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Zoom (NASDAQ: ZM): The Pursuit of a People-Centric Collaboration Platform

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Eric S. Yuan, Founder & CEO, Zoom (NASDAQ: ZM)Eric S. Yuan, Founder & CEO
If playing in the Oracle Arena tops the bucket lists for players of Golden State Warriors, ringing the NASDAQ bell sits high on the checklist of many entrepreneurs. For Eric S. Yuan, the founder and CEO of Zoom Video Communications (NASDAQ: ZM), that moment came on April 18, 2019. A few minutes away from Zoom’s public stock market debut, Yuan could not help but retrace the steps that led him to this particular moment. From being a mining engineer’s son in China’s eastern Shandong Province and collecting construction scraps and recycling their copper for cash at fourth grade to emigrating to the U.S. during the early dot-com boom, joining and eventually leaving Cisco WebEx, and finally founding Zoom, it had been a marathon for Yuan. At the same time, he knew that the IPO was not the end of his journey. As Yuan finally addressed the cheering crowd before ringing the opening bell at NASDAQ, his bashful grin turned into a focused look as he said, “A new game starts today!”

The Journey in Rear View Mirror

As Yuan rang the NASDAQ bell to declare his company public, there was another spectacle waiting for people outside the NASDAQ MarketSite building. The onlookers caught Zoom executives, investors, and family members waving at the LED video display unit on the exterior wall of the building; the screen connected them with the employees, who joined the NASDAQ IPO ceremony, remotely via Zoom video.

Beneath the late bloom lies a story of perseverance and better execution, proving that an unexpected challenger can sweep the field, even in a crowded market.

Chasing after his dreams and overcoming multiple failed attempt of getting his visa to the U.S., Yuan finally joined then two-year-old Webex in 1997. During its acquisition by Cisco in 2007, Yuan soon became Cisco’s Corporate VP of engineering, in charge of collaboration software. However, when interacting with Cisco WebEx customers, he needed more than what was available in the market at that point in time. According to Yuan, the available collaboration solutions were not efficient. Each time users log on to any of the video conferencing tools, the system would have to identify which version of the product (iPhone, Android, PC, or Mac) to run, which slowed things down. Besides, too many users on the line would strain the connection, leading to choppy audio and video quality, while the solution lacked modern features like screen-sharing for mobile. After a year of pestering his bosses to let him rebuild Webex, Yuan gave up and decided to leave Cisco in 2011 with a mission of developing a people-centric cloud service that transforms the real-time collaboration experience and improves the quality and effectiveness of communications forever.

A Star was Born

With Microsoft owning Skype, Google in the market via Hangouts, and Cisco still leading in market share, Zoom’s initial competition in the video conferencing arena was against the entrenched incumbents. However, Yuan had a clear vision in his head: create better technology for video communications, then figure out what app to build on top. Following through the plan, Yuan and the U.S. members of his team quietly worked on their product for nearly two years from rundown offices in Santa Clara, with an oft-broken elevator, and a mission-crucial video camera perched atop a cheap fridge.

When Zoom first launched its product in 2012, it had several key differences from its competitors. Its lightweight web version can figure out almost instantly the kind of device users were using, meaning Zoom does not need different versions for Mac or Windows PC.
It also added a software layer that shielded any bugs that might be introduced when a browser like Chrome, Firefox, or Safari pushed an update. In addition, Zoom could operate even at 40 percent data loss, so it would still work on a spotty or slow internet connection, and it undercut its rivals with a freemium model that includes most of the features.

Snowballing up to the Present

Now, a little more than eight years later, Zoom has hosted over 50 billion annualized meeting minutes, and its customer base includes one-third of the Fortune 500 and 90 percent of the top 200 U.S. universities. Today, Zoom is a unicorn startup, partnering with larger companies such as Slack and Facebook, as well as launching Zoom for Telehealth for use by medical professionals. It has also grown into a top-500 app via Facebook login trends, an objectively impressive feat for an eight-year-old company. 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.

Zoom offers its service to not only in video conferencing but also offers web conferencing with additional functionalities across the platform. If users have already deployed any hardware conference-room solution, Zoom can also interact with that. Zoom has a conference room solution called Zoom Rooms based on commodity hardware with its software. To this extent, it also supports wireless presentation enabling users to get rid of projectors as well. The CEO says, “Our approach toward video conference has been substantially different from that taken by others who have attempted to add video conference to an aging, pre-existing conference call or chat tool,”.

Phoenix Children’s Hospital, one of the users of Zoom’s video conferencing solution, highlights the true capability of Zoom. Staffs of the hospital 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 extended stays, the hospital has offered iPads with Zoom accounts to them for meeting each other in virtual support groups and helps them attend school without immunological risk. “It’s like a restaurant,” Yuan says about a similar glitch with a third-party vendor. “When a customer walks into a restaurant, and until they leave, the entire experience needs to be great.”

That is a defining characteristic of Yuan: his passion is not derived from the financial benefits, but rather the customers his company makes happy. The way Yuan sees it, “What better way to have a real-time pulse on how your business is doing, what features or integrations you should be building and so forth than to be listening to your customers all day?” His passion for improving Zoom’s product strongly correlates with his passion for helping his customers. That is why Yuan, as CEO of a huge public company, never gives up and has been able to reach the level of success he has today.

Heading off in the Future

Zoom announced a voice product in October—Zoom Phone. Alongside an update to its conference room bundle Zoom Rooms, it is one of several major product lines Zoom has touted in recent months. 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 is a move Yuan thinks is strategic to winning over large enterprises, where CEOs spend lots of time in virtual meetings.

As Zoom races forward, he expects employees, who turned out around the world for the IPO ceremony to wave to their CEO over a live feed in Times Square using—what else?—Zoom to follow his lead. Referencing back to its recent IPO, Yuan recalls the pearls of wisdom from one of his mentors, who compared IPO with graduating from high school. “You go celebrate one day, and that is it,” Yuan says. “You don’t want high school to be the peak of your performance, right?”
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Company
Zoom (NASDAQ: ZM)

Headquarters
San Jose, CA

Management
Eric S. Yuan, Founder & CEO

Description
Founded in 2011 by former Cisco Webex head engineer Eric S. Yuan, Zoom sells subscriptions for enterprise-level video-conferencing services. It partnered with several established brands during its infancy, such as Logitech and the workplace collaboration tool Redbooth. Today, Zoom is a unicorn startup, partnering with larger companies such as Slack and Facebook, as well as launching Zoom for Telehealth for use by medical professionals. It has also grown into a top-500 app via Facebook login trends, an objectively impressive feat for an eight-year-old company