Zoom | Interview with its Founder & CEO – Eric Yuan
In San Jose (CA), we meet Founder & CEO of Zoom, Eric Yuan. Eric talks about his story how he came up with the idea and founded Zoom, how the current business model works, as well as he provides some advice for young entrepreneurs.
Martin: Hi, Today we are in San Jose in the Zoom office. Hi Eric, who are you and what do you do?
Eric: First of all, thank you for visiting us. I am Eric Yuan. I am the founder and CEO of Zoom video communications. We are building the number one best video conferencing service worldwide. And I think our service offers the best quality, is of use in the video conferencing service. And prior to founding Zoom, I worked for Cisco. I was a corporate Vice President at the Cisco systems. And I came to Cisco as part of the WebEx acquisition and I was actually one of the founding engineers and ultimately became vice president of engineering at WebEx. So I worked on real time collaboration technology for more than 18 years. I have a high confidence to share with you, Zoom as the best video conferencing company.
Martin: Once you’ve been exiting WebEx to Cisco, at what point in time did you say, “Hmm, let me start another company?”
Eric: So that’s a good question. First of all, you know, I live in Silicon Valley, I would call that a Startup Valley. I feel great if I work for a startup companies. So I do not think, I’m proud of that if I tell my friends or neighbours that I worked some other big companies, so this is the culture of Silicon Valley. Another reason is before I left to Cisco, I spend a lot of a time to work with many of our customers, we wanted to get more feedbacks.
Essentially, the reason why we started Zoom centered around customers and their needs because quite often customers told us was that there is some new promise, the existing solutions can’t help to fix. Like a conference room solution, like a “Zoom” room, software defined video conferencing solutions and also how to interact with the existing hardware-based conference solutions. And plus, how to make your solution mobile friendly, like share your iPhone and iPad screen. Last but not least, these days, almost every business, SMB or large enterprise, they have all kinds of solutions, like Skype, Google Hangout, WebEx, Google Meeting, you name it. It’s totally different user experience, how to interact with those solutions, how to build one solution with the best experience, that is very challenging at the same time. That’s why we decided to build a new solution from scratch, to address all those problems.
Martin: So how did you then start? Who was in the founding team? How did you meet? How did you start going to the market?
Eric: So after I had that idea, I decided to leave and after I left, all those best engineers who have been at WebEx, they knew I left, they all wanted to follow me, so they join in the Zoom. And also we got some seed funding from all the Silicon Valley entrepreneurs, some ex WebEx senior executives as well. I think quickly we organized our team, we had enough funding. And I think for the first 2 years we were working very hard, we got the product platform done.
At that time we reached the A round and the B round we got great traction over the last 2 years and we already had a more than 140,000 business customers who are using our solutions, it is going great.
BUSINESS MODEL OF ZOOM
Martin: Eric, let’s talk about the business model of Zoom. So actually who are your target customers and what type of product solutions with what type of value proposition are you offering to them?
Eric: Sure. We target business customers, SMB and large enterprise. Also we target education customers as well as healthcare customers like telemedicine, telehealth.
Our business model is we have a freemium model, I would call that a true freemium model, meaning we can give you all the features for free, there are no limitations whatsoever. And when it comes to more than two person for a group video conferencing we also give you all the features for free but for every meeting with limited duration to 40 minutes. This is something new, most customers really like that. I even don’t need to pay you, but 40 minutes is good enough.
Also, we offer our service not only to offer video conferencing but also offer you web conferencing and also we have additional functionalities across the platform. Plus if your company already deployed the hardware conference rooms solutions we also can interact with that. Plus, there are many conference rooms worldwide. Only less than 5% are enabled with the hardware conference room solutions. We have a conference room solution called Zoom Rooms based on commodity hardware with our software and the customer likes it, really like it. Not only for way you do conferencing but also with support of wireless presentation essencially you can get rid off the projectors as well.
Martin: Eric, you have somehow a unique business model, because you said, you provide most of the stuff for free and thereby building of a huge platform. Other video conferencing providers are charging from the first customer and so on. What is the reason of building this kind of platform and how can you monetize on that?
Eric: So first of all, we truly believe that Zoom has the best video conference platform. So how to reach out to those customers, this is part of your business model, so we have a true freemium model. Customers, they can go to our website, sign up for a free account, you can use that for free for one to one. You can have up to 50 participant, you can use it for free but at every meeting 40 minutes. But for a lot of customers the 40 minutes is not good enough. And so for some important meeting, the meeting with customers is probably 1 hour, then they need to pay. And when it comes to subscribing to our paid services, it is extremely affordable, just $14.99 per host per month. If you look at other service, it is very expensive, even more expensive, less features, quality wise also not as good as us. That’s why after we launched our solutions we did not do any marketing, purely leveraging the word for mouth. We got tractions, customers referred us to other customers, “Finally, I found a good solution that works so well, I really enjoy using Zoom”. They spread the word to their friends, their business collegues and so on so forth. That’s why we got traction.
Martin: What enables you to produce the value much much cheaper than anybody else?
Eric: That’s a good question. First of all, myself and my team, I want to say, we are working on this collaboration technology for more than 18 years. You look at any other company worldwide. At any other company they don’t have that expertise. So when we started building up the Zoom technology, from day one, we knew that we should do it differently this time. We knew how to optimize product, optimize architecture, make sure from day one every single thing is fully automated and also make sure we build the technology by ourselves, we do not license some expensive hardware or software. And with that we can build a very optimized model – like how to optimize traffic, how to optimize your computer power and so on and so forth, that is why we can offer great price and at the same time still profit.
Martin: And when you developed the product in the first place, did you have some beta customers or a group of potential customers who you involved in the product development process.
Eric: I think we are fortunate, after we launched our product through the private beta customers, our first paid customer is Standford University, continuing study department. They found our solution because they were looking for our solution at that time. After they tested our platform, they shared with us: “Yes, that’s exactly the platform they were looking for.” And even before we launched our product they became our paid customers. After that, we get another customer, another customer, everyday we get a lot of customers and new visitors to our platform.
Martin: And how do you acquire the customers is more like though inbound marketing and sales or are you really going out and targeting them?
Eric: Well the way it works is like we have visitors to our website by and you sign up for your account. You cannot use Zoom by yourself, this is a collaboration platform. You might be your friends, your customers or partners to use Zoom platform. If this product works well, guess what after the meeting is over, the participant, they would say, “Oh this platform is great, where did you find this platform? What is your experience so far?” If you’ve a good experience you might have share it with your other friend and your other friend might sign up for another free account. This word of mouth marketing certainly works very well for us.
Also we reach out to those customers who already paid for like 1 account, 2 or 3 accounts. Let’s take a company with a special domain like www.abc.com for example, we have a system to track, “Oh we have 5 paid accounts from abc.com” and we reach out to them, “Hey, how do you like this solution?” and feedback, “What can we do to help you?” We start very healthy conversations with customers and guess what, very soon they begin to buy another 10-20 and very soon the whole department might deploy the solution, and then it is in 2 departments. Later on the CIO will standardize on Zoom Platform. That is one way.
Another way is, given that we got some traction already, quite often some large enterprise IT director or CIO, they also directly reach out to us, “Hey we want to have a pilot to try your platform.” And normally after the one month trial, I think they are going to standardize on Zoom platform.
Martin: What are the major obstacles over the last years that you needed to overcome to and how did manage them?
Eric: I think overall, for scaling phase we need to hire a lot of people. Beef up our customer support, sales and marketing, more engineers. When we started with 50 people it is easy to maintain the culture. If you have a more than 200 people, 250 people it is a relatively hard. How to maintain a culture, that is something that we needed to overcome because our culture is to deliver happiness to our users. As we hire more and more people every week have like 5 or 10 people, how to maintain the culture? That is really something I think that we are thinking about everyday.
Martin: And what did you do in order to enforce this kind of culture?
Eric: I don’t think I don’t have any secret sauce, we just talk about that and all the leaders, all the employees who are here for a long time, we lead based on example. I think every day, in all hands meeting we just share some good stories, try to show the employees what does that mean for delivering happiness to our customers. I just think this is more like a daily routine in work to share with employees what it means to deliver happiness to your customers.
Martin: So when somebody is using Zoom, does he need to sign up so you have contact detail?
Eric: If you are a host, you definitely need to sign up for a free account or a paid account and to start a Zoom video conference. For Zoom participant, they do not need to do anything. After you sign up to a free account you can send an email link right to your customers or partners. After they get that email invitation, they click that link, everything will be automatically set up and they can join the Zoom video call.
Martin: Okay, great!
ADVICE TO ENTREPRENEURS FROM ERIC YUAN
Martin: Eric, let’s talk about your startup advice in the major learnings over the years. So imagine somebody young comes to you and says, “I would like to start a company”. What type of advice can you provide him?
Eric: If any young entrepreneur want to start up a company, my answer is always, “Yes, please do it. This is best time”. Ultimately, I think the start up companies, they are driving economy, driving this society forward. And the one lesson I learned over the past 18 years especially after I came to Silicon Valley I would say, the courage. You have to get the courage to try even if you might have failed, that’s ok – try again. If you failed try again and if you are patient, working hard, keep trying, someday you will be successful.
Martin: What other advice can you share, with for example running a company?
Eric: To run a company is more like to play sports. Number one thing is you want to win, that’s really important. Number two – you have got to work hard, organize the best team, work hard every day, deliver happiness to your customers and also have fun and then you will be successful.
Martin: Eric thank you so much for sharing your insight. It was a pleasure
Eric: Thanks you.
Martin: And if you want to communicate with your customers and you’re looking for a cheap affordable and really awesome solution check out things and thank you.
Eric: Thanks you.
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