Sorry for a third post in a row, but one important point for myself: These were my first posts to the forum, even though I’ve been reading things here for a while. I hope my questions will spark a good discussion. Although my questions may be critical, I’m certainly unaware of the market and perhaps wrong (about many things). My intentions are good…
Leaddesk has, and can have, a lot of positives. The scalability of the software side, for example, can be a good starting point.
One more thing in the spirit of “threat or opportunity”: I’ve heard that robotics will be a big factor in call center technology. I remember hearing that in the US, the majority of sales calls are already made by robots. This, of course, means that software (CRM?) becomes absolutely critical in business management. What thoughts does this provoke at Leaddesk? Is this an opportunity? Is it possible to get “in between” there, or are Leaddesk’s features already incorporated into those software? And is this robot aspect even true?
Well, this is sort of my point: what is a reasonable revenue target to aim for? Is it 100 million? With what resources can that be achieved? The market already exists, and customers’ needs are already being met daily in one way or another. Does Leaddesk have the opportunity to carve out a good share for itself?
Answering myself: In its analysis, Inderes expected a turnover of approximately EUR 21.7 million for 2022. So, EUR 100 million is probably not a reasonable target. Even though the annual growth in percentages is quite respectable, it is quite small compared to the size of the market (in my opinion). So, what could be the company’s future?
The best part of yesterday’s event was the Q&A session, which included a few tough questions from a software user. The Q&A answers many of the questions asked here, starting at about 1:05
I’ve gone through all the brochures, analyses, videos, and events multiple times. In the end, I decided to allocate about 8% of my portfolio to LeadDesk.
The biggest risk I see is the success or failure of the targeted acquisitions (successful merger/integration within a reasonable timeframe, avoiding the loss of key personnel from acquired companies, etc.).
Risks are there to be borne and opportunities to be seized.
I’m in.
The company is an attractive investment, yet there are still some concerns.
The company has made acquisitions to date, but there was no mention of them in the prospectus or at yesterday’s event. How many acquisitions and/or business transactions have been made, for example, last year, and how much revenue and profit have they generated?
How successful has the integration of acquisitions been? Have the acquired businesses been logically integrated into LeadDesk, and have, for example, customers of the acquired companies been brought to use LeadDesk’s software?
How much of the SaaS revenue comes from the LeadDesk product, and how much from the software of acquired companies?
How much of the international revenue is brought by acquired companies, and how much is generated organically?
Is the inbound product already at a level where it is possible to win deals in customer accounts where inbound plays an important role and the same system is desired for both inbound and outbound? This was not the case a couple of years ago.
Welcome to the forum, @tyhma_raha Here’s a summary of my thoughts, and my colleague @Petri_Aho can add more
These billion-dollar markets are very macro-level definitions, and it’s good to note that when you start breaking them down, many niche markets fit under their umbrella, giving rise to their own players (e.g., LeadDesk focuses on small and medium-sized high-volume contact centers (primarily outbound and only in Europe)). In our analysis, we estimated the size of the European market by the number of outbound salespeople and then, using a price/seat/month estimate (€75), we looked at the total market potential, arriving at a figure of approximately €900 million. This only gives a ballpark figure and comprises only outbound and only the cloud market, assuming 100% penetration to the cloud. That cloud migration is still in its early stages, so the cloud market today is still a fraction of that. The market is very fragmented (and local), and one could assume that in the long run (like 10 years), with the cloud migration, it will consolidate into the hands of a few companies, and LeadDesk’s ambition is to be one of them (grow/acquire or be acquired…). So, although LeadDesk is a relatively small and young company, the market can also be described as relatively young in its development stage.
The cost of opening a new market, depending on the market and the chosen strategy, ranges from €0.5 million to €1.5 million (this was discussed in the Q&A). I believe that with the €5.5 million, good results were achieved, considering how much the run rate (ARR) grew from the beginning of 2015 to today. It is likely that new markets will be “easier” to open now that lessons have been learned from 5 markets already. There were also good comments on this in the Q&A session. IPO funds will be used for acquisitions and opening new markets, but it’s important to note that the company’s operational cash flow is already at a level that provides flexibility.
This was also discussed in the Q&A (and our report also includes comments on competitive factors). Competitive factors include reliability, data security, integrability, telecom services and backend infrastructure, software features, strong customer base, references, credibility…
The transition to the cloud does not happen overnight, and the adoption of a new operating model (software from the cloud) always takes time for customers and the entire industry. So, perhaps at the market level, one could say that market maturity has been a limiting factor. Over time, the market for these software solutions will become increasingly mature for cloud migration. At the company level, growth largely depends on how much money is invested in sales.
When the definition is limited to cloud-based sales and customer service software, the claim is certainly true.
Why would companies choose a Software-as-a-Service (SaaS) solution that erodes their profitability instead of treating software acquisition as an initial investment in the company? In my experience, these monthly payment setups have been met with great criticism in the software industry. A customer’s software-related needs are unlikely to change over time, but these “loan payments” are eternal. The video even mentioned that some clever engineering student could code such software as their final project.
Thanks, @Pika-Sissi, for the article you linked. It looks like old Uncle Brutus will be passing on this case and will instead acquire shares from the stock exchange based on the company’s later performance, if it starts to look promising. This decision is also influenced by the fact that I don’t know the company’s industry and products well enough, and I might not be enthusiastic about delving into the matter. It’s better to stick with companies whose industry and products are more familiar.
I’m also skipping this one. The main reasons are the questions I raised earlier. Additionally, I still haven’t read a sufficiently comprehensive explanation of what exactly the moat is in this case.
In VC-funded cases like this, where a company goes public so early, it inevitably makes me think that there isn’t much faith left, and investors want their money back. Small companies like this should easily be able to raise money from the VC market and avoid all the administrative burden that comes with going public.
I didn’t have the competence to assess a fair price on my own, so I ended up trusting Inderes’ valuation. However, I only subscribed for half of what I imagine my maximum position in LeadDesk would be, so there’s a reserve for potential additions.
What fascinates me about the case are the already proven demonstrations of rapid growth. Years of rapid growth also indicate that the product must be at least in reasonable condition (in marketing, customers and the company itself, of course, praise it as excellent).
A new employee just joined our customer service and said she had used Desk in her previous workplace. When asked what it was like to use, the answer was “easy and effortless. Straightforward without unnecessary fuss.” “Much smoother than the old one was.”
That was, of course, encouraging to hear from someone who used the system daily in their work. The company was some kind of security company.
So I assume that the product is good in terms of quality and price, because it apparently works well for its purpose and the market seems to want to acquire it, judging by the strong growth.
That’s already an equation that makes it possible to conquer markets, as long as the marketing machinery works properly. Apparently, it has worked so far, judging by the growth in numbers.
Let’s hope there aren’t any “Enersense-like” immediate setbacks, and that the descriptions of the future are at least broadly accurate.
In my opinion, the chairman of the board specifically mentioned at the presentation that the current owners are not divesting; on the contrary, some are increasing their ownership now that it’s possible.
So far, the company has made only one small acquisition in 2016, which, to my understanding, was more about acquiring talent, technology, and customer relationships than actual business operations. This is mentioned on page 32 of the prospectus and in the following press release: https://leaddesk.com/blog/leaddesk-continues-growth/
The integration has been successful, in our understanding.
3/4. Acquisitions have not, in our understanding, significantly increased revenue, and they have been integrated into LeadDesk’s product.
The inbound product is not, in our understanding, LeadDesk’s spearhead for sales, as outbound sales cycles are shorter, making it easier to gain new customers through them. Inbound customer relationships typically develop once the customer has first verified the product’s functionality in outbound.
Good question. The company would surely be able to answer this more deeply. LeadDesk’s own server solutions are mainly used in telecommunication services (VoIP), where it is important that the servers are as close as possible to the users to ensure service quality.
Here’s a summary of my thoughts, and my colleague