How Zoom became a $35 billion video conferencing empire
Eric Yuan’s Zoom Video Communications Inc is a classic case of how a sure success startup can earn millions for early investors. Look who made a fortune on Yuan’s dream project. Hong Kong’s Li Ka-shing, Tiger Global Management’s Chase Coleman and Yuan himself, whose net worth has zoomed to $10.7 billion. Then, there are other early funding round participants such as Samuel Chen, a little-known Taiwanese investor who controls a $1.6 billion stake in Zoom. Chen and other investors made initial investments in Zoom in 2011. A year later, as Zoom burned through its seed funding and few venture capital funds showed interest, Chen stepped in to lead a series A round.
The Coronavirus pandemic and the resultant economic mayhem has eliminated millions of Americans’ sources of income, but not Eric Yuan’s. Shares of Zoom, which recently reported a 170% increase in first-quarter revenue, have more than quintupled since the initial public offering last year. The pandemic has proved to be a blessing in disguise for the video conferencing app Zoom. Even before the outbreak of the virus forced people to work and socialize primarily online, Zoom’s share price grew exponentially. Just one year after joining the three-comma club, Yuan has amassed a fortune of over $7.5 billion. Eric Yuan’s success story should be an inspirational model for startup entrepreneurs.
Born in China’s Shandong province, Yuan’s parents were mining engineers. He has an undergraduate degree in applied mathematics and a master’s degree in engineering. He spent four years working in Japan after graduation but was inspired to move to California’s Silicon Valley to work for an internet startup after listening to Bill Gates who give a speech about the dot-com bubble. It is interesting that the US denied Yuan’s visa application eight times before allowing the future billionaire to move to California in 1997 as he had a disagreement with the immigration official who processed his application. He was 27 at the time. Yuan spoke little English when he first arrived in the US.
I told our employees several times, ‘Let’s focus on the end user, let’s focus on committing to society, and focus on the crisis and doing the right thing, show our corporate social responsibility.’ Don’t focus on marketing and sales. That’s horrible culture.
Eric Yuan
Zoom had one of the most successful IPOs of the year, making the company worth more than both Lyft and Pinterest. Zoom’s share price rose 72% on its first day of trading alone. The company is now worth $35 billion. It has over 30,000 corporate clients including Samsung, Uber, Walmart, and Capital One. “During the early stages of Zoom, I personally emailed every customer who canceled our service,” Yuan said in an interview with Thrive Global in 2017. “One customer replied to my note and accused me of sending auto-generated emails “impersonating” the CEO — he said Zoom was a dishonest company! I wrote back that the email was indeed from me, and that it wasn’t generated by one of our marketing tools. He still didn’t believe me, so I wrote back again and offered to meet him on a Zoom call right that minute to prove it was me writing the emails. That call never did take place, but he stopped accusing Zoom of being dishonest!”
Life before Zoom
Before founding Zoom, Yuan was a Vice President at telecommunications equipment company Cisco Systems. He worked for another videoconferencing company called WebEx that was acquired by Cisco in 2007. Back when he still lived in China, Yuan and his girlfriend were enrolled in two different colleges that were separated by a 10-hour train ride. The two later got married. “I was only able to see her twice a year and it took more than 10 hours to get there by train. I was young then — 18 or 19 years old — and I thought it would be fantastic if in the future there was a device where I could just click a button and see her and talk to her.” The experience gave Yuan the idea to incorporate video into telephonebased conferencing systems like Cisco’s. He also wanted to make a more userfriendly conferencing system that was fun to use. Zoom is known for its virtual backgrounds, which allows users to make it appear as if they are on the beach or in front of the Golden Gate Bridge. Yuan has a 99% approval rating from employees on workplace review site Glassdoor, which named Yuan its Big Company CEO of the Year in 2018. Yuan lives by the motto “Hard work and stay humble.”
Next big platform for startups
Zoom is planning to be the next big platform for startups to build billiondollar businesses. To achieve this, Zoom is teaming up with start-ups to innovate its product line to compete with global technology giants. After having tasted success, Zoom has to consolidate its position and needs to compete with Microsoft, Facebook and Google by innovating its product line. To achieve that goal, Zoom is teaming up with start-ups building the next big app on its open platform using Zoom APIs.
Zoom has grown to 300 million daily participants from its launch in 2013, and its market cap has risen from $15.9 billion at the time of its IPO in April 2019 to near-$50 billion. Early investor Maven Ventures has reaped a 200 times return on investment during the start-up’s meteoric rise. Maven Ventures founding partner Jim Scheinman has suggested a plan for an app marketplace contest online for start-ups to build new features and functions for Zoom to spur the next wave of growth. The company held an app marketplace contest online for start-ups to build new features and functions for Zoom using Zoom APIs.
In a so-called Whale Watch competition held in June with a virtual backdrop of whales swimming, leaders of 10 tech startups who were selected as finalists among 600 contestants presented business plans in Shark Tank-like pitches over Zoom to Scheinman and four other judges. Docket — a startups in Indianapolis with an app to make meetings more efficient with collaborative agendas, note-taking tools, archives and task steps— won the competition and hopes to raise $2 million in venture capital.
