While much of the attention for IPOs this year has been on high-profile operators like Slack, Lyft, Uber and Pinterest, the standout deal has so far been Zoom. Last week the company launched its offering and the stock rocketed by 72% on its first day of trading, putting the market cap at nearly $16 billion. Now Zoom is among one of the most valuable cloud companies in the world.
All this is the vision of Eric Yuan, the company’s founder and CEO.
Here’s a backgrounder: While attending college in China during the 1980s, he majored in Computer Science because he admired tech entrepreneurs like Bill Gates. By 1997, Eric came to America – after much difficulties with the immigration system – and joined the engineering team at WebEx. It proved fortuitous as the company would revolutionize the conferencing market.
Then by 2007, WebEx sold out to Cisco and unfortunately, the innovation started to lag. Eric tried to push for change but he was mostly rebuffed. In 2011 he started Zoom, raising a seed round from a variety of angels.
As should be no surprise, Eric was fairly unconventional in his strategy — that is, by the standards of Silicon Valley. For example, he did not spend lavishly (the original offices were quite modest) and there was little emphasis on sales and marketing.
All in all, the formula has been spot on. As of today, Zoom is growing at 100%+ and is profitable. There are also 50,000 corporate customers and 344 of them pay over $100,000 a year.
OK then, what are the takeaways for entrepreneurs? What are the lessons here that can help with your own venture? Well, let’s take a look:
Customer First: Eric is obsessed with making the best product possible. Keep in mind that he worked on the Zoom platform for two years before it was launched. He would also personally answer questions from customers and reached out to every customer that cancelled.
The bottom line: Zoom has a Net Promoter Score (NPS) over 70.
“Zoom succeeded when so many others didn’t,” said Roy Raanani, who is the co-founder and CEO of Chorus.ai. “When Eric started the business, he knew the video conferencing industry intimately and understood that existing products didn’t meet user needs. He had a vision that everyone should ‘Meet Happy’ and focused on creating a simple product experience that ‘Just Works,’ hiring a great team that focused on executing the fundamentals right, and putting customer and employee happiness at the center of Zoom’s culture.”
Viral: Conferencing is inherently viral and allows for the creation of network effects that can make it tough for competitors to attack. Granted, this is not easy to pull off but Eric’s focus on creating a strong product has been critical.
The Zoom S-1 notes: “Our rapid adoption is driven by a virtuous cycle of positive user experiences. Individuals typically begin using our platform when a colleague or associate invites them to a Zoom meeting. When attendees experience our platform and realize the benefits, they often become paying customers to unlock additional functionality.”
Big Market, Big Problem: When Eric founded Zoom, there was lots of skepticism. Wasn’t the market already won? How could he battle against rivals like Microsoft, Google, WebEx and GoToMeeting?
But like any entrepreneur, Eric was convinced of his vision. He understood that there was much that could be done in the industry, which was not investing enough in new technologies.
“The Cardinal rule for any startup: Solve a really big problem and solve it well,” said Jamie Sutherland, who is the founder and CEO of Sonix. “Zoom did this. While there was lots of rhetoric around the idea that video conferencing had been solved, the reality was that it wasn’t really solved well. Everyone…literally every human I knew had pains with video conferencing. And when it doesn’t work, it is a huge pain. So, couple that with an enormous global market, and you’ve got a huge opportunity.”