Zoom, Zoom, Zoom! The Exclusive Inside Story Of The New Billionaire Behind Tech’s Hottest IPO

Zoom, Zoom, Zoom! The Exclusive Inside Story Of The New Billionaire Behind Tech’s Hottest IPO

Zoom CEO Yuan cut an unlikely figure as he addressed the cheering throng in the moments before ringing the opening bell at NASDAQ and he said, “A new game starts today”. His startup was not very well known with respect to other companies like Lyft and Pinterest  [the two consumer companies who made their IPO (Initial Public Offer) debuts.] The shocking thing about Yuan was that he was physically present at all the events.

Yuan, founder of zoom (a video conferencing software) practices what he preaches. He also went on a person to person with his engineers for about 3 years. Yuan planned a 50 mile trek for his IPO road show from San Jane to San Francisco for a single investor launch. Customers always used to ask Yuan to visit them, but Yuan used to ask for a zoom call before visiting them.


And this thing worked in Wall Street, where he was able to raise its IPO price to $36 per share; valuing the company $9.2 billion and became a new billionaire at the age of 49. The 72% of the stock of the company boosted the capital to $15.9 billion. Yuan, who holds 20% of the market share, has net worth of $3.2 billion. Yuan, an engineer-turned-found, was once running a Cisco’s WebEx Video Conferencing Business. He set out to make tools that work equally in any part of the world. He used a “freemium” model that allowed anyone to host a meeting of 40 minutes or less for free. Yuan personally used his video tools to appear in the locations from San Francisco’s Golden Bridge to beach in Santa Barbara and used to maintain a satellite office by this.

Zoom earned an annual profit of $331 million. 118% up in its IPO debut by accomplishing 50000 corporate customers including Samsung, Uber, Walmart and Capital One. After accomplishing good success from its first IPO, Yuan got a good fame and on the same side he is as fugal as he insists on reimbursing Zoom when he give a friend a Zoom bachpech.

Profit is always the reward for taking risks and Zoom must still prove that it can continue to its best among big competitors like Google and Microsoft, who used to scare Zoom in its early days. With the passage of time, its list of competitors is likely to grow more.

Ringing the NASDAQ bell checks off one dream for Yuan; and there are many more to be accomplished. Yuan’s ambition is to connect to the working world like Facebook did, and want to make his company even bigger than Cisco.

When Yuan was in fourth grade, he used to collect construction scraps. He used to study mathematics and Computer Science at Shandong University of Science and Technology. He got married at the age of 22 when he was pursuing the master’s degree. He got inspired by the work of Bill Gates and wanted to own a company someday. And his eyes were set on U.S Tech boom, he was misunderstood by a contractor by the U.S custom after being asked for his business card, which listed Yuan as a consultant; and therefore his VISA was denied. And this thing continued for the next year and a half as his VISA kept on denying, but he didn’t give up and kept on trying.

In the summer of 1997, Yuan joined WebEx, a two year old company based in Milpitas, California. In July 2007, WebEx got acquired by Cisco for $3.2 billion.Not long after, Cisco tapped Yuan to lead WebEx’s engineering group. But by 2010, Yuan was unhappy as the service simply wasn’t very good. Each time users logged on to a WebEx conference, the company’s systems would have to identify which version of the product (iPhone, Android, PC or Mac) to run, which slowed things down. Too many people on the line would strain the connection, leading to choppy audio and video. And the service lacked modern features like screen-sharing for mobile.

Yuan feared that Someday someone is going to build something on the cloud, and it would really piss him off.  After a year of pestering his bosses to let him rebuild WebEx, Yuan gave up and decided to leave Cisco in 2011. Cisco was more focused on social networking, trying to make an enterprise Facebook. He used to think that Cisco had made a mistake. And after leaving Cisco, he believed in it that he was right to take the decision of leaving Cisco.

The biggest hurdle for Yuan was to convince his wife, who saw him throwing away a lucrative job managing 800 people. But he made her understand that he knows about how hard the journey is but he’ll regret if he won’t give it a try.

First Yuan asked friends, including fellow investors in a consumer video app called Tango, to write him $250,000 checks so he could pay 30 engineers to work on a new idea, to create better technology for video communications, then figure out what app to build on top. Mostly because of their faith in Yuan, the investors, including former WebEx CEO Subrah Iyar, gave him $3 million for his startup, which was then called Saasbee. Everyone in venture capital thought it was a terrible idea.


Within months, Yuan realized he wanted to target the video conferencing business again. The VCs had reason to be skeptical. With Microsoft owning Skype, Google in the market via Hangouts and Cisco still leading in market share, video conferencing had entrenched incumbents; there were also multiple startups, including the well-funded Blue Jeans Network. They believed that it would require flawless execution to win. Even at Qualcomm Ventures, which led Zoom’s $6 million Series A investment in 2013 alongside Yahoo cofounder Jerry Yang, there was lots of internal debate.

From rundown offices in Santa Clara, with an oft-broken elevator and a mission-crucial video camera perched atop a cheap fridge, Yuan and the U.S. members of his team quietly worked on their product for nearly two years. When Zoom launched, it had several key differences from the crowd. Its lightweight Web client could figure out almost instantly what kind of device you were using, meaning Zoom didn’t need different versions for Mac or PC. It also provided a software layer that shielded any bugs that might be introduced when a browser like Chrome, Firefox or Safari pushed an update. Zoom could operate even at 40% data loss, so it would still work on a spotty or slow internet connection. And at $9.99 per host per month ($14.99 today), it undercut its rivals. Zoom customer service Chief Jim Mercer was then working at competitor GoToMeeting when a colleague opened a Zoom account to see what the hype was about. And with that one click, they were in, and there were 25 feeds of participants at the same time.

After raising another $6.5 million from Li Ka-shing’s Horizons Ventures, Zoom raised a $30 million round from Emergence Capital in 2015 (Li, Hong Kong’s richest person, remains a frequent user of the tool, a rep says). Soon after, Zoom began to target larger corporate clients. Yuan stunned partners at Emergence when he showed up for his pitch meeting and promptly insisted every investor download the Zoom app and join him for a live video conference of the presentation. Yuan shocked them again when, approached by large corporations that year, he warned these potential customers Zoom’s features might not be ready for their business. But after scooping up many of the fast-growing companies in its backyard in Silicon Valley, like Box, Slack and Uber, Zoom broke out of tech in 2016, and now manages accounts such as Gap Inc. and Williams-Sonoma.

At Phoenix Children’s Hospital, staff attend meetings, host surgical case conferences and work with patients over Zoom. Annoyed with a more complicated predecessor, Phoenix Children’s tested Zoom for nearly four years and now has 464 staffers registered on it. For kids who are facing long stays, the hospital has provided them those Zoom accounts and iPads to meet with each other in virtual support groups and help them attend school without immunological risk. Being out of school for too long, it can lead to them not graduating. With Zoom, they can be living in the room, interacting with the lesson and their class. It keeps them able to participate. It’s been fantastic so far.


By the time Sequoia backed Zoom in a $115 million Series D round in early 2017, valuing the company at $1 billion, the famed venture firm had been fighting to get a piece of it for more than two years. Sequoia believes that they were going through all the due diligence, andthere have to be a thousand Eric Yuans in the world, because everyone they spoke to, they knew Eric, big or small.

Yuan’s secret for being everywhere: Zoom, of course. His habit of taking the most important meetings virtually started because of basketball. A diehard NBA fan since moving to the U.S., first of the Lakers’ Kobe Bryant for his work ethic and then of his local Golden State Warriors, Yuan made a point of attending every one of his three kids’ basketball games and gymnastics meets. One unique Zoom feature is a virtual background the user can change to show a logo or image, disguising where they really are. Last summer, his eldest son, now a graduating high school senior who set the local league record for three-point shots, had a tournament in Los Angeles.

 


This led him to make room for a celebrity investor from his beloved Warriors last year, but it was veteran role player Andre Iguodala, not a flashier star like Steph Curry or Kevin Durant. He had a great conversation on how my game relates to his business, doing the little things right. The feeling is mutual: respect for a professional who wins by putting team before ego.

Two months before the IPO, Yuan walks through the sales and engineering departments of Zoom’s newer San Jose headquarters. The elevators finally work in this one, but it’s still somewhat dingy, the result of Yuan’s decision to prioritize a space close to the Caltrain and lease it pre-furnished to save on costs. It’s the Chinese New Year, and Yuan hands out little red envelopes to any employee who looks up, calling out most by name. For Zoom’s 1,700 staffers today, many of whom became multimillionaires in Zoom’s IPO, the payoff is a gag: one crisp, “lucky” $2 bill.

Yuan’s public-facing thriftiness serves a secondary message: What matters at Zoom is the product, not the perks. He shares his office with his product chief and old friend Oded Gal, a fellow WebEx veteran he hired away from BlueJeans Network three years ago. But you’ll seldom find Yuan there. A few times a year, the CEO takes a temporary desk with a team he wants to focus on by sitting side-by-side, marking his choice with two small family portraits and a stack of books to give out. Yuan’s been with the engineers since Zoom announced a voice product in October, now called Zoom Phone. It’s one of several major product lines Zoom has touted in recent months, alongside an update to its conference room bundle called Zoom Rooms. Though an increasing number of Zoom’s users log in via smartphone–one out of six today, Yuan says–many big firms still depend on hardwired conference rooms. Zoom provides the software; partners like Dell, Logitech and Polycom supply the TVs, cameras and speakers. It’s a move Yuan thinks is strategic to winning over large-size customers who’s CEOs spend lots of time in virtual meetings.

A revitalized Cisco—as well as Google, Microsoft and even potentially Apple and Amazon—threatens Zoom just as it did in its early days. While Zoom has claimed to work with at least 90 of the Cloud 100—Forbes’ exclusive ranking of the top private cloud companies—some corporations like Sony have resisted the move to Zoom as too complicated to set up at large scale. At some corporations like GM and Verizon, teams use multiple solutions that don’t include Zoom at all. Others like Ford use Zoom, but only for a handful of people. Even at Qualcomm, which owns a piece of the company, you’ll find Cisco and Microsoft. People just have a solution they already pay for.

 

As Zoom adds features and larger accounts, with some companies simultaneously hosting thousands of people across multiple chats, the company will need to be careful not to cut corners and damage the product. In January, Zoom suffered a high-profile service outage, which it blamed on Amazon Web Services, but all people saw was that Zoom’s app didn’t work.

Yuan thinks it as a restaurant, when a customer walks into a restaurant, until they leave, the entire experience needs to be great. You can’t blame anything on anyone else.

But, of course, it can cut both ways. When Facebook went down in March, the New Zealand House of Representatives streamed its committee meetings over Zoom instead of Facebook Live. And per its regulatory filing with the SEC before going public, Zoom noted more than half of the 500 largest companies in America had at least one paid seat on Zoom, but few had signed large contracts, suggesting an avenue for significant sales down the road.

Then there’s the international market, where Zoom did just 18% of its business in its last fiscal year. Expansion into markets with the most demand for Zoom—the United Kingdom, Japan, France, Germany and Australia—presents a natural future angle of attack. Zoom is furthest along in Canada and is studying it for its next phase of growth. And after Yuan, ever thrifty, spurned the chance to buy the Zoom.com address in the company’s early days, opting for the cheaper Zoom.us, Zoom quietly acquired it last year for $2 million, a domain that could prove valuable in disassociating the company from the U.S. in touchy overseas markets.

China remains a wild card. Zoom has more than 500 engineers there, rare for a U.S. company. But China is an unproven market for the enterprise business, Yuan says. Still, Zoom’s employee foothold in the country and Yuan’s personal connections would suggest that if any company can make the jump, it would be Zoom—potential privacy concerns aside.

If Zoom hopes to become as big as Cisco someday—the San Jose-based company booked $49 billion in sales last fiscal year, and its stock is trading near a 20-year high, generating a market capitalization of about $250 billion—it will likely need to offer far more than video in the years to come. Voice-only calling was likely just the first in a range of features Zoom could add within communications, such as standalone messaging and file sharing products. One likely area for a bigger push: data. Zoom already connects customers to other services to record and transcribe its conference calls and help sales reps flag phrases or patterns of interaction that might suggest a deal is close, from an ideal time to chat or the duration of a call. Similar tools could help marketers, product developers and customer service reps learn from their Zoom meetings in the future, too. And Zoom has powerful friends for that push, so long as it doesn’t compete too much. Enterprise software leaders Atlassian and Salesforce both have invested directly and others, like LinkedIn, have made it a preferred partner.

In the meantime, don’t expect Yuan to let his newfound billionaire status go to his head. He may drive a Tesla, but only because he sees the company as a lot like Zoom—it’s designed differently and it’s faster under the hood (plus Tesla is a customer, too). Back in his cubicle the Monday after the IPO, he’ll keep trawling the Zoom Twitter account for customer testimonials to retweet. And he’ll expect employees, who turned out around the world for the IPO ceremony to wave to their boss over a live feed in Times Square using. Zoom to follow his lead. A mentor once told Yuan the IPO would be like graduating from high school.

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