vibe still.
Turner Novak:
Yeah, I think many people have made the observation it, it's like, "Have you seen any actual in-production vibe coded apps that are more than just a screen or two?"
Eoghan McCabe:
But it's adding efficiencies, et cetera. So I don't think it's that, but there's just a lot of loss of energy. I mean, maybe it's that everyone has all the software now. Certainly all these software categories, they're not new anymore. AI came around at the same time that these categories all became super mature. If you look in any software category, think of like an Asana. I don't follow them closely, but I'd be in a tough spot if you asked me how should they innovate in a major way? What's new there? These companies, even Intercom has been around 14 years, I think Asana has been around 15, 16 years. I just feel like probably the juice is being squeezed out of these categories. That's what I think.
Turner Novak:
You think everyone has all the features, everyone is competing-
Eoghan McCabe:
I think that's kind of it, yeah. I think that's kind of it. And certainly we came out of a period post-COVID of really insane fake growth. So, there's a rebalancing in some ways, and a lot of companies have been shedding the fake users and revenue that they won in late '20, well 2021 and a little bit of '22. So, it could be that, a bit of a combination of the categories are all super mature, there's not a lot of opportunity for innovation anymore, and these companies have been slowly shedding the crappy revenue they won in the post-COVID sugar rush. Maybe that's it. I'm sure some smart analysts have a better narrative, but the reality is it's happening, and it really feels like late stage software is in trouble unless it can find an AI story to help it be relevant in whatever comes next.
Turner Novak:
And is it because people are adopting and using AI in a way that's net new compared to just a new-
Eoghan McCabe:
No, it's more what I'm saying is that for whatever reason, I've attempted to give two reasons and maybe both of them are not true, but for whatever reason late stage software's slowing down. And I'm almost certain it's not about just accelerate just building more software. What's going to be required is that the people playing in those categories need to figure out how do they get disrupted by AI, and build that.
Turner Novak:
Themselves.
Eoghan McCabe:
Correct. And that takes us to our story, which is what you asked me about. I was just trying to set the stage for what's happening more broadly.
Turner Novak:
Was there a moment when you realized this or is it-
Eoghan McCabe:
Yeah, but it's a combination of things. So, the story starts almost in 2019. I got sick in 2018, I much later found out it started when I got a tick bite in the summer, the start of June 2018. And so, I was super sick. Some days, I mean, couldn't get out of bed, some days couldn't really see, it was wild. And then, revenue started to slow because we made some pricey mistakes, chiefly because I was sick frankly. And then, I was super unfairly attacked in the press, and in my sick and deflated state didn't know how to defend myself. And so, by the time early 2020 rolled around I was just done with being a software CEO, and really down on myself and was ready for a change. So, I left the CEO role in the summer of 2020, and I promoted someone internally to be CEO. Frankly, I thought the company was about to be sold. There was two big companies that approached us at the time, so I thought I played it excellently where I left and wouldn't have to work in the company-
Turner Novak:
You didn't have to do that. That's actually pretty smooth. Yeah, that was good.
Eoghan McCabe:
It didn't quite work out. Then I thought we were going to go public. We had a date in '22, 2022. Is that right?
Turner Novak:
Oh, wow. Do you remember a rough date?
Eoghan McCabe:
Yeah, I want to say it was something like the 15th of July '22. Yeah, it was the summer of '22. But at that stage, the entire of the technology market had, in technical terms, shit the bed.
Turner Novak:
Yeah. It's a pretty technical term.
Eoghan McCabe:
And many had dropped like 90%. No, many great names had dropped 80%, 85%. So, the IPO market was closed and frankly just really reopened. And so, I was just unhappy that how the company was performing for some couple of years, we didn't agree with a bunch of different decisions but I was on the outside at that point. And my critique didn't find any purchase with the board until the company started to perform so poorly.
Turner Novak:
Did you start to go through some of that mature cresting-
Eoghan McCabe:
Yeah, but in a really dramatic and violent way.
Turner Novak:
Oh, really?
Eoghan McCabe:
Some of these companies that are finally now seeing negative net new ARR and negative ARR growth, they evidently took a lot longer to come down from the 2021 highs, but we really fell off a cliff and it was because we just had a really dilute strategy, didn't know who we were. And the revenue growth we enjoyed in '21 was really a lot of cheap expansion that we begged, borrowed and stealed. We were very aggressive with our customers and upsold them on the things they were already buying rather than paying careful attention to what they really needed in the future. And so, I feel like the combination of everyone pulling back from all software, but particularly that software which they didn't absolutely need contributed to our precipitous drop. So, we had five quarters of sequentially declining net new ARR. I came in at the end of the fourth quarter and-
Turner Novak:
This is '22?
Eoghan McCabe:
This is '22, like '22. And so, the company was in a bad spot, like a week dilute strategy, didn't know who it was anymore. Even the culture was weak, revenue falling off a cliff. And I went back with a lot of personal energy to right the wrong side had seen over the years, but also with the moral authority, both as founder and as the new CEO who came in when the company was in a trouble spot to make a lot of changes. And so, part of the secret of our success and the dramatic pivot we made is that we had to make a big change. And I don't want to discount the value of the decisions I did make, it still takes bravery to bet the company on wildly new things, and turn off revenue, and make all the wild changes I made. But I do want to emphasize that we didn't have a choice.
Whereas many other companies, big names who, like I keep saying, now are experiencing negative ARR growth, they were doing okay. They were doing even good enough. And so, they had more to lose. So, it was those two things. And then, the month after I came back, ChatGPT launched, and so the whole world changed really quickly. And Des, my co-founder, came to me a weekend or two after ChatGPT launched and said, "Hey, the AI group," we already had an AI group in the company, "says that they think that there's something interesting that can be built here."
And we didn't even use the word agent at the time. Agents have got cool in the last six, nine months, but we didn't say agent, but we realized we could build an AI thing that would do service instead of humans. And the more we pulled that thread, we were like, "Holy shit, this is going to disrupt ..."
Turner Novak:
Your entire business.
Eoghan McCabe:
Exactly. Everyone who sells seats to humans that do service are in big trouble. And so, we both needed a new vehicle for growth in the business, but also saw significant threat, and that together was an opportunity for us to jump on AI. And that was a short number of years before we end up now where we're in the service AI business, quickly we'll be in the customer AI business, we'll do more than service. But amongst say, service AI agents, whether you look at the incumbents like Zendesk or the startups like Decagon, we're the largest by revenue, largest by customer count, number one in the performance benchmarks, we win 100% of bake-offs against our direct competitors. We're number one in G2. So, I just want to emphasize that the pivot was not only dramatic, but to our relief and surprise insanely successful. And so, we're still in the process of processing that because it crept up on us, even in the last six months, how well it worked out.
Turner Novak:
So, you win 100% of the deals that you go up against-
Eoghan McCabe:
With any of our direct competitors. These are bake-offs where it's us versus say two or three other CS AI agents, and the customer will either run them all head-to-head, do AB tests, or have a batch of questions and run through them, and Fin consistently beats the others in terms of the percentage of the customer queries it can successfully resolve. Yeah, and of course we've got to keep that up. And so, that's part of the adventure of AI-
Turner Novak:
Yeah, that's high stakes.
Eoghan McCabe:
Yeah, I mean, it just doesn't stop. And so, we could talk about that separately if you're interested, but the whole world of software development has very much changed the pace and intensity.
Turner Novak:
And one thing that you said when we were talking beforehand, you mentioned that basically AI is going to be better than humans at pretty much everything. It's one of those things, it sounds like a very loaded take but also an actual very down the fairway, like no doubt, software's always better than humans. Is there a certain timeline you think through of how that will evolve in certain areas, maybe customer service you're most attuned to but-
Eoghan McCabe:
Yeah, it's definitely happening today in a very real way, and it's just going to continue bit by bit. And then, one day we'll wake up and we'll realize that all of the hardest work is actually being done by AI. It's going to be extremely gradual, so gradual such that, like I said, very real economically valuable work is being done today by AI. I'll talk about customer service in a second, but look at Waymo, it's real. It's all AI, and it's better than humans. It crashes substantially less than humans. The drivers are infinitely less-
Turner Novak:
They're perfect. They're whatever you need from them-
Eoghan McCabe:
Yeah, they're imperfect. Let me put it that way. For women who don't want to be in the car, in a car with a stranger, Waymo. For people who just want quiet time, Waymo, privacy, Waymo. They want to make a business call or they want to sit with their loved one, Waymo. I mean, it's really crazy. So, whether it's driving safety, personal safety, privacy, peace, consistency, I mean, it's just better. There are some ways in which it's inferior, it's kind of slow, et cetera, but these things will get solved, but it's better. And so, customer service, for example, on average it takes a human service rep 9.8 minutes to close a ticket, and on average they leave customers waiting 102.8 minutes before they start to respond.
Turner Novak:
So, it takes them 102.8 to respond, and then within 9.8 minutes they close.
Eoghan McCabe:
Correct.
Turner Novak:
So, it takes almost two hours, it takes-
Eoghan McCabe:
Correct, correct.
Turner Novak:
... 110 roughly to get through it.
Eoghan McCabe:
Fin, our AI agent, is essentially instant. It's not instant because there's some back and forth, you're going to chat with it, clarify some questions, but it's basically instant. AI is better than humans. Or you take Fin answering a really high value question about pricing, it's always going to give the same answer. Or Fin needs to look up some highly sensitive data, it's always going to follow the procedures. When you ask humans to do repetitive work that they hate, they make mistakes. I mean, all humans make mistakes regardless, but when you ask humans to do really inhumane and inhuman work, they're going to fuck up many times. AI is just better than humans. Not in all the ways today, but when you can apply it to work like this it just ends up being better. And that's one of the really interesting things about AI. We think about it as this efficiency thing, like, "Oh shit, all the humans are going to get replaced because it's cheaper. It's not just that it's better and it's faster." So, we joke and we had a short-lived ad campaign that said, "Better, faster, cheaper. Pick three."
Turner Novak:
Usually you can only pick two, right?
Eoghan McCabe:
That's right. And that is how deeply wildly transformative AI is.
Turner Novak:
And it's one of those interesting technologies where costs curve coming down, I think if you're using the most recent models maybe that's not quite true, but generally trending downward, but then also it's getting better over time. I think there's this classic with internet connectivity, it doesn't really get faster-
Eoghan McCabe:
Or more slow. Oh, were you saying internet connectivity doesn't really get faster? Yeah, it's plateaued-
Turner Novak:
Or like with the cloud. It's like with the cloud, it's like the cost came down but you didn't get better Cloud.
Eoghan McCabe:
That's a good point.
Turner Novak:
It's just you're in the cloud-
Eoghan McCabe:
That's a good point.
Turner Novak:
... and it's there. But with AI, it's getting cheaper and better at the same time.
Eoghan McCabe:
I think it's having multiple plateau moments. So, I think it plateaued for a little bit and maybe it's going to accelerate again. But yeah, we all imagine that certainly it's about to get significantly better. I don't try and predict that, but probably it will. But yeah, I think you're probably right.
Turner Novak:
How have you guys approached that then with building out the products? How do you do the trade-off of, "Oh, it's not quite here, but maybe in 12 months it will be because that's in the trend"? How do you think about that when you're building stuff?
Eoghan McCabe:
For us, say with open AI with their chat technology or image generation, people are delighted for it to do the best it can, because the best it can is pretty great and it didn't exist before even though it's imperfect. With Fin, with an agent that you're going to have to talk to your customer, best effort's actually not good enough. It's not okay for you to ask as an end user, an agent for help with resetting your password and it pukes up your credit card number in plain text, or it refunds or it deletes your password. I'm making stuff up here that's kind of facetious, but it's not okay for a best effort estimate.
Today, and I promise I'm not using this as an opportunity to pump and promote Fin, but I tweeted that we are now doing a million resolutions a week, which equates to 6,533 humans. And I asked ChatGPT to visualize that so I could have a nice little graphic for my social media posts. And it was like, "No problem." And it said it put on the top 6,533, and then a bunch of human icons. And I'm like, "What?" And I counted it and it's like 400.
Turner Novak:
I was going to ask you about that. Yeah, I saw the tweet. I was like, "This doesn't look like 6,000 people."
Eoghan McCabe:
Yeah, exactly. My joke is too dry. My joke is too dry. I said, "Here's its attempt," and that's okay. We laugh at it, but if it does that with your customers it's not funny. So, we have built a very complex system that uses many models to only get involved when it is highly confident it knows the answer and can help. And as such, we're not on the bleeding edge of any one model, whereby when that one model gets dramatically better, we get dramatically better. And this is the misunderstanding between these cutting edge AI application companies I think, it's certainly the case for us, that they indeed are not GPT wrappers. It sounds a little defensive when I go and say that, but it's I think close to maybe a dozen models of many different varieties from different vendors and with different configurations just to make it highly competent at serving customers.
Turner Novak:
Well, yeah, you're not like a GPT wrapper, you're like a GPT Optimus Prime or whatever. It's like multiple, all woven together like-
Eoghan McCabe:
Something like that, yeah. But there's many other types of models and they're not just EO and LLM. There's a lot going on there, including some of our own LLM technology or machine learning technology.
Turner Novak:
So, you've experimented with some of your own models?
Eoghan McCabe:
Yeah. So, we're working on that. And by the time this is out we will most likely have announced that we have made significant advances with our own models. They'll be the world's first CX models, proprietary CX models that do the type of work they do, train on proprietary CX data. And we're quite confident that they're not only going to increase the performance of Fin yet again, help us continue to beat our competitors in those bake-offs, but also allow us to own the full stack. When you own the full stack it allows you to be a lot more nimble. Like Apple owned the hardware, the operating system, the iMessage app, the iMessage protocol. They even own the custom emoji things, as bad as they are. They own this whole thing, and it just allows them to be a lot more fluid. They even own the chips that these things run on. And so, when you're not held back by third party vendors, you can move faster and get ahead of the game. So, we're excited about being able to do that too.
Turner Novak:
Because that's kind of in the current, I don't know, meta around everything AI is that all the values accruing to certain layers. So, if you don't have something in that layer you miss out on capturing a lot of the value.
Eoghan McCabe:
Well, I think that if you rely on the generic models you are subscribing to eventually becoming generic. And so, I think that unless you have your own innovation and your own technology, you can't get beyond that. And like you said, indeed the value will go to layers in the stack where the innovation is, and we'll get to a point where it's not the base level models anymore.
Turner Novak:
So I guess first off, any software company you need to reimagine yourself for AI, do you also need to start training your own models then most likely?
Eoghan McCabe:
I don't know. There's so many different types of software companies, and there's software companies that serve older esoteric industries that probably aren't in a rush for AI. And then, there's industries or areas where the AI is just not that obviously valuable right now. For customer service, everyone saw that coming. But I will say that if you buy the idea that AI will eventually eat all white-collar work, which it seems to be good at, then it's going to disrupt most software because most software is built for adding efficiency to white-collar work. Most business software.
Turner Novak:
But when somebody hears all these, the model companies, like I look at OpenAI, and if you take the current narrative is they're spending billions and tens of billions of dollars to train and run these things. Isn't it super expensive or is it not as expensive as people would think?
Eoghan McCabe:
Certain types of AI work is not as expensive as you might think. But some of it is, and it has required that we've had to allocate significant parts of our balance sheet to it, but it's not the tens, or hundreds, or billions that get thrown around, at least for the type of work that we're doing.
Turner Novak:
Yeah, I guess part of that too is if you go under the surface a little bit, it's like Microsoft's not actually giving OpenAI $10 billion, it's giving them credits to run ChatGPT, which is like people pounding that all day, every day.
Eoghan McCabe:
Totally. Absolutely.
Turner Novak:
It's like one of the most frequent use cases, and it's just cloud cost or cloud spend essentially at the end of the day.
Eoghan McCabe:
Exactly, yeah. And that's where a lot of the magic and innovation is happening in AI at the moment, it's at runtime.
Turner Novak:
So when you decide, "Okay, we need to rip everything out and start over," what was the process? How did you figure out how to approach this and what to do?
Eoghan McCabe:
Well, I had the great benefit of being an outsider, because I was chairman of the board but I wasn't in an operating capacity. So, as an outsider you can make all of these broad statements that on the ground are not true in 10 different ways, but at a high level can be powerful and quite meaningful. And the things I saw from the outside were that we needed a lot of clarity in our strategy, we needed a lot of focus in our company, and strength and resilience in our culture. We needed to be a lot more customer oriented in our commercialization strategies, not force everyone to talk to sales. Our pricing was super complex. And so, I came in with a lot of those ideas written down. I had a form of a manifesto and a 10 point plan that I acted on. I haven't had that clarity since. Once you're in the trenches, then it's all gone. So, I'll never be as effective and as strategic a CEO as I was before I was CEO again. It's just a tricky thing.
That's why breaks are so important for leaders. Even one day away, for me, I find that I get so much clarity that I didn't have when I was just smashing my head against the wall. And you see that a lot with young leaders. I made that mistake too. They're just grinding seven days a week, every week of the year. And it's actually quite difficult to have clarity on what the most important work to do is if you're doing it. Anyway. So that was part of it. And then the other part was, I went in deciding that I was going to very much bet on myself, in a way that I hadn't in the past. Obviously I had in a very practical way when I cofounded the company, but it's easier when you're younger to question yourself when there are smart people around you coming up with, like I said, those 10 reasons. Any given decision might be bad. So sometimes I'd hesitate on decisions, sometimes I'd scale down decisions. And-
Turner Novak:
This was back in the 2018, 2017 version of you?
Eoghan McCabe:
Yeah, exactly. Before. Intercom started in 2011. So I had a big long run before I left. And I did what I see so many CEOs do, which is just try and satisfy multiple stakeholders and play it a little more safe. And I just decided to never do that again. And I now make rash decisions and go with the first idea that came to mind. And I've learned that most of those decisions are really good decisions. Probably a bunch of them are not, or probably they could be optimized if I sweat over them for two more weeks. Maybe they couldn't, maybe they'd get worse. But now I'm just making mostly fast and loose decisions. The hard decisions I'll procrastinate on. And then when it's overdue, then I'll make the fast and loose decision.
Turner Novak:
You just should have done it two weeks ago.
Eoghan McCabe:
Exactly. Yeah. But I really have found that there's a lot to be said for founder intuition, because the intuition contains so much tacit, practical, undefined, undescribed understanding and knowledge that goes a long way. And so, when I'm talking to young founders now, and I was speaking to one yesterday, and she was trying to land on a name for a company, she gave me a list of 10 names. She said, "What do you think of these names? Such and such a name is my favorite. But a number of people have said it has negative connotations." And I'm like, "If it's your favorite, it's your favorite. Choose your favorite." She's like, "Oh yeah, you're right." She needed that little bit of push. It's like, "Go with your gut. Fuck the midwits." They'll always have all these reasons your strong ideas are wrong. And you'll never have worse regrets as a founder that if you make mistakes, and the mistakes are someone else's idea, not your own, when you went against your intuition.
Time and time again, great artists and creatives and interesting people, they got the right idea, but they don't fucking lean into it. So that's one of the big things I learned anyway, was to bet on my intuition.
Turner Novak:
Yeah. I feel like I've run into similar things actually, where it's like you didn't fully execute on or didn't fully lean all the way into the thing that you thought was right, or you took someone else's advice on something that maybe they don't know what they're talking about or they're more removed from it. Yes.
Eoghan McCabe:
Or they're very smart, such that they're absolutely not wrong with their criticism, but they don't have the broader insight that you have that tells you that the criticism doesn't negate the power of the insight. You, as the founder, are the insight holder. You're the one that has to keep that flame alive. That's not their flame. And so, actually, having these conversations can be very helpful. They can help generate ideas for how you can approve or your flame. I'm stretching the analogy now. But allowing them to smother that flame that you were excited about, it tends to be a bad idea in my experience anyway.
Turner Novak:
And you were initially, I know you just mentioned a little skeptical about AI, just when it first hit. Was there evolution? Was it talking to the team? It was like, "Oh, maybe there's something here," or did you still push back a little bit after that?
Eoghan McCabe:
I just have learned to be skeptical of all hype. And even still today, there's a lot of AI talk that is propelled by group think and FOMO. A lot of people talking about the power of AI. You see these posts on social that says, "Holy shit, I just started 10 companies and made $50 trillion over the weekend."
Turner Novak:
The vibe coded app.
Eoghan McCabe:
Yeah. By asking ChatGPT this one fucking thing.
Turner Novak:
The power of AI.
Eoghan McCabe:
Yeah. You're like, "The power of AI. Read this 15 part spread."
Turner Novak:
And then sign up for my course.
Eoghan McCabe:
Exactly. And it's like, "No." And obviously mine was silly and facetious, but they're sufficiently believable that everyone else is like, "Oh shit, everyone else is doing cool things with AI. And if I'm not also-
Turner Novak:
Yeah. You're going to get left behind.
Eoghan McCabe:
... I'm going to get left behind. I'm going to look like a loser. So I better say some cool stuff about AI." So there's a lot of that. And as transformative as AI is, and I believe it's more transformative than the internet. Our current understanding of it, I'm also quite certain, is quite infantile, and is bolstered by a lot of hype. And so, that's all. I just felt the hype and I'm like, "Wait a sec, let's see what this can really do."
Turner Novak:
So you mentioned something that was interesting. You said that you think that AI is going to potentially be more transformative than the internet. Why do you say that?
Eoghan McCabe:
Just because it's flagging itself right now as a really big deal, bigger than cloud and mobile, I think. It has the potential to do actual work. That's a new type of thing. It's a new type of technology. And always at the start of these new big deals, by default we underestimate their potential, because we can't imagine the ways in which they'll get used and be deployed. So I used to say at the start of Intercom, and I still think it's true today, and this is in 2011, that we still haven't seen the degree to which the internet is going to transform the world. And that's probably still true. Now, you can ask yourself, what is the internet? ChatGPT liens on the internet. Is it a product to the internet? The AI itself is arguably quite different and separate from internet technology. But I'm certain that we haven't seen the full effects of the internet on humanity.
And so, just pattern matching, I just think that this is clearly a big deal. It's bigger than other trends. It's different in that it does work that humans used to do. It doesn't just make them more efficient or connect them like the internet did. And it's only getting started. And so we're highly lightly underestimating it. That's all.
Turner Novak:
And it seems like the takeaway is this. This is the first time that the internet or software does work for you. It's never really been the case.
Eoghan McCabe:
Software. Yeah. I mean it has a little bit before. We used to have software that would manage certain types of automation and-
Turner Novak:
Like early machine learning type stuff maybe.
Eoghan McCabe:
Yeah. So it was doing little bits of work. But clearly there's a chasm that's just being crossed. And again, that's going to change even in a few years when people start to figure out how to apply agents and let them be more agentic and define their work. I don't mean really, really exotic ways, I just mean when you're going to have agents in the workplace that understand more abstract briefs and can figure out how to solve problems themselves and then get to work with it. That's a fundamentally new thing. The automation we've had in the past has been very deterministic. Even if you use machine learning to make it a little bit more efficient, it's been quite deterministic. So arguably it's been doing little bits of work, but not. It could be a 100,000 X the amount of work that software used to do. Yeah. It's at least 100 X. It's probably 1,000 X. It's just so much more work.
Not only is it going to do all the work that humans used to do, it's going to do work that humans couldn't do, didn't have time for, or it was not economical to spend money to have humans do. There's going to be so much more work done in the world, so much more. As power gets cheaper, as computing gets more effective, as AI and agents gets more powerful, we're going to just deploy these things to problems we haven't even thought of yet. They'll deploy themselves to problems that we certainly haven't thought of yet.
Turner Novak:
The agents will start deploying other agents?
Eoghan McCabe:
Well, maybe. But again, that sounds more like The Matrix. But I just mean, we'll have abstract agents in business and other places that will know how to get to work. Yeah.
Turner Novak:
So you mentioned something super interesting right there about the way software's going to change the pricing specifically. You mentioned, I think that was kind of a big thing that you guys cut off. You mentioned earlier that you messed that up back in maybe a couple of years ago. And then your cofounder, Des, when I told him that we were talking, he's like, "Oh, you need to talk about how you figured out this new outcome-based pricing, this AI native pricing model."
Eoghan McCabe:
Totally.
Turner Novak:
I think you were the first one to do it.
Eoghan McCabe:
Yeah. We were the first. Yeah.
Turner Novak:
So was it hard to do that or...
Eoghan McCabe:
Again, part of the story is that we messed our pricing up so badly in the past that we developed these very principled rules for how pricing needed to work at Intercom going forward and created the new Fin pricing in that image. So historically, Intercom had very complex pricing because we did so many different things. We sold to sales support and marketing, so we tried to serve many use cases. Then it was very sales forward, so it was aggressive and we'd twist people's arms. And it was unpredictable because it had all these metrics that reacted to usage. And so, we developed these principles that included stuff like transparency, predictability, et cetera. But one of the core principles is a clean map from value to price. And so, we try and always practice value-based pricing. And the ultimate in value-based pricing for a thing that does customer service is to charge for the service itself. And the unit of service for us is a resolution. And it resolves a customer issue to the liking of the customer. Then we will charge you 99 cent and never before.
So if Fin tries and fails, they'll charge. If Fin tries and actually learns a lot from the customer but can't finish the job and then passes it to the customer service rep, and then the customer service rep has all that information to get it started... Get him or her started, I shouldn't call humans its. We are now mixing agents and humans. We're still charging nothing. So yeah, we were just crazy principled about it. Originally, it cost us $1.21 per resolution.
Turner Novak:
So you were losing money.
Eoghan McCabe:
We just had the conviction that surely we'd be able to make this cheaper. And we made it dramatically cheaper. So we've very healthy margin now. But yeah, we just believe in the power of 99 cents. It just felt very fair. And by the way, we pay $26 at Intercom when we do customer service. We pay $26 for every human resolution. So some people will do 15, some people will get it as low as five, but a lot of those people who think it's very cheap, they don't look at the fully loaded costs of benefits and office space and all the things. But if you can answer a resolution instantly for 99 cents versus $26, we knew that would be a smash hit. But everyone has not done it. So basically everyone's doing resolution based pricing one way or another.
Turner Novak:
And it's like that across not just customer service, but a lot of different categories in AI. It seems to be like you pay for the work that the AI delivers to you.
Eoghan McCabe:
Well, it's a little different than paying for the outcome. So paying for the work is, the AI data bunch of shit.
Turner Novak:
And it's terrible.
Eoghan McCabe:
And you have to pay for it.
Turner Novak:
Yeah.
Eoghan McCabe:
Whereas we're saying, "The AI did a bunch of shit. You only pay if your customer is happy with the work we did." It's a very high bar. It's a very high bar. What we like about that is that it's hard for the customer to argue with. The only friction you have there is that it's a new metric. Anytime you introduce a new metric, you introduce friction because they have to learn. Seats, you don't have to explain anymore. But c'est la vie. This is part of the fun of playing in a new category.
Turner Novak:
So then how did you do the customer education around that? Did you roll it out and it was super simple and everyone got it? Or was there some friction?
Eoghan McCabe:
People got it quickly.
Turner Novak:
Okay.
Eoghan McCabe:
Really quickly. Yep. It was remarkably effective. But I was going to say the reason we like it is that... The second reason we like it, apart from the fact that there's a little friction, when we explain this to customers and it feels good that we're charging for value, is that we then are incentivized to increase our resolution rates. And so, if we can make our system more effective at doing work for them, we earn more too. So it's got a built in perpetual incentive and reward system where we continue get paid for that. If we just charge for work done, then-
Turner Novak:
You're working all day, just pounding it.
Eoghan McCabe:
Doing bullshit.
Turner Novak:
Yeah.Just getting stuff out there.
Eoghan McCabe:
Why not? So we like that model. Some people have tried to charge for work. I think it's okay, but I think the braver, harder thing is to charge for real value and outcomes.
Turner Novak:
And one thing you mentioned was you're charging 99 cents. It used to cost you a $1.21. So you're losing money. That seems to be the current narrative around AI products is like, "Oh, they all have negative gross margins, are all losing money. This is a huge bubble." But I saw you reply to someone on Twitter that was commenting on this, and you're like, "We actually have comparable margins to traditional software."
Eoghan McCabe:
Yeah. Best in class SaaS, yeah.
Turner Novak:
So what's the disconnect there?
Eoghan McCabe:
We were always in the chat business. We had a messenger early on and we started to build bots early on. Fin is a third generation of agent or bot. I say that to explain the reason that we had an AI group from the start. And we now have an AI group that's over 50 people. We have a research group within that. These are real AI scientists, researchers and engineers. Crazy team, all co-located in Dublin at the moment, where we relocate people to Dublin. Amazing fucking team. And the same reason that we're able to earn a strong margin on 99 cents. And by the way, people, I shouldn't say their name because I'd have to double check it, but some of our competitors are charging two and three and $4. So we're also the cheapest. But the same reason that we're able to charge a healthy margin even with such a cheap resolution, is the same reason that we beat all our competitors in trade-offs. And that reason is that we've got real AI, real AI teams, real AI technology, real AI scientists and researchers.
And I think that that's where frontier AI application companies are going to go. And that's a really interesting challenge because if you haven't noticed, there's a really serious war for talent. But if you want to be a real AI company, you need real AI talent. I think if you're making AI applications, again, in long tail, on sexy, on obvious esoteric areas, I don't want to pick on anyone, but imagine if you're doing some sort of plumbing management system.
Turner Novak:
There's maybe less competition or...
Eoghan McCabe:
There's less competition, and you can probably use the generic models for a much longer period of time. But customer service or customer agents is arguably the most obvious application of AI. And customer agents are going to do all the customer interaction in the near future. They're going to do trillions of dollars of salaries. It's potentially the most obvious area. Then there's going to be a lot of competition. And then the frontier companies like Intercom and Fin are going to need to do real AI. It's a long-winded answer, but that's the actual truth.
Turner Novak:
So is it that you train your own models, that you get lower cost?
Eoghan McCabe:
Well, we're doing that, but we also just use the models in a far more sophisticated way. It's not hard to take Sonnet or GPT and wrap it in some really light vibe coded software and have it answer some questions from customers. It's extremely hard to do that at an average resolution rate in the 60s, which is the best in the industry, and beat all our competitors, and not hallucinate. It's extremely hard. And it's just a lot of very complicated tuning and configuration of this multifaceted system. It's just fucking hard.
Turner Novak:
So if I have a vibe coded customer support-
Eoghan McCabe:
I say vibe coded now to be facetious, our competitors are not vibe coded actually.
Turner Novak:
Okay. But if I were to go say, "I'm just going to try to compete with Intercom and vibe code this thing."
Eoghan McCabe:
You could make a cool demo.
Turner Novak:
And it will probably be that in reality on the back end, I'm just running tons of cycles and it costs me $8 versus you had it fine tuned?
Eoghan McCabe:
Potentially that. But it's just going to be, again, another technical term, dog shit. In the market, it's going to fail hard. This is one of the big things that software companies need to wrap their heads around in the pivot to AI, you can't validate it empirically. Whereas you used to be able to sign into the new app and click around and say, "It works. It looks great." You can't do that with AI. You need to actually run scientific studies to see how it performs with real data, and in our case, real customers. And part of our secret also is that we have billions of data points from our tens of thousands of customers, from the help desk that we also sell, to do rapid high volume testing.
Turner Novak:
It would probably be because you're not just getting software, you're basically getting an employee that's doing work. So if you hire an employee, you're not just going to like they show up and you say, "Oh, look good, you're hired." You want to see a proof of work. You're going to check references.
Eoghan McCabe:
Well, that it's not even one employee.
Turner Novak:
That's true. Yeah.
Eoghan McCabe:
It's a team of employees.
Turner Novak:
So you're going to be really extensive. It's almost like if you're going to acquire a company of 1,000 people, you're going to want to know he entire team.
Eoghan McCabe:
Deeply extensive. You want to see resolution rates, time to response. But also the feel of the answers like, "Okay, such and such an agent actually had an acceptable resolution rate. But it's super verbose and it takes customers a long time to read the questions. And they find it really robotic. And it has impacted the CSAT score." So there's a lot of art to it too. But chiefly, because I'm messing my argument up now by saying that there's art, when I was trying to say the science, chiefly, it's about running through the tests to see how all these different tweaks impact the outcome. We've now run well over 300, we're probably approaching 400 different A/B tests run to very high levels of statistical significance to see how all these different changes of the Fin system perform in the real world.
Turner Novak:
So if somebody has lower or negative margins, that's probably because they haven't-
Eoghan McCabe:
Maybe that's part of it too. But I think that... So I don't know this, but the narrative publicly, I believe is that a lot of these coding copilots or coding platforms, AI coding technologies, have negative gross margins. That's what people are saying. I don't know if that's true or not. And that's a little bit more of a raw exposure to the generic models. At least that's what it appears. And I don't know, you're closer to the action, and I feel like your ability to charge a margin above what you get from Claude Code or just Claude itself is going to be a little limited. I'd have to really look at these businesses and see the numbers better to give a better answer. That's a guess here. But there's a lot of companies out there that it's insidious, actually. They've got negative gross margins, and so much of their revenue is like a tire-kicking revenue, in that people are signing up to try these new tools because they're really exciting and cool. And they've got a lot of dead revenue.
Whereas companies and products like Fin, where we only charge for value and outcomes, it's not possible for us to have dead revenue. We can only get revenue when we actually deliver value in the world. And if we stop delivering it, then our revenue goes down. And so, there is two categories of AI companies now. There's those that have this apparently negative gross margin revenue and a lot of dead revenue, and then there's those that are doing real work in the real world. And that's an example of what I'm getting at when I'm talking about the fact that our understanding of AI today is still very naive. In just a year, we're going to be like, "Oh, wow, that was silly of us." And Like, "Wow, that company we thought was really hot, it's not that hot actually."
Turner Novak:
Yeah. Or the one we thought was dead and screwed is 10 times-
Eoghan McCabe:
Got awesome.
Turner Novak:
... hotter now. Yeah.
Eoghan McCabe:
That also.
Turner Novak:
Because I think one window of that argument is, let's say you pay a really good engineer, 300 grand a year all in.
Eoghan McCabe:
Sure.
Turner Novak:
And then Cursor's 20 bucks a month.
Eoghan McCabe:
Sure.
Turner Novak:
Do you really think that Cursor's not going to be able to charge instead of 20 a hundred or a thousand. If it's actually as good-
Eoghan McCabe:
Totally.
Turner Novak:
... as it's supposed to be, and somebody's paying a thousand times more, can you just increase the price?
Eoghan McCabe:
Totally. But the question is, how much is it better relative to its competitor, and how much are they willing to charge?
Turner Novak:
That's fair enough.
Eoghan McCabe:
And it's going to be tricky, unless one is vastly superior, for them to be able to maintain a significant margin of both costs.
Turner Novak:
I think the other thing that they were doing was it's like a fixed subscription price, but then they had variable costs. If somebody uses it, the cost is out of control. So it was just like the wrong pricing model initially.
Eoghan McCabe:
I'm not sure how to think of it. Honestly, I don't know. I haven't studied it very carefully. But my example where I said that we know that we pay our service reps, our humans $26 per resolution, but we sell Fin for 99 cents per resolution. We do that because we know that the following argument won't work. "Hey, you pay 26, we'll charge you half 13 bucks." We just know it doesn't work. Because we know that people know that AI is a lot cheaper. And if we're charging 13 bucks and the other guys are charging two bucks. I don't know. They're going to start to look attractive. So yeah. The margin game, what I think is going to happen is that there'll be a lot of players in all the categories. It's going to be hyper-competitive. And then one will get an edge. And then if they manage to continue to play their cards right, that edge will compound and other players will then end up in certain sweet spots or certain areas. Some will be acquired, there'll be consolidation, but there's not going to be 10 coding platforms. There might be two really big ones.
But this will naturally get figured out. But only when there are a much smaller amount, will they be able to charge a margin. And if they really do have negative gross margins right now, that's the bet that all their investors are making. That these guys seem to be out and ahead of everyone else, once they have that dominance and superiority in the market, they'll be able to catch up. It's an interesting game, and it's a game that used to be played in the consumer world when people lost margin to customer acquisition. And a lot of it didn't work out. A lot of it failed.
Turner Novak:
Some of it did though.
Eoghan McCabe:
Some of it did.
Turner Novak:
To massive success too.
Eoghan McCabe:
Like Instacart and those types of companies, Uber, Uber Eats, I think they all had these dynamics. And I named all the winners. So if you can end up as the winner, then it worked out. It was good.
Turner Novak:
It's like, let's just say you're one of those ones like, "Oh man, our gross margins are negative. We better slow down. We better pair it back." Somebody else is just going to charge pass. If have the right investors set on board, employees, the right product, they're going to smoke you.
Eoghan McCabe:
Totally.
Turner Novak:
So you have to play the game to the extent that it's out there.
Eoghan McCabe:
Well, part of the game is a game of chicken, like who's going to not continue this very crazy game and continue to raise increasingly large amounts of money, dilute themselves, set expectations, in the hope that they become a winner. So eventually people will drop out or be forced to drop out because they can't race. That's how winners emerge also. They just can't continue to finance their losses.
Turner Novak:
So is that a strategic thing that you've thought about in how you position in the market or...
Eoghan McCabe:
For some reason it's different. And we've been making a positive growth and a strong positive gross margin on Fin almost from the start. Only at the start, we were making a loss.
Turner Novak:
Really?
Eoghan McCabe:
Yeah. And so, that hasn't been a dynamic for us, and we have not been cash constrained. And I don't know. If I had a little longer to think about it, I'd probably do a better job at answering. But it doesn't seem to be a dynamic.
Turner Novak:
I feel like in a sense, you're in a pretty interesting position where you had the scaled customer base already.
Eoghan McCabe:
I think that could be a really big part of it.
Turner Novak:
Because you didn't have to go and say, "Oh, we need to spend 100 million on essentially customer acquisition to scale up really quick.
Eoghan McCabe:
Exactly. So that's certainly a big part of the dynamic.
Turner Novak:
But then you also had an existing AI team. It wasn't like, "Oh, we got to go hire 50 AI researchers." It's like, "No, we have 50 people on our AI team already."
Eoghan McCabe:
We have the customer base, distribution, AI team, and a lot of cash in the bank, we're cash flow positive. So all of those things are helpful.
Turner Novak:
But a shrinking business. So it's like, "Okay, we need it."
Eoghan McCabe:
Well, yeah, a business with a declining growth rate. We had not yet started to shrink.
Turner Novak:
Oh, you didn't? Okay.
Eoghan McCabe:
No.
Turner Novak:
But the net new RR was decreasing.
Eoghan McCabe:
We pulled up before revenue started to decline. We had slowing growth rates, but we never hit that bottom, thankfully.
Turner Novak:
Okay. Yeah. So it seems like you almost had the perfect setup of doing a life altering or company altering strategic, even though it seemed like a terrible situation you were in, you actually had an interesting setup to make this.
Eoghan McCabe:
Of course. Of course.
Turner Novak:
Because you had the team. You had the distribution. You probably had, I'm assuming a lot of your investors were like, "Oh, AI is a good idea."
Eoghan McCabe:
Sure. Like "Great. Can we get some of that AI dollars?" Of course.
Turner Novak:
Yeah.
Eoghan McCabe:
The following two things are true, and I mean that strongly, so much so that I resent anyone that claims that that's not the case. It's true that this opportunity was handed to us on a platter. It's just unarguably true. Customer service, we were in the right space, and there's just such an opportunity there, and we just went through all the advantages. It's also true that it took a willingness to be kind of fucking crazy to bet the farm on this new fancy thing. I mean, we were the first to have a billboard with AI on it. We were the first to... I said, "We're going to spend 100 million of our own balance sheet." We're the first to say that. They were going to spend their own real money on AI. We're the first of a late-stage company to say that "We're going to pivot to AI." And we weren't the only company in trouble. So it still required bravery and craziness. But yes, the opportunity was also presented to us. It was ours to screw up, for sure. And both can be true at the same time.
Turner Novak:
So, something interesting that you mentioned a couple minutes ago, a little earlier, was you're not really thinking about this as just specifically customer service. It's kind of a broader opportunity than that.
Eoghan McCabe:
Right.
Turner Novak:
Can you expand on that?
Eoghan McCabe:
Yeah. I mean, we think that everything in a business that doesn't involve making a product or delivering a service is going to be done by agents. Whether it's deep in a company doing accounting or whether it's on the front line with customers, helping them buy your product. There'll still be, for quite some period of time, humans in all these departments, but there's going to be agents doing a broad spectrum of non-strategic work, the stuff that doesn't define and make the company different. And I don't think you're going to have multiple, say, customer-facing agents. I don't think it makes any sense to have an agent that chats with your customer on your website to help answer questions about the product, and then another agent that helps it get onboarded and use the product more successfully, and then another agent that answers questions when it gets stuck, and then another agent that upsells the customer. It doesn't make any sense.
And certainly, in the real world, customers don't see a distinction. When you are in a boutique store and you have a question about a product, you'll ask the person behind the desk. If you bought a product and it was broken, you'll go back and ask the person behind the desk. If you, as that business, want to upsell a customer on a more valuable item, it's going to be the person behind the desk. So, the customer doesn't have any distinction. And so, I just think making a bunch of different agents is going to be wildly, crazily, ridiculously complex. And as such, people will want one to rule them all. And we're calling that thing a customer agent. And the goal is to deliver concierge experience to every single customer. White-glove service for anyone who shows any level of interest in your business throughout the customer lifecycle. Just like agents are better than humans at service, they're going to be better than humans at all of these things. There won't be a single customer that won't get the attention they deserve.
If you really wanted to treat them with the dignity and respect you felt that they had, given that they're paying your bills and potentially making you rich, you certainly wouldn't make them wait multiple days for an answer. You'd be on it. Every single whimsical question they had, you'd be there for them. And in the future, customer agents won't just, like I said, solve problems, but they're going to be experts, consultants. Think of the clothes, the use case of buying clothing online. If you imagine the agent as being really an AI agent, as being a really effective version of the thing that the humans do today. "Hey, do you deliver to this place?" or, "Can you change the delivery address or I need to do a return?" You're thinking of it all wrong.
Customer agents are going to be the very best stylists in the world, right? They're going to be experts in their field. Like, "Hey, I know that you chose those pants and those shoes. And you told me earlier that you're shopping for this wedding you're going to this summer in Italy. They could totally work. People usually buy these other shoes with that suit. And I actually wanted to show you this photo of this one celebrity that wore this suit to this show and they wore these shoes. And I think it looks awesome. And it's up to you. But if you want, if you send me a photo, let's see what it looked like on you. I think it looks pretty dashing. Anyway, I don't want to do a hard sell or anything, but if we wrap this up now, I'll give you 5% off this package too." I guarantee people are going to be like, "You know what? Sold."
You see how people talk to our agent, Fin, all day long. They're thanking it. They're making little jokes. Fin is making jokes back. People love it. And so, if it can give you that experience, I think people are going to love it too. So, that's clearly the future of all different types of businesses, is customer agents doing all the things incredibly well that don't differentiate you from your competitors.
Turner Novak:
Well, you could even say with that the customer agent could say, "People just really want this new suede suit. Everyone is asking the suede suit. We don't have one. Maybe we should make a suede suit."-
Eoghan McCabe:
So, on the back end. So, you're talking about, like, an operations agent, which obviously makes sense too. So, customer agent is all the customer-facing stuff. Then you got the operations agent, which is on the inside.
Turner Novak:
Do you think that will be separate?
Eoghan McCabe:
TBD. I think people will have their own operational agents. And I think that there's going to be companies that make kind of like GLUE agents or everything agents. There's a cool company called Lindy that's doing these types of things. There's probably many more. And then there's going to be specific agents that we want probably for legal stuff, accounting, customer stuff. And then TBD who's going to do the internal operations. And you could imagine that internal customer operations be done internally. And we're working on certain versions of that where it'll work with your team, ask questions of the humans when it doesn't actually have answers and build up its repertoire of knowledge. So, I think there'll be some overlap, but TBD what the operations agent looks like and who will build that.
Turner Novak:
So, how do you think the way that companies are designed and run is going to change? Just how we see this kind of agent, almost, like, an agent for each department, as that kind of evolves over the next decade-ish or so, is it going to be, it's a single person and they have 20 different agents that just represent every single different function of a company? Is that the extreme?
Eoghan McCabe:
I don't know. I think that it's not just going to be a manager and all these IC agents, I don't think, because there'll be an amount of the work that the agents just can't do, that humans will still want to do.
Turner Novak:
Like, always? Even in 10 years? Even in 20 years?
Eoghan McCabe:
I think there'll even be a preference in many instances where they'll want to actually differentiate themselves from the shitty companies that only use agents and say, "Oh, we messed up." Like, we get on a quick call and they apologize. It's going to be a really interesting experience. We'll get to a point where you're like... It's like a peek behind the curtain. It's like, you'll tell your buddy, "The craziest thing happened to me today. I was on this store," blah, blah, blah, blah, blah, "and something fucking crazy happened. I then out of nowhere ended up talking to a person." And he's based in San Francisco, and he was just this guy in a flannel shirt, and apparently, he runs the thing. It'll be archaic and quaint, you talk to humans, but it'll make sense. It'll be remarkable.
But that's in the outer reaches of this future world. For the next 10 years, the agents won't even be able to do a lot of the human stuff. There's a long way to go to cover 100% of all demand for service. And so, my point is that it won't just be managers and IC agents. It'll be a mix between managers and IC humans with the agents. And maybe what it'll look like is you have an IC-type manager who can do some of the human work and then has peers who work alongside it and also work for him or her, them, and also do their work.
Turner Novak:
Understand.
Eoghan McCabe:
But this is just one of the examples of smartasses like me can get on podcasts and say how they believe the future is going to look. It's all bullshit. We haven't a clue.
Turner Novak:
Yeah. And you're probably going to be biased towards people using Fin versus not.
Eoghan McCabe:
Of course. Well, of course I am. I mean, that for sure. But Fin aside, my idea about how humans and agents are going to work together, that's just fucking bullshit that I, I mean, almost just made up now. I can imagine it, but I don't think we have a clue. None of us have a clue. You should be very skeptical of people who are very, very confident about what the future's going to look like.
Turner Novak:
Yeah. So, one thing that I have noticed is that you have not really said Intercom much. Specifically, when you created the AI-native version of the product, you called it Fin. Was there a certain significance around that decision?
Eoghan McCabe:
Yeah, very much so. Historically, brand prestige meant something important. Even Apple, for example, apart from maybe recent years, so it could be a bad example, have historically and still consistently make good products. And their reputation for being hardware people at the very least is relevant today, because people are still building hardware. We want new hardware. So, Apple's brand and reputation as a company that makes great hardware over the last 20 to 30 years is relevant today. When a new technology or trend emerges, not only can that brand maybe not translate, but it can be kind of a ball and chain and a counterweight, something that works against you.
And we all have, without saying it out loud, realized that AI is kind of like a young person, a new company's game. We kind of imagine that all the new hot AI is going to come from new hot companies. And you look at them, it's a bunch of kids working 365 days a year on negative-gross-margin companies. Just joking about that one. And that's our image for what that looks like. And so, if you have a prestige brand from a previous generation that looks very differently from what your expectations are for what good looks like in this new world, it can work against you. And that's our perception with a brand like Zendesk, Salesforce, or maybe even Intercom, or their previous-generation companies. And no one expects that they're going to be the leaders in AI. If you heard that Cisco are making the most interesting AI coding platform, you would say, "I am going need to see some... I want to see that."
Turner Novak:
I would say there's zero chance.
Eoghan McCabe:
It's probably not true. Right?
Turner Novak:
I would say... This is actually a bad example of your point because IBM made Watson, this new thing and the-
Eoghan McCabe:
True, but Watson was not great, actually. I mean, it was new, but it wasn't the modern AI.
Turner Novak:
That's fair. Yeah.
Eoghan McCabe:
Right? But it can happen, but it's pretty rare. And so, for us, we're proud of who we are. We're Intercom. We're unique in that we have the best help desk and the best agent for our part of the market. And that's why we're winning a lot of customers from people like Zendesk, because people want something that works together. You can't really get that with the standalone guys. But we really need people to know that the Fin thing's a new thing. And so we want it to kind of like win on its own. And you look at our billboards, for example, don't say Intercom on them. We're spending tens of millions of dollars on advertising that has no Intercom on it. We send all the traffic to fin.ai. Only on the bottom of the page does it say, "An Intercom Product." We're not trying to hide the fact that we're Intercom. We're just trying to let people see it anew for what it is, because it is new.
I mean, the AI group was 6 or 7 people and we started working on Fin. They're 50 now. We were spending a couple million dollars in AI back then. We're spending 100 million-plus over the next year or two. There's so much that's new here and we've made a dramatic pivot and we need to package that in a way which people understand. It's probably kind of common sense, but it's kind of a wild thing to do when you have a respected brand. But it is actually working. And now we have a great channel on intercom.com. We sell a ton of software that way. But now we have a new channel, fin.ai. We sell a ton of software that way. I don't know. We'll see. It's complicated.
Turner Novak:
You mentioned you're spending tens of millions on billboards. Do billboards work?
Eoghan McCabe:
I think they work when you're trying to establish a new leader of a new category in people's minds. Just brand recognition. You can brute force it. I think you can. It doesn't mean that they'll develop preference for it, but I think they have a way of... There's an insidious way of that positive exposure to a brand influences people's perception of the company. If you've heard it many times, you're kind of like, "I've heard that somewhere. That's an interesting company. I think I need to check them out." And yeah, we are fighting the inertia of the star that is the hot white star that is Intercom, and therefore, it makes sense to spend a lot. Now, I think those $10 million are billboards and they're also digital advertising, et cetera.
Turner Novak:
Oh, fair. Okay.
Eoghan McCabe:
So, it might not all be... I should know how much we're spending on all the various things, but I have smart people that do that. But I do believe it works to some degree.
Turner Novak:
And you said something really interesting in the past. You mentioned when you came back to Intercom, that you just didn't like the brand at the time.
Eoghan McCabe:
Well, I didn't like the brand expression.
Turner Novak:
Yeah. So, what was going on-
Eoghan McCabe:
I just thought it was very robotic and corporate and shit. We always were brave and different, creative. And we see ourselves as that kind of company. And so when the brand shows up differently, it's going to make everyone feel uncomfortable. It's like you having to go to a party dressed in... I don't know you. I actually don't know you well enough to finish that sentence. But dressed like a fucking dork. That's what it felt like.
Turner Novak:
That's fair. Yeah. Maybe a slightly different topic, but talking about some of the AI stuff, if you look at the two kind of CEO archetypes, there's the sort of manager CEO and there's the founder CEO. You probably fall more in the founder CEO bucket.
Eoghan McCabe:
I am a founder CEO. Yeah.
Turner Novak:
Because you're the founder CEO. How do you think about those two archetypes as we kind of go into the next couple years?
Eoghan McCabe:
Well, I just think that I know that AI is so fucking competitive and the people working on it are young and very hardworking kids in their 20s. And we worked super hard back in the day, but maybe they're working harder. I don't know if that's true. But there's no timeouts in this game. You just got to push aggressively every day of the week and work at a cadence that is quite unfamiliar in the late-stage-software days. In the late-stage-software days, every year or two, you check in in your strategy, you do a quarterly exec meeting, you'd review the goals for that quarter and set the KPIs after having reviewed the goals from the last quarter. Maybe once a year, you'd have the innovation and strategy team present to you.
Turner Novak:
Some new innovations.
Eoghan McCabe:
They'd tell you what's coming. The R&D team would say, "Here's what we've been working on for the last year."
Turner Novak:
That's good to hear from. Yeah.
Eoghan McCabe:
Yeah. And you'd be like, "Cool, I like that. Oh, cool. Cloud. Okay, great. Let's make sure we have something for our cloud strategy." I sound really like being fucking ridiculous right now-
Turner Novak:
Yeah. People are like, "Oh, maybe we need the NFT strategy or”
Eoghan McCabe:
Whatever. Maybe. Unfortunately, many people had an NFT strategy.
Turner Novak:
Yeah, unfortunately. Yeah.
Eoghan McCabe:
And there was this slow cadence, and it may be, and I say may be, and really, I mean, didn't fit the professional CEO who was part of a large organization and they were really good at that cadence, structure, order, harmony. But in the AI world, it's like, imagine you set your new strategy and your goals for the quarter. It can be day three on the new quarter, someone releases a new model, and your competitor releases a new product, and the other competitor just announced a new financing. And the product you all were really hyped about kind of didn't work and you need another quarter. And you realize that your old brand that everyone loved is kind of fucking holding you back, and you need a new brand, and you can't get the fin.ai domain and it's really the only one. You're going to have to talk to the fucking guy who owns it and he wants a lot to be paid for it.
Turner Novak:
Did this actually happen?
Eoghan McCabe:
This actually happened.
Turner Novak:
Oh, wow.
Eoghan McCabe:
And it's this constantly dynamic, wild thing. And yeah, professional CEOs, I just think anyone who wants to work in that cadence, it's just going to be left in the dust. And so, I just think that this time demands the founder MO which is flying by the seat of their pants and rolling their sleeves up and getting involved and making quick and fast decisions and not being afraid to make a mess.
Turner Novak:
When you think about that, an annual product plan, let's say we're sitting there, August of 2024, I think Bolt launched in October of 2024, Lovable somewhat recently after that. Then you had v0 from Vercel. You had Replit launch-
Eoghan McCabe:
Windsurf.
Turner Novak:
Yeah. Windsurf and Cursor. All these companies basically break the record for fastest AR growth.
Eoghan McCabe:
Of course. Of course.
Turner Novak:
What's the joke? Accounting rules aside?
Eoghan McCabe:
Sure, yeah.
Turner Novak:
Did you see the one video that went viral?
Eoghan McCabe:
Yeah, I did.
Turner Novak:
Oh, that's actually one you replied to. Yeah.
Eoghan McCabe:
That's the one I replied to.
Turner Novak:
Yeah. It's like, gross margins aside, extreme growth. So, professional CEO, you check back in October of 2025-
Eoghan McCabe:
You can't. An annual plan doesn't work. And so, part of what you also need is employees who are willing to work in that chaos. And I've always got feedback that, like, "Oh, we're making too many changes."
Turner Novak:
Is that the hardest part of working for you, is that you're always-
Eoghan McCabe:
No, we can get to what the hardest part of working for me in a second. But I always got that feedback and I actually took it as a negative and was quite insecure about it because I'm not a hyper-organized person. I'm not the professional CEO operator. I'm the person that hires that person. But now I know it's a feature, not a bug, actually. In the AI game, you have to change. We would be fucking dead if we didn't rip up all of our rules and all of our plans and all of our strategy and ICP and everything else multiple times in the last couple years.
Turner Novak:
Because there's been quite a few startups that have emerged trying to do customer service, right?
Eoghan McCabe:
A number. Of course. Yeah. You have to stay adaptive. Yeah.
Turner Novak:
Speaking of that, actually, if you were a startup right now, if you had to start over, if you're not allowed to do Intercom, you have no customer service allowed, what kind of opportunities do you think are out there for startups right now? Is there a framework that you have?
Eoghan McCabe:
No. Starting anew is so difficult, particularly now that things are moving so quickly, because you need to start something long before it's valuable or cool, well before the category takes off. So, so much of the early-stage thing is a crapshoot because of that, which you probably know. So, for me, when I think about starting new businesses, it's always just needs IC in the world that I will be really excited to fill. And I do think that that works in technology today, including in AI.
If you stay close to fields of personal interests... And of course, you can try and build stuff in fields that are not interesting to you, but I hate that approach, personally. I hate that throw-shit-at-the-wall approach and see what sticks. It's just really, really hard to build for people you don't understand or care about. But if you can stay close to domains that are interesting to you and that you care about, really get to know them. And then also be the person in that field that knows the most about modern technology and applications of AI. I think that there's opportunities to build cool new stuff. But so many of these AI companies are really abstract also.
Turner Novak:
How so?
Eoghan McCabe:
They're building platforms for AI companies that do a certain type of niche. Do you know what I'm saying?
Turner Novak:
I mean, I've definitely seen some of those.
Eoghan McCabe:
But then you look at their revenue and their customer base and it's like, "Oh, it's kind of real." And I believe it's real for what it's worth. Now, maybe it's actually not. I'm not going to name the company.
Turner Novak:
Maybe it's like the optimist in you is you're like-
Eoghan McCabe:
No, I'm not an optimist, actually. Totally, I was skeptical on the AI thing. I'm not an optimist. I think at least half of these companies are going to flame out. That's how it works, particularly when everyone's FOMOing into a space. Maybe two-thirds are going to flame out. It's kind of okay also. Everyone should go into it all eyes wide open. But yeah, I do think that there are those abstract opportunities. If AI is going to be as big as AI seems to be, then building tools and platforms for AI is probably a thing, these second-order things that I never would've thought of. But you have to be a certain type of nerdy individual to get excited about that too. But when you get far enough away from early stage, all your early-stage ideas kind of wither and die. You need to be a desperate founder to smell the ideas quite often.
Turner Novak:
Yeah. And I feel like when you're just thinking about competitions, there's probably less incumbent competition in helping AI-native companies, but there's probably a lot of startup competition in the how do you do evals better or... think there's this one... I don't know if this even worked. It was employee reviews for AI agents or something like that. You can get pretty esoteric.
Eoghan McCabe:
But maybe it does work, yeah.
Turner Novak:
Yeah, maybe it does.
Eoghan McCabe:
Yeah, maybe it does.
Turner Novak:
One question that I know I wanted to ask you about was, you are originally from Dublin, Ireland, obviously, also based here in SF. You probably were one of the first scaled and successful distributed teams. Is that still something you guys lean into a lot?
Eoghan McCabe:
So, we're semi-distributed in that we have multiple offices, but we try to not hire remote. It's just kind of a painful fact of our existence. It was an advantage insofar as as it gave us access to talent markets that we wouldn't have if we were just in San Francisco. And we have benefited and continue to benefit quite a bit from being in Ireland and London and being one of the more interesting companies to build actual technology in those places. But being far away from the humans that you're collaborating with and kind of spending most of your life with and on such a deeply emotional and a profound adventure with sucks. It's horrible. I don't recommend it to anyone. And a lot of people sleepwalk into it because they're kind of like, "Oh, my co-founder doesn't want to move for whatever reason," or, "We can't find a designer here," or whatever it is. I'm not saying you have to be in SF at all, even though there are great benefits to being here. But they take the easy path of building a distributed team and then just make it ever harder to undistribute themselves, so much so that they never become undistributed. And I just think it sucks. I just know that in-person's better.
There's the days I crave were the days where we were in the same office or I was back in Dublin. You're going in in the morning, you're meeting your co-founder or someone for a coffee. You kind of can have ad hoc meetings. I don't know, it's just more fluid and fun. I spend the majority of my day looking at a little digital square in front of me. And for my one beautiful human life on this Earth, under the sun, I choose to fucking stare at this little digital square. I don't know. I don't know. Doesn't seem like the best way to spend your days.
Turner Novak:
Probably not. I don't know if Bryan Johnson would approve.
Eoghan McCabe:
He probably hates this idea. But I'm not even talking about it from a wellness perspective. I'm just talking about just richness of life experienced. So, I do it out of necessity, but I know it's just so much more fun to meet people in person. Look, we all have various trade-offs we make. It's okay if you make the conscious trade-off. I'm just telling people don't make it unconsciously.
Turner Novak:
It sounds like if there's distributed team with multiple offices, and it's like, the people that are in different cities because of the necessities of whatever-
Eoghan McCabe:
Right. That's not necessarily the remote thing, because I do have people in SF I meet in person. There's a lot of people that meet in person in Dublin and in London. And we try to keep teams together, certainly in the same time zone. The time zone makes it even worse.
Turner Novak:
Oh, yeah.
Eoghan McCabe:
Way worse. Because Dublin's eight hours ahead. And so, I'm just starting my day. I'm barely waking up. They're at the end of their day. They want to go home. It's terrible mismatch.
Turner Novak:
Yeah, true. How do you think the media has changed over recent years? I mean, we're on a podcast. I'm an influencer, I guess, at the end of the day. What's the-
Eoghan McCabe:
Congratulations.
Turner Novak:
Depending on who you're talking to, it's like, sometimes it's an embarrassing thing. Some people are really excited for it. Yeah. For me, it's like, I kind of accidentally became one. So it's like, you got to lean into it. But have you seen that evolve over time as a founder and how you kind of play that for your company?
Eoghan McCabe:
More and more people evangelize the idea of founders going direct, and it's a trend that's real. You've even got people like Mark Zuckerberg going on a range of different podcasts, speaking in long form in a very raw way. And I think that that's only great for people like Mark. I think without that, he was substantially less human to the world. And so, for founders, having this opportunity to go on different people's podcasts, have these long-form conversations, publish their own podcasts or videos, even just their own writing on Substack or even on Twitter or X, all these things are outstanding. I will begrudgingly admit that there is some, at the very least, psychological stamp of approval or value stamp that conventional media still delivers. And when you're covered by The Wall Street Journal, I don't know, I guess it's got a certain sheen to it still.
Turner Novak:
Yeah. People kind of lean forward when they hear that.
Eoghan McCabe:
I think so. Now, if you think carefully about it, is there a good reason for that? Probably in part, no. But in part, yes, because to actually get covered by the Wall Street Journal, you need to be comprehensible and interesting to the mainstream.
Turner Novak:
Yeah.
Eoghan McCabe:
And that is a kind of signifier that there's something that's broadly more interesting here than the nerdy podcast. But yeah, I just tell all founders to just tell their story early and often. Don't be afraid to repeat themselves. The new cohort are all vibes founders, at least the best of them. They're really good at media.
Turner Novak:
Did they grow up on the internet? Is that why-
Eoghan McCabe:
Part of it, right?
Turner Novak:
Yeah.
Eoghan McCabe:
Well, they grew up with TikTok and they grew up with Instagram. And the best of them learned how to promote themselves at the very least, saw how people who were good at promoting themselves did it. It's hard actually for a lot of founders. I'm not that type of person. I don't want to do that. I don't want to create a bunch of fucking videos of myself. It's not interesting to me. Very painful, but there's people who like doing it and they're good at it, and they get a lot of benefits now. So I think the game is now a hype game. It's now a cell phone media game. It's a direct game, and the more you can tell your story early and often, the better. And I think the last thing I would say is the more vulnerable you can be, the better.
Turner Novak:
Really? Why is that a big deal?
Eoghan McCabe:
Well, just because with the vibe marketing comes the bullshit, and there's a lot of overly slick content, and kind of dry podcast interviews that are very difficult to listen to in my opinion.
Turner Novak:
That's true. If someone's listening this far into this one, you got to give them credit.
Eoghan McCabe:
Yeah. What are you saying? This is dry? Is that what you're saying? If you can be vulnerable and authentic in yourself, I just think it's a lot more interesting and relatable. And it's hard, everyone on the internet is trying to take quick and cheap shots. It's hard to take shots of people who are just fully being themselves and not trying to sell too hard. So the prototypical future successful founder, and I do think that this is a strong signifier for someone worth investing in, is someone who is able to tell their story confidently, knows who they are, they're authentic, they're willing to make mistakes, admit when they're wrong and is not afraid to be on camera and just produces content and communicates. Those guys go so far. So far. Some of them go too far. And there's some companies I can think of which I won't name that maybe they're all hype, we don't know yet, but I'm almost certain that the future successful founders will learn how to do this well.
Turner Novak:
Well, it's that whole of distributions all the matters. That's not entirely true, but to the point-
Eoghan McCabe:
Well, it makes a big difference if indeed software is getting cheaper to develop, right? What's left then?
Turner Novak:
And to your point of maybe someone went too far and we don't know if they actually have a product and if it actually works, but we know that we should care. There's two different sides of that problem. It's like you made a great product, nobody knows about it. And there's the other side. You have no product, but everyone knows about your product. Two different problems. Maybe one of them is easier or harder to solve or get around.
Eoghan McCabe:
Well, I think you need to do all the things.
Turner Novak:
True.
Eoghan McCabe:
And we've got a lot better at building software. When I started building software, things like Ruby on Rails just came out, and it was a profoundly-
Turner Novak:
You didn't have cursor, you had to actually write the code, right?
Eoghan McCabe:
No. Well, forget cursor. We didn't have, I don't know what version of Rails we're on now that make it even easier. These frameworks only just came out that allowed you to save a lot of time developing basic CRUD apps. Now software is commodified and yes, now we have cursor and everything else, which are going to add great efficiencies, but distribution is not commodified at all. It's monetized. So you can pay your way in. And if you are a new founder with not a lot of money, you're finding the comments like me with the hundreds of millions of dollars or tens of millions of dollars dumping it on-
Turner Novak:
Billboards.
Eoghan McCabe:
... billboards allegedly.
Turner Novak:
Yeah, allegedly.
Eoghan McCabe:
So what have you got left? You've got your own vibe and magic to give to the world. And so maybe this take proves wrong, but I really think that the new hot founders are going to be ones that can sell themselves well.
Turner Novak:
Yeah. Well, I think one thing too is if you think about from yourself and you just think of like how do I feel about constantly putting myself out? I'm tweeting 20 times a day, I'm making a bunch of TikTok videos, make 10 or 20 a day, you know all that you're doing and you just assume every single person out there is seeing and consuming all and they just think, oh man, Turner's just tweeting all day, Turner's making TikToks all day. But the average person is going to see maybe one or two or three of those and they might see 10 or 20, maybe 50% of what you put out. No one will actually see all of it. So it's kind of like putting shots on goal. And a lot of times you don't really know what's going to hit when you're making content. I will tweet something, and I thought it was pretty clever and like oh, this is going to be a banger, and it just kind of flops.
And then sometimes I'll have one where there's a typo and it was like, took me two seconds to make, but it gets a million views. I'm like, shit, I almost didn't tweet that one. So it's kind of one of those like sort of the same thing of high shipping velocity on product. It's just with content, you just put it out there, you just do it 10 times a day and the ninth one and the 10th one is the one that really hits, and that's the reason people know about you. But if you chop those off and you only did eight or you only did one a day or you did one a week or one a month, imagine if you did 10 a day, the hundredth times is the one that hits.
Eoghan McCabe:
That's totally true.
Turner Novak:
10 days and you got you hit versus if you were doing one a month or one a week and it'd take you a hundred, it would literally take you a hundred years.
Eoghan McCabe:
It's true. Unfortunately, I'm doing the one a week strategy. Because I'm not one of these young founders that is social native, where I have all these ideas for pithy tweets and I'm really excited for the world to like.
Turner Novak:
Yeah.
Eoghan McCabe:
I'm not that guy unfortunately. So this is some of the advantages that the new kids do have. Some people can work and tweet like Amjad from Replit apparently can work and tweet. He's built a great product. Business is on fire. The guy is out there in social media promoting it non-stop. Apparently it all works. Kudos to him.
Turner Novak:
Well, and one thing to think of too is you might think, oh, he's just tweeting all day or he's just always doing is just typing all day. But you're probably spending a lot of time in Slack. You're spending a lot of time in email. So you're just kind of shifting some of that to being a place that's one on many. So it's like you can send an incredible message super insightful on Slack or an email to one person, or if you put it on the internet, a hundred thousand people will see it and you almost get more credit for it in a way. So there's downsides putting the wrong thing out there on the internet, but there's also unbounded upside.
Eoghan McCabe:
Yeah. You have to not overthink it. You have to be willing to be wrong. Yeah.
Turner Novak:
Yep. Talking about putting things out on the internet, I kind of wanted to, just to kind of wrap this up, I went to your personal website. Your website's incredible. It looks like it was made in 2003 maybe.
Eoghan McCabe:
Yeah, it's designed to look like it was made in 1996.
Turner Novak:
Okay.
Eoghan McCabe:
Because they were the glory days for me when I first got online. GeoCities and all that good stuff.
Turner Novak:
Okay. I was going to say GeoCities. Yeah. I had a GeoCities website back in high school that I had.
Eoghan McCabe:
There you go.
Turner Novak:
It had the little sidebar ads thing, you know what I'm talking about?
Eoghan McCabe:
Perfect. Yeah, of course.
Turner Novak:
You could pay for premium to get rid of it. But I was 12, so I didn't have that.
Eoghan McCabe:
That was a beautiful thing.
Turner Novak:
You said one of the things on your website, you said you took out a loan for $2,200 for your first flight to San Francisco.
Eoghan McCabe:
Yeah. Yeah.
Turner Novak:
Really? So what's the story with that?
Eoghan McCabe:
I mean, just that I didn't have a lot of money. That's the end of the story.
Turner Novak:
You were just hell-bent on I'm going to get to San Francisco?
Eoghan McCabe:
Yeah, yeah. I had one friend out here who told me earlier that year like, "Dude, it's crazy out here. Kind of the whole internet's being built out here and there's so many VCs and you kind of have to be here." And yeah, the word was kind of getting out about San Francisco. San Francisco wasn't the center of Silicon Valley in 2011. That was just like a conversation, people were saying, "Oh, it's starting to move to San Francisco."
Turner Novak:
From South Bay-ish.
Eoghan McCabe:
Yeah, exactly. South Bay, Palo Alto and Cupertino and Menlo Park and Mountain View. That was where Silicon Valley was. And so I moved here just as people were saying, "Ooh, San Francisco is going to be the new Silicon Valley." And yeah, I came here to be part of that. Had to be part of that.
Turner Novak:
Yeah. And another thing semi related on the website, it said it took you quite a while to raise the very first round for income. I think I saw that the pitch deck is on the website, which I'll throw a link in the description for people to see, but I think you were trying to raise 600 grand.
Eoghan McCabe:
I was trying to raise a million dollars, and I just burn through every single investor intro I got. I just got nos everywhere. You see the thing, this is where I really sounded like an old man, but back then there weren't seed firms. There was maybe three or four or five.
Turner Novak:
So was this 2011?
Eoghan McCabe:
2011, there weren't really seed firms. There were VCs. And I think kind of the way you did it was that you raised friends and family round and then you went to the institutional people and then maybe you raised a series A and the friends and family round was maybe your seed kind of. There weren't many people who are writing big C checks. Now you see all these people, all these fucking kids, I'm just trying to joke here, trying to lighten the situation, given that how all that sound, announcing their 7, 8, 9, $10 million seed rounds. There was one just announced today that I invested in, and that was unheard of, seven fucking million dollars for a seed round. If someone told you that in 2011, it would be actually funny. It would be a funny joke.
Turner Novak:
You would've thought they were literally trolling you.
Eoghan McCabe:
It would be a joke because it didn't happen.
Turner Novak:
Yeah.
Eoghan McCabe:
It didn't happen. Yeah. So anyway, I went to all the various angels I could get interested to, got a bunch of nos. Then I got a couple yeses. I got 5K checks, 10K checks. I think I got a 50 or a 100K check from Biz Stone, who was the founder of Twitter, one of the Twitter founders. So he was one of the big ones. And I met him, we took a walk around the mission for probably 25 minutes. He shook my hand and said, "Yeah, I really like it. Yeah, cool. Okay, cool. I'm in." Kind of like 5,000K, like, but really I really got the impression that, and I like Biz a lot. This is only a compliment to Biz. He ended up making a bunch of just killer investments, but I'm like, God damn it, that guy really hasn't done his due diligence at all. Like how? What? He doesn't know anything.
Turner Novak:
Vibe investing.
Eoghan McCabe:
Exactly. But I mean it really worked out for him. But yeah, long story short, many many painful depressing months. Came back to Ireland, cap in hand like fucking loser to my co-founders. I had managed to scrape together 500K, much of which just came together in the last minute. Then Biz knew these Japanese guys digital garage and introduced me to them and I had a meeting with them during the day in Dublin. It must have been really late in Japan. It was a Skype call. It was 26-year-old me. There was like 12 guys in suits.
Turner Novak:
Okay.
Eoghan McCabe:
The lost in translation factor was very real.
Turner Novak:
Did they know English?
Eoghan McCabe:
Yeah, they did.
Turner Novak:
Okay.
Eoghan McCabe:
But I'm pretty sure that they barely knew what I was saying. I barely knew what they were saying. But it was something like, I don't know how it went, but they were kind of like, they said something like, very good, we'd like to invest $500,000. Sorry, yeah, $500,000 and I was like, okay. And that went on to be a great fucking investment for them also, I mean a killer investment. Back then of course seed rounds were we raised at a 6 million valuation. So it's like-
Turner Novak:
Maybe some dilution, they're probably sitting around a hundred X at least, right? Something like that.
Eoghan McCabe:
There's some dilution. I don't know if it's a hundred X, but it was a good investment, let me put it that way. So kudos to those guys. And I got to meet them over the years, we'd meet in person. They were just the most polite lovely gentlemen ever. So our round was just really random. I didn't deserve that million dollars, but it came together. And so I can't overstate my resentment for the kids who are raising 10 million at a hundred million valuation in a week.
Turner Novak:
So why is that happening now?
Eoghan McCabe:
I think we're more aware of the potential of these investment vehicles like 15 years later we now see the plethora of unicorns and decacorns. So first time. Is that we say decacorn?
Turner Novak:
Decacorn.
Eoghan McCabe:
Terrible phrase, but I'm embarrassed even that I said that phrase. I realized I've never said it before.
Turner Novak:
Yeah, you've never said it out loud before?
Eoghan McCabe:
Never said that word before. There was barely billion dollar private companies back then. It wasn't a thing. The reason it was called unicorn was that it kind of didn't exist. And now there's little AI companies that are worth a billion dollars three months after launch. I mean, that literally happens now. And so we weren't aware of and awake to the potential still of software, the internet, technology, cloud. And that's why now when people see AI come around, they're like, "Holy shit, we're not going to make that same mistake again." Because these things are so much bigger than we realized.
And just like SaaS was bigger than we thought before. I say it again, that AI is probably way bigger than we could possibly imagine. And so as ludicrous as these rounds are, even though some will flame out and people will lose their money, some are going to make phenomenal fortunes. Because just like unicorns are so rare then and now we have companies worth tens of billions, maybe in 10 years, it's not going to be rare for companies to be worth hundreds of billions when they're private. It might not be the thing that only five companies can achieve. Maybe they'll be 50. And so then it makes sense to lean in aggressively, but not back in 2011.
Turner Novak:
Yeah. Well, an interesting thing though, when you think about the people investing that capital and how do you monetize it, you charge fees and you get the profits or the carries. So in public markets, there's fee compression. So if you're running a public market fund, you probably can only charge about 1% of your capital. But if you run a venture capital fund private markets, you can charge 2%. So people charge two and a half or 3% a year.
Eoghan McCabe:
Right.
Turner Novak:
So there's incentives for the capital to kind of be there. If people know the returns are there, you miss out on with public, you get paid your carry quarterly, sometimes annually with private markets you need to actually exit. So you don't get the carry quite as much. But the incentives are, that moves the incentives even more towards raising AUM and getting that management fee. So it's like you've got, if the companies are doing well and they're growing into the correct profile, you'll have investors who will step up and raise the capital to solve for that and keep them private. So I think the incentives are aligned, whether you could say it's good or bad, the incentives are set up to where that's probably going to happen.
Eoghan McCabe:
And there'll be just a lot more money chasing this current capital for sure. And just going into, once again, many esoteric unfamiliar, unsexy categories, the capital is going to trickle down in many areas of directions. So it's going to be interesting to see maybe VC firms will grow. Maybe it turns out that the close to infinite VC funds will actually not be enough.
Turner Novak:
Maybe. I feel like that's a pretty hot take. I feel like most people say there's too many VCs.
Eoghan McCabe:
That's what I would say.
Turner Novak:
Yeah.
Eoghan McCabe:
Well, it's just really hard to differentiate now.
Turner Novak:
Yeah. How do you decide when you meet an investor? I guess you're a little different now from where you're at, but maybe if you can reflect on it and think about it. I mean, I guess at any-
Eoghan McCabe:
I still do it.
Turner Novak:
... spectrum. How do you about like... Do you look at what value will you provide to me? Is it like, do I trust you? Would I want to get a beer with you? How do you gauge it?
Eoghan McCabe:
I have sharp hot takes on this. I'm glad you asked.
Turner Novak:
Okay.
Eoghan McCabe:
I think that value add is fucking bullshit. I do think that some, particularly if they're operators, can maybe help, but I think it's really the job of the founder to run their damn business. And if they set up a situation where either they think or the investor thinks that the investors should be contributing anything, something's going wrong. But for the most part, most investors are not going to be able to help the founders. I mean, there's just a fundamentally different discipline. I do think that they can help them thinking about future financings and about corporate matters, valuations, exits, and they can make appropriate introductions to other investors and bankers and strategic buyers, et cetera.
So all of that makes sense. And I think that's really cool. But I am really allergic to the big firms that have apparently these sweet sub services. I think that that's bullshit. So that's kind of one side of it. The investors and so I'm repelled from investors that say, how can we be helpful? I'm like, "Come on buddy, you can't. Sorry, you typically can't. Not with me, not with the brand new founder. You can't. You're probably a great investor, but that's a different discipline."
So I'm repelled from those types of people. I'm attracted to investors who have the confidence to communicate directly and openly, and actually know what they bring to the table and are willing to disclose their own interests. So when you get investors who are like, I just want to be involved in great founders and you're fucking amazing, and like, oh, I really actually love your company and you are particularly incredible. And I just, oh, the timing isn't right or something, something.
Turner Novak:
You didn't say anything. That was the most generic line of words I've ever heard.
Eoghan McCabe:
But that is 80 to 90% of investors still. I reconnected with a bunch of investors because we haven't raised since late 2017. So I've been not exposed to investors for-
Turner Novak:
Oh, wow.
Eoghan McCabe:
... eight years. And I'm like, huh, maybe they've changed. And I got the same lines from a brand new cohort of investors. But a couple investors would say things like or will say things like, that opportunity is interesting on the face of it. We like that company, but our return profile is three to five X. And at this stage, we don't know if we can achieve that or just by the nature of this business, which is an arguably great business, is not going to make as much sense as me allocating this capital to a slightly earlier stage company that's growing at this different rate. And they'll show their cards a little bit and have a grown up conversation. Because then if it's authentic and real, if the founder wants to feel hurt, then it's kind of on them. Whereas if the investor is fucking bullshitting them, which the founder will always feel, at least subconsciously, that's when I think the relationships go awry. And so the investors, while they think they're helping themselves from hiding their true motivations or hesitations about the business themselves.
Turner Novak:
Yeah. Or keeping optionality, of I couldn’t convince my team to invest now.
Eoghan McCabe:
I think that they're actually damaging their reputation with the best founders, who will smell bullshit a mile away. So again, I've seen just time and time again, the best investors, the top 1% or 2%, they're more than confident to say, this is a little early, we'd like a little bit more proof on this, we like this and this, but this I'm a little concerned about, we'd like to get to know you a little bit longer, and it's just a chill thing. Or this is not for us because we only do this other thing. But as soon as you start laying all the, like you are fucking amazing and I do anything to work with you, but for some reason I'm not investing in you. Absolute bullshit. That's still 80%, 90% of investors-
Turner Novak:
Really?
Eoghan McCabe:
... which is really, really surprising. And it's just because, sorry, it's just because I think a lot of investors don't have experience managing people. When you manage people and you have to give hard feedback, and you have to build rapport with people who want to follow you and work with you, even though you told them things that they didn't want to hear, you quickly learn just the authenticity pays and bullshit doesn't. And I just don't think that they've had that experience. I will admit that it's very easy for me to say that on the founder side of the table, who doesn't have to maintain optionality, and doesn't have to maintain their reputation amongst immature founders who are going to badmouth you no matter what you say. So I actually know it's fucking hard, but I will say that despite how hard it is, some investors can do it. And I think they're the fucking legends.
I've met some of them, and I'm just so impressed with them. I was raising money again for this business, another business, I would go straight back to those people because they're real. And I'd love if the world kind of knew more about them. And one of the insidious and shitty parts, it's just the overall dynamic here is that there's always a new batch of founders that don't have the experience that I have, that don't know it can be a different way and they'll fall for the bullshit. And they don't have the standing and ability to tell investors to go fuck themselves if they misbehave. So the bad patterns perpetuate.
Turner Novak:
So should I tell someone to go fuck themselves or-
Eoghan McCabe:
Probably. No, I'm just kidding.
Turner Novak:
Or do you-
Eoghan McCabe:
Well, unless if there's a reason to, yeah, but what I'm saying is what are the various reasons you won't invest? Sometimes you just think you just don't see the opportunity there.
Turner Novak:
Yeah. So it's just like giving a data point. It's just like, I-
Eoghan McCabe:
Yeah. Here's literally the conversation I would try to have. And if you had a hundred of these conversations, I guarantee it's going to resonate with all the right people. They're going to come back to you. I would say, I'm trying this new form of feedback and communication with founders that basically no investors do, because they're all trying to maintain option value and it encourages them to bullshit founders. And I really don't want to do that. And I'll admit that I've been there a little bit, because sometimes it just doesn't pay to be really real, but I'm not going to do that anymore, and I'm going to try and build a reputation that is based on authenticity. And so here's what I think your business. I think you're very compelling. I think that you really believe in what you're doing, and you're smart, and I've enjoyed my conversations with you and I really hope that despite what I'm about to say, you'll talk to me again. I think that the way you're currently configuring the business, it's just a little odd for what we've seen before.
And that could mean that either I'm super wrong and it's an incredible opportunity. And I'm really close minded and you're going to make a fortune without me. Or maybe if I'm lucky, you'll come back in the next round. Or it could possibly mean that you need to make a little adjustment and you'll figure this out. And I've seen it before with great founders like you, who are slightly misconfigured, who go to market in the wrong way, learn and change, have incredible success. And so for me, who can only make a small number of investments, I have this limited size fund, these are the check sizes I write. I'm really only going to make one investment every month. I can't get comfortable when I think that that's the wrong thing. And neither you're right or I'm right. It doesn't really matter. But that's where I'm at. And I hope that me being real with you will win some trust such that when you're raising again, you'll come back and maybe it won't. And I guarantee that the best people will be like, okay, I've actually never heard that before.
Turner Novak:
Yeah, that's pretty hard to argue with. Yeah.
Eoghan McCabe:
Thank you. Some people will be like, fuck you, whatever. But they're not the right people at all. The best people will be like, I really like that authenticity.
Turner Novak:
If you talk about the other 80, 90%, they don't even get this might be the first time someone actually said that to them.
Eoghan McCabe:
I guarantee, if you do that, you'll be most times the only person that does that. I guarantee it. Because the types of investors I meet now are way more experienced at later stage, great firms. So they've learned to do this. The early stage guys haven't even learned that. So I think it's a secret weapon, just radical transparency, directness, authenticity. You could build a whole brand around that, in my opinion. But again, easy for me to say from this side of the table. Wish you the best of luck with that.
Turner Novak:
Yeah, thank you. I mean, I think at the end of the day, that probably sounds easier than it's hard building an AI company from the ground up.
Eoghan McCabe:
Well, no, I think it's all hard. I think it's all hard. Listen, your dollars are the exact same color as everyone else's, but somehow people have to choose your ones somehow. And there are now countless idiots with green money, countless. You and I could never list them. ChatGPT could never list them. And so you really got to be careful when you're building that reputation. So that conversation is easy to have when a smart ass is talking on a podcast, but in real life it's difficult. But having said that, I think it's an opportunity.
Turner Novak:
Interesting. Okay. It's good to reflect on. I do try to give as much feedback as I can, but to your point, it's hard to do it at scale in a kind way everyone, things definitely do fall through the cracks.
Eoghan McCabe:
But that's for the legends of the legends.
Turner Novak:
Yeah. I like that though. It's good motivation. It's good food for thought.
Eoghan McCabe:
Yeah.
Turner Novak:
Well, it's been a lot of fun.
Eoghan McCabe:
Yeah, really fun.
Stream the full episode on YouTube, Spotify, or Apple.
Find transcripts of all other episodes here.