SaaS Interviews with CEOs, Startups, Founders
1014 Zoom CEO on Killing His Old WebEx Baby With $150m+ in ARR
04 May 2018
Chapter 1: What is the background of Eric Yuan and his journey to Zoom?
This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple of hundred thousand dollars to 2.7 million.
I had no money when I started the company.
It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone. My guest today is Eric Wan.
He's the founder and chief executive officer of Zoom, which many of you, I'm sure, have heard of. We're going to jump into that in a second. But before Zoom, he was corporate vice president of engineering at Cisco, where he was responsible for Cisco's collaboration software development.
As one of the founding engineers and vice president of engineering at WebEx, he was the heart and soul of the WebEx product from 97 to 2011. He grew that team from 10 engineers to more than 800 worldwide and contributed to revenue growth from zero to more than 800 million. He was named inventor on 11 issued and 20 pending patents in real-time collaboration.
And in 2017, he joined the Forbes Tech Council and was added to the business insider list of the 52 most powerful people in enterprise tech. Eric, are you ready to take it to the top? Thank you. Yes, I'm ready. That is a mouthful. Okay, so you're at WebEx, big success. You go to Cisco and then you go, oh, I really missed this video conferencing space. Let me jump back in. What happened?
So, you know, we sold the company to Cisco in 2007, and Cisco is a great company. However, back to 2010, 2011 timeframe, and Cisco was invading to change its collaboration strategy because I saw a great opportunity to build a next-generation collaboration solution, which is video conferencing-centric rather than web conferencing-centric. That's what we did before at WebEx.
And the customer, they are looking for a solution like a video-centric collaboration. And that's why I saw that opportunity and Cisco was willing to change that. So I had to leave to build the next generation of collaboration solution.
But now you're kicking WebEx butt. I mean, you're taking their market share. How does, I mean, Cisco is pretty dumb for letting you go. Did they not try and make sure you wouldn't compete with them somehow?
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Chapter 2: What prompted Eric to leave Cisco and start Zoom?
And one month later, some top WebEx engineers, they quit and followed me to join Zoom. Oh, Cisco really doesn't like you, do they? They are okay. At that time, they focused on the social networking. At that time, they thought the overall collaboration strategy should be around the social networking. I have a different opinion.
They probably thought, I do not understand the collaboration, and they think I will go into a wrong direction.
Tell me more about the business here. Have you bootstrapped this, or have you raised a lot of capital? If so, how much?
And when I started, I did read the 3 million seed funding from all the Silicon Valley, you know, angel investors or friends, and some ex-Cisco executives, some former WebEx executives as well. And then later on raised the A round, B round, C round, and D round.
And the D round led by Sequoia, C round led by Emergency Capital, B round led by Horizon Ventures, A round like Qualcomm Venture, Jerry Yang's EMI Cloud Venture, and some angel investors. So how much total? Yeah, in total, we raised $145.5 million.
Yeah, $145 million. Now, where does that capital go? Is it to the engineering team? Is it to user acquisition? Where is most of it going?
And most of the A round and B round money, I think, was spent on sales and R&D team. The C round and D round money is still in the bank. We did not touch that yet, because we already generated enough cash to help us to invest more into the banking operation or marketing side.
Yeah. Well, in that case, you know I charge a $20 million fee to come on my show, right? Just kidding. What's your team size today? We have over 800 employees worldwide. And are you mostly based in San Francisco? That's headquarters? No, sorry. Our headquarters is in San Jose. San Jose. Okay, very good. And then remote, the rest of the folks?
Yeah, we have offices in Denver, Santa Barbara, Kansas, London, Australia, China as well.
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Chapter 3: How does Zoom's business model work and what is its pricing structure?
And part of my issue is signing documents while I'm on the road. So I just found this new tool. I'm using it pretty aggressively. It's called SignEasy. So you can get started for free at getsigneasy.com forward slash sign. Now, do you spend any money each month on paid acquisition or no, you just let your viral coefficient do the work?
To some extent we do because we still need the Google search, right? We need to pay the Google search keyword, right? From that perspective, I think that's still paid acquisition. But the reason why everybody is doing that, you know, we got to do that as well to focus on the low end. You know, for most of the customer acquisition are done by organic growth. Okay.
A lot of incoming these, you know, high-pay customer refer to another customer and, you know, there's a snowball, you know, effect. So,
Well, let me ask this a bit differently. How quickly, whatever you do spend on paid stuff, conferences, ads, things like that, how quickly do you like to make that money back? What do you like to keep payback period under?
It's where, you know, again, in the street market, it's like, you know, the second, right? Online, S&P, and enterprise. Online, S&P is very, very fast. Within one quarter, you already get the money back.
Yeah.
Okay, and now will you stretch that a little bit more on your enterprise accounts because you know their lifetime value will be much higher? Absolutely right.
Yeah, enterprise account depends. Sometimes it could be one quarter, sometimes it could be a year. Okay, but you never like to go more than a year? Oh, we do. Sometimes some account is more than one year because they already subscribed to other service. They're not happy. However, they already sent a contract for two years, right? What can we do, right?
Okay.
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