Zooming to the Top! The Inspiring Story of Zoom's Success
Eric Yuan, the Founder, and CEO of Zoom, a remote conferencing services company, did not reinvent the wheel. Instead, he made it better. He entered a crowded marketplace and developed a platform that improved the video conferencing experience. Today, with the COVID-19 pandemic forcing millions of people to stay at home, it has become the go-to service for virtual meetings and to keep people connected.
In just nine years, Zoom has grown from zero to a multi-billion dollar enterprise that has given Eric a paper fortune of around $10 billion. Yet, in the beginning, he struggled to get venture capital firms to back his startup. They thought it didn't need to exist because, in their minds, the market had been sewn up. How wrong they were. Eric ignored the skeptics and went his own way. This is how he did it.
Eric was born and brought up in China, where he studied applied mathematics and computer science. Inspired by a Bill Gates speech on the dot-com bubble, he dreamed of coming to America to work for a Silicon Valley startup. Well, that was easier said than done. The first time he applied for a U.S. visa, it was rejected, as it was multiple times after that. He refused to give up and finally received his visa on the ninth attempt, almost two years after his first.
Eric arrived in Silicon Valley in 1997 at the age of 27 and joined the two-year-old Webex. He spoke very little English then and spent most of his time writing code. The company was acquired by Cisco in 2007, and Eric became Cisco's Corporate VP of Engineering, in charge of collaboration software. He was moving up the corporate ladder.
His job involved meeting customers, who told him of their frustrations with the then collaboration solutions provided by Webex, a platform he helped to build. He didn't meet a single happy customer, and in his opinion, the product wasn't evolving quickly enough.
Drawing on his technical expertise and firmly believing he could come up with a platform that would solve customers' problems, he started working on ideas. He felt the evolution of smartphones and tablets could make video conferencing more accessible than ever. So, Eric pitched his bosses a new smartphone-friendly video conferencing system. They weren't interested. If they had been, Zoom might never have got off the ground.
Frustrated by this experience and convinced there was a demand for easier to use software that could also work on mobiles, Eric took a bold step and left well-paid secure employment to start his own business. He felt compelled to go his own way and saw this as his only viable option of making the product he wanted.
"Cisco is a great company, but it was unwilling to change its collaboration strategy back then," he told Bloomberg TV. "I had no choice but to leave to fix the problem." Unsure about what the future would hold, this was a massive risk.
His first hurdle was his wife, who thought he was throwing away a lucrative career. Eric managed to convince her, saying if he didn't try, he would regret it later. In fact, his wife was part of the inspiration for Zoom.
The seeds for the smartphone-friendly video conferencing software were sewn many years before when Eric was a freshman in college in China. Living apart from his girlfriend now wife meant he had to take a long train ride to visit her.
"I was only able to see her twice a year, and it took me more than 10 hours to get there by train," he told Forbes in 2017.
"I was young then - 18-19 years old - and I thought it would be fantastic if there was a device where I could just click a button and see her and talk to her."
After leaving Cisco, he had a chance to make his teenage dream a reality.
Eric's new life as an entrepreneur and founder did not get off to a good start. He struggled to convince venture capitalists to back his new venture. They thought it was a terrible idea and did not see the need for another option when the market was already dominated by Cisco, Skype and other prominent players. Eric was down but definitely not out and didn't let investors' opinions stop him. He was determined to prove the naysayers wrong. His screensaver at the time highlighted his positive attitude "it can be done." So he borrowed money from friends and family who believed in him and his idea, including former Webex CEO Subrah Iyar, who gave him $3 million.
With the funds, he employed 30 engineers to work on his idea, creating better video communication technology. They worked on it solidly for two years, and Eric launched the platform for Beta testing in 2012.
A key element in his strategy was creating zoom with a video-first mentality, unlike Skype and other companies that created audio first then adjusted the video, which proved costly. Beta testers were happy with the product, and after some fine-tuning, Zoom was launched into a crowded marketplace in January 2013. Not only were there entrenched incumbents but also a lot of other startups.
Recipe for Success
However, Zoom was a hit from the start. Its recipe for success was that it had clear differences that made it stand out from the crowd. It was as compatible as it could possibly be with web browsers and detected devices instantly. Therefore, there was no need to have different versions for Mac or PC. Data use was also low enough that it worked well even with weak connectivity, and with a low-cost subscription service, it undercut rivals.
To attract more customers, Eric offered a freemium version of Zoom for meetings under 40 minutes with up to 100 users. He reckoned the more people who tried the product, the more word would spread. This would catch the eye of businesses who would see it functioned better than Webex and other competitors. It was a smart and audacious move, and it worked.
By May of 2013, Zoom claimed they had reached one million participants, which secured a round of VC funding. With more success, Eric started to target bigger corporate clients and more investors. His approach was unique, but one that allowed him to demonstrate the benefits of his product. He would turn up to meetings to make sure everyone had downloaded the Zoom app and invited participants to join him on a live video conference. Eric rarely attends meetings in person. He conducts a lot of business virtually by Zoom.
The company continued its rapid upward growth trajectory. In 2017, it received $100 million in Series D funding and a $1 billion valuation. Zoom was now a unicorn business but one that was different from other unicorns. It was actually making a profit year after year.
Zoom launched its initial public offering in April 2019 and was one of the most successful public debuts of that year. On the day it went, public shares went up by 72%, and the company was valued at $16 billion.
Surging share prices, insatiable demand from business and individual users, it seems that Zoom could hardly put a foot wrong. However, the company’s growth has not been without its problems. In July 2019, researchers found a security bug in the app that could theoretically have allowed hackers to gain access to Zoom video chat sessions on Mac computers. The company quickly fixed the issue.
Then in early 2020, the app was rocked by a string of security lapses. Hackers hijacked meetings leading to a warning to consumers from the FBI about so-called zoombombing intrusions. There were also accusations about giving personal data to Facebook and other companies without fully informing users. It was a tense time for Zoom that saw its reputation take a massive hit and a fall in its share price. Eric responded quickly. Among the measures were a bug bounty, financial rewards for people who spot security flaws, delegating some staff to work solely on addressing shortcomings and announcing a 90-day ban on planned features. Eric also spoke to the public on a live YouTube video stream.
“Clearly we have a lot of work to do to ensure the security of all these new consumer use cases,” Eric said on the call. “But what I can promise you is that we take these issues very, very seriously. We’re looking into each and every one of them. If we find an issue, we’ll acknowledge it and we’ll fix it.”
Boom in Demand for Zoom
Despite the recent setback, Zoom's growth rate is phenomenal, more than living up to its name. During the pandemic's peak, more than 300 million people were taking part in virtual meetings every day, and the number of paying customers more than tripled. Zoom was on a solid trajectory before COVID hit, and it looks set to continue. The company is working with at least 90 of the Cloud 100, the top private cloud companies, and will continue expanding overseas. The international market represented 18% of its business in its last fiscal year. Eric's gamble to leave his well-paid job at Cisco all those years ago has paid off handsomely. But he can't afford to rest on his gold plated laurels. A revitalized Cisco, as well as Google and Microsoft, will be snapping at Zoom's heels. However the Zoom story continues to unfold; it will be fascinating to watch.