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As consumers flocked to online channels in droves during the pandemic, businesses embraced all the technologies they could get their hands on as part of an industrywide digital transformation effort. Customer communication and engagement tools, in particular, took the spotlight as companies sought to ensure queries and problems were addressed and swiftly resolved.

At the same time, businesses face a growing array of privacy regulations, while customers expect their data will be treated with care and not shared externally without good reason.

This is why Chatwoot is building an open source customer engagement platform to challenge some of the major players in the space, including multi-billion dollar publicly traded Zendesk; Salesforce’s Service Cloud; Freshworks; and Intercom. To help in its mission, Chatwoot today announced it has raised $1.6 million in seed funding from Goat Capital, Y Combinator (YC), Uncorrelated Ventures, Hack VC, and a host of angel investors, including Lambda School CEO Austen Allred.

Data control

By offering an open source alternative to these big-name proprietary incumbents, Chatwoot promises businesses of all sizes two major advantages. In the age of Europe’s GDPR, California’s CCPA, and myriad imminent regulations, such as the Colorado Privacy Act (CPA), companies can no longer play fast and loose with users’ data. As Chatwoot is an open source platform, companies can host it entirely on their own infrastructure.

“It is an operational hassle to ensure that the third party you use is compliant with these laws,” Chatwoot cofounder and CEO Pranav Raj S told VentureBeat. “In regulated industries like health care, where HIPPA compliance is required, using a third-party solution might not be an option.”

Another core selling point is Chatwoot’s extensibility, and Raj S argues that while most existing customer engagement tools are well-suited for a SaaS business, they’re probably not flexible enough to incorporate different data models from industries such as health care and insurance. A SaaS platform might want to monitor product usage metrics, user retention, and other data that is either anonymized and aggregated or otherwise not particularly sensitive. But an insurance or health care provider could hold all manner of confidential and personally identifiable information (PII) that they need to access internally while safeguarding it from third parties.

“With Chatwoot, these companies can define their own data models for a customer and add information to them,” Raj S explained. “This eventually helps in providing more context to the customer service team members.”

Welcome to Chatwoot

Chatwoot’s genesis dates back to 2017, when Raj S and his cofounders developed a proprietary product focused on customer support tools for social messaging channels. For a variety of reasons, things didn’t quite work out for Chatwoot in its original guise, and after seeing the growing number of data privacy regulations and businesses exploring self-hosted options, the team made the decision to open-source the product in 2019 before re-incorporating as a new business late last year. The founding team also made it into YC’s winter 2021 batch.

The core Chatwoot platform constitutes a shared inbox, which allows companies to connect all their various communication channels — such as social networks, email, and messaging apps — in a single, centralized location. From here, anyone in the company can see all previous communications and pick up where the last chat left off.

Elsewhere, Chatwoot packs most of the tools you would expect from any modern customer engagement platform, including a live chat tool; native mobile apps; and out-of-the-box integrations with third-party platforms such as Slack, Shopify, Stripe, and chatboot tools such as Rasa and DialogFlow.

There is at least one other similar platform out there already. Fellow YC-alum Papercups touts itself as an “open core Intercom alternative,” though its current focus seems to be on a live chat widget. Chatwoot, on the other hand, supports most of the channels a customer would likely wish to reach out to a company through, including Facebook, Twitter, WhatsApp, Instagram, and email, and companies can also build their own custom channel using an API.

Show me the money

The customer engagement software market was pegged at $11.5 billion last year and is predicted to double in value within five years — so Chatwoot is chasing a chunky segment.

In terms of business model, Chatwoot is adopting a hybrid approach to monetizing its platform. For those who wish to retain full data control and self-host, Chatwoot offers a range of premium add-on services, including a $19 per user/per month plan that offers installation support, monthly software updates, and priority technical support. An enterprise plan, which ships with “customized” pricing, includes additional features, such as the ability to develop custom integrations and tailor the Chatwoot interface so it’s more on-brand.

In tandem, Chatwoot is also adopting a fully hosted and managed software-as-a-service (SaaS) approach, starting at free for a restricted “hacker” plan, with additional tiers spanning “startups,” “business,” and “enterprise.”

Companies wishing to use the free and open source source (FOSS) “community edition” pay nothing, of course, with no limitations on the number of agents that can use it.

While it’s still early days, Chatwoot claims some 1,000 companies are using its product globally, though they are mostly on the free self-hosted community edition. Raj S noted that while it doesn’t actively track self-hosted installations, it has observed contributions from developers working at Unity, Microsoft, and some government organizations in Europe.

Available under a permissive MIT licence, any third party can take Chatwoot and do what they like with it. So, does this mean they could also build a competing service, as we’ve seen elsewhere across the FOSS space? According to Raj S, while there have been numerous examples of this happening in the infrastructure space and beyond, it is unlikely to be a problem for Chatwoot.

“I don’t think this would be an issue for us, as there is a significant UI component associated with the product which cannot be easily repackaged to a different product,” he explained.