What can Intercom's £100M bet teach PE Operators?.
Can a PE-backed CEO make 'bet the company' moves like an early stage founder? Intercom's dramatic AI pivot offers a masterclass in strategic transformation—and raises crucial questions about mandate and risk in private equity.
The Founder's Dilemma in a PE World
When Eoghan McCabe returned as Intercom's CEO in November 2022, the company was bleeding. Five consecutive quarters of declining net new ARR. Zero growth territory. A "bloated" organisation lost in post-COVID confusion.
His response? A £100M bet on AI that would transform customer service forever.
Since listening to McCabe on a recent edition of Lenny's Podcast a thought has been rattling around in my head: Could a PE-backed CEO make the same move?
The Tale of Two Mindsets
Private equity and venture capital operate in fundamentally different mathematical universes—and the numbers tell a stark story.
Venture capital lives in power law reality: Seed investors genuinely target 100x returns because they have to¹. With 65% loss rates on early-stage investments², only the massive winners can carry an entire fund. A VC fund needs 3x returns just to be considered successful—yet only 5% actually achieve top-tier performance³. It's a binary world where 6% of startups drive 60% of all returns⁴.
Private equity operates in operational reality: PE firms target 2-3x returns over 3-5 year periods⁵, with IRR expectations of 20-30% annually⁶. They don't need unicorns—they need consistent execution. Cambridge Associates data shows average PE returns ranging from 2.2x to 3.7x depending on operational improvements and multiple expansion⁷.
This isn't just philosophical—it's mathematical. VC diversifies across 20-100 bets knowing most will fail. PE takes concentrated positions in proven businesses and improves them systematically.
Here's the tension: When AI disruption threatens your market, do you have the mandate for Intercom's £100M bet-the-company pivot? Or are you constrained by consensus-driven boards, legacy stakeholders, and LPs expecting predictable 2-3x returns?
The Intercom Transformation: A Timeline of Bold Decisions
McCabe's return in late 2022 couldn't have been timed better—ChatGPT launched just as he was taking the reins. Within six weeks of GPT-3.5's release, Intercom had a working beta. By March 2023, Fin launched at £0.79 per resolution while losing £0.96 per resolution.
Most PE-backed CEOs would have been fired for those unit economics. But McCabe doubled down on the aggressive investment, and it paid off spectacularly. Fin's resolution rate climbed from 41% to 76% of all support requests. Revenue exploded from £800K to £9.6M in one year.
Today, Fin processes over 1M resolutions per week and is approaching £100M ARR. The transformation wasn't just financial—it was cultural. Forty percent employee turnover. New values focused on resilience and shareholder value. A complete organisational reset that would make most PE operating partners break into a cold sweat.
The Rational Partners Operator Framework
Through our work as CTO consultants at Rational Partners—conducting AI audits, due diligence, and fractional CTO engagements—we have a front-row seat to how mid-market companies approach AI adoption. From this vantage point, we've identified four critical areas where AI can transform SaaS businesses:
1. Security Posture — The foundation layer that most companies get wrong. Your employees are already using AI tools, and you're likely in compliance breach without knowing it⁹. We've developed a 5-level framework for AI security deployment that helps CEOs navigate from basic agreements to fully self-provisioned deployment.
2. Product Features (The Intercom Play) — Building AI directly into revenue-generating features. The key question: does your company have the resources to build proprietary AI, or should you integrate existing capabilities while maintaining security compliance?
3. Software Development Lifecycle — AI for code generation, testing automation, and product roadmaps. This is where smaller teams can achieve outsized productivity gains without massive capital investment.
4. Operational Efficiency — Sales, marketing, finance — every function benefits from AI automation. Often the fastest path to margin improvement for PE-backed companies, though tool proliferation requires careful governance.
The PE CEO's Dilemma: Mandate vs. Opportunity
Here's where it gets interesting. If you're a PE-backed CEO managing a $30M ARR SaaS company, where do you place your bets?
Option A: Follow Intercom's playbook. Go all-in on product AI. Risk short-term losses for potential category leadership.
Option B: Focus on operational AI — enhancing your software development and product process. Drive margins across other functions through AI-led efficiency gains. A safer path to your 2-3x return target.
The answer isn't universal — it depends on your market position, competitive threats, and most importantly, your board's risk tolerance.
The Consensus Challenge
Unlike Intercom's founder-led transformation, PE CEOs must navigate a more complex stakeholder ecosystem:
- The PE Partner: Focused on fund returns and timeline pressures
- The Board: Mix of PE representatives and independent directors
- Legacy Management: Often skeptical of dramatic pivots
- Limited Partners: Ultimate owners demanding predictable returns
This creates a consensus-driven environment that can be both a blessing and a curse. More scrutiny on major decisions, but also more resistance to bold moves.
Lessons for Mid-Market Leaders
1. Speed Matters More Than Perfection — Intercom's six-week timeline from ChatGPT to working beta shows the importance of rapid experimentation. In AI transformation, being first often trumps being perfect.
2. Be Prepared for Short-Term Pain — Losing $1.20 per resolution while investing $100M requires enormous conviction. Make sure your board understands and supports the investment timeline.
3. Cultural Transformation is Non-Negotiable — 40% turnover sounds brutal, but it may be necessary. AI transformation isn't just about technology — it's about building organisations that can adapt to accelerating change.
4. Focus Your Bets — Not every company can or should follow Intercom's playbook. Choose your AI bucket based on competitive position, resources, and exit strategy.
The Bottom Line
Intercom's transformation from a declining SaaS company to AI category leader offers powerful lessons for PE-backed CEOs. But the key insight isn't just about AI — it's about having the mandate and conviction to make transformational moves when the market demands them.
The question isn't whether your company needs an AI strategy. The question is whether you have the organisational courage to execute it.
References
- Kruze Consulting. VC Return Expectations by Stage. Kruze Consulting (2024).
- Industry Ventures. The Venture Capital Risk and Return Matrix. Industry Ventures (2024).
- TechCrunch. The meeting that showed me the truth about VCs. TechCrunch (2017).
- Andrew Chen. Why startups are hard — the math of venture capital returns. andrewchen.com (2024).
- Cambridge Associates. US Private Equity Looking Back, Looking Forward: Ten Years of CA Operating Metrics. Cambridge Associates (2024).
- Franchise Business Interviews. Understanding Private Equity Return Expectations. Franchise Business Interviews (2024).
- Cambridge Associates. US Private Equity Looking Back, Looking Forward: Ten Years of CA Operating Metrics. Cambridge Associates (2024).
- Franchise Business Interviews. Understanding Private Equity Return Expectations. Franchise Business Interviews (2024).
- Rational Partners. How Mid-Market CEOs Can Deploy AI at Lightning Speed (Without Cutting Corners). Rational Partners (2025).
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