And why we are still very happy about that post COVID19
Early February, we completed our EUR 1.75M investment in Trengo. Trengo offers a SaaS platform that aggregates all client communication channels into one shared inbox. The platform allows businesses to improve their client communication by combining channels such as Facebook, Whatsapp, Instagram, Twitter, webchat and voice into one screen, and allows teams to easily collaborate to handle conversations.
They didn’t need funding
When we first reached out, Trengo was not actively looking for funding since their business is already profitable and they are growing fast. Yes, that of course triggered us ;-). However, since Trengo has the ambition to scale even faster and expand their international presence, the team was open to discuss how we could help them. We had to convince them that they could benefit from additional capital (and that they should accept us as the right investor). During several strategy sessions where Trengo shared how they were operating, we were able to share our experiences and give insight into our thoughts of how to scale SaaS businesses even further. Working together suited both of us well: for us, this is a very important stage since we can see the team in live action. Vice versa, Trengo could experience what we could bring to the table (and perhaps even more importantly, let them know that we understand that in the end founders and management make great companies, and VC’s are mere facilitators on that path to success). We believe that having strategy discussions and working on an OKR plan together is a great way to validate if you are a good match.
While these meetings actually took longer compared to other deals, the negotiation was quite short. We were both convinced we wanted to work together which made for a smooth and mutually agreeable negotiation.
So, why Trengo?
- A product-led founding team accompanied with relevant commercial experience. Trengo was originally founded by Patrick Meutzner and Marcel van de Weerd, who had a software development agency before. With their vision and skills of how to develop products, the small team was able to develop many features and build a robust product in a short amount of time. Of course, having someone who can sell the product is equally important. That is where Igo Trampe came into play: he brings greater commercial power to the operations.
- A clear value proposition that solves a new and growing problem. We have seen a tremendous growth in client communication channels over the last decade, such as Facebook, Instagram, Twitter, Whatsapp and voice. Customers expect their suppliers to be available via many channels and ideally 24/7. Although chatbots and flowbots are on the rise, the personal touch in client communication remains crucial. As companies try to keep up with consumers’ high expectations, oversight and control easily spirals out of control and becomes unmanageable. By combining these channels into one portal and empowering teams to easily collaborate, Trengo helps businesses improve their customer service and sales, as well as save money and time spent by those departments.
- Fast growth at healthy unit economics while being bootstrapped. The Trengo team managed to bootstrap their company while growing fast. The big advantage of bootstrapping is that companies will find its way to be capital efficient, instead of scaling too early, burning a lot of money and then finding out there is no way to profitability. While this is not possible for every type of business, Trengo proved to be a profitable business even at a small scale. Their cohorts showed a strong land and expand model which means customers typically take larger accounts over time. Which is a very good indicator of satisfied customers and being able to grow exponentially!
- A red ocean market – but a strong position for complementary value. The client communication market is incredibly large but therefore also has many competitors. Some offer one specific communication channel and Trengo matches this well by looking for collaboration. By being the aggregator, businesses can use multiple solutions – or add new ones to their existing channels. In regard to direct competition we observed there is still a large opportunity in the SME market since the competition has a focus on large enterprises and the mid market.
- Users love the product and use it daily. Looking at the usage of the platform, we found that Trengo has an 80% DAU/MAU ratio. The first (or perhaps second) application users open at their office is Trengo as Trengo is the environment where they can communicate with their team, prospects and clients. This opts for a strong lock-in which was shown in the high retention rate. Their land and expand model reconfirms this with clients undertaking quite a few upsells by either using the product with more users or adding new features.
- A business critical application with many options to add more value. While users might only use several features of Trengo at first, it doesn’t take long for Trengo to become a business critical application. As orchestrator of multiple apps (channels) at the first screen of a user, Trengo has many opportunities to further enhance its position. Think about further team collaboration, adding more flowbots and deeper integrations with CRMs, dashboarding, productivity tools and workflows. Being central in such a core activity of a business is a very interesting position.
And then COVID19 hit the market
During the time we made this deal COVID19 was something from another world and of course we didn’t anticipate the magnitude of this crisis. And while the long term effects will have to unfold themselves, the short term effects for Trengo are more positive than negative: Trengo is ideally suited for remote work and team collaboration, resulting in a boost of their revenues. The company even tripled its customer onboarding capacity in the last month. While in the office, teams would sit together and briefly could ask short questions or feedback on client communications, the switch to remote work forces them to do otherwise. We just love companies that have business critical software solutions and a highly daily usage, especially if they are targeting remote work solutions during COVID19 days ;-).
And of course, it takes two to tango (yes, the joke ‘it takes two to Trengo’ has been made over a 1,000 times already, so that would be lame to put in here…) so we invited the team of Trengo to share their views on the transaction as well:
“Although we weren’t necessarily looking for external capital, Peak opened our eyes to bigger opportunities, especially internationally,” says Patrick Meutzner, co-founder of Trengo. “It has always been our goal to reach the top on a worldwide scale. With Peak’s extensive knowledge, expertise and capital, we believe we can achieve this goal even faster than we planned.”
“Aside from that, we really value the strong personal connection we feel with Peak. There are a lot of Venture Capital companies, but we place a lot of importance on their knowledge of SaaS companies and scaling internationally. Since we’re embarking on a long term journey together, you need to be sure there is a good match. Peak simply ticks all the boxes.”
Thank you, Patrick, Marcel and Igo — We couldn’t be more excited to be part of your journey and are looking forward to the next chapter!