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4 Secrets Behind The 300% Growth Of This $4.2 Billion Founder’s Latest Startup

There is more than luck to this amazing founder’s string of startup success

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BY Peter Cohan - 03 Oct 2017

PHOTO CREDIT: Getty Images

What happens when a top executive at a startup goes to work for the big company that acquired it? Usually, the executive stays long enough to get their cash and then bolts. Sometimes, that executive stays for years and ultimately gets so disgusted with how the new owner is ruining their startup, that they leave and start a new company aimed at all those flaws.

 

This comes to mind in considering the career of Eric Yuan who in 2007 sold a company to Cisco for $4.2 billion and his current startup is worth $1 billion. As he explained in a September 21 interview, he left Beijing in 1997 to be the founding engineering of WebEx. Cisco Systems bought the videoconferencing company in 2007 for $3.2 billion and Yuan stuck around Cisco as a VP in its Collaborative Systems group.

 

In 2011, Yuan left to start videoconferencing service Zoom which is now growing faster than the enterprise videoconferencing industry which is estimated at $16 billion this year and expected to grow at a 20% annual rate to about $41 billion by 2022, according to Markets and Markets. FORBES reported that Zoom grew 300% in 2016 after raising $100 million in January 2017 at a $1 billion valuation.

 

IDC reported that Cisco is the dominant player with Polycom and Huawei taking second and third place. In the third quarter of 2016, Cisco's revenues grew 6.4% and it controlled 46% of the worldwide videoconferencing equipment market. Polycom's 2.3% growth yielded 21% of the market and Huawei's 4.6% growth resulted in 12.2% of the market.

 

Why is Zoom growing so fast? Here are four reasons.

 

1. Care about your customers.

Yuan was not happy with the way Cisco was managing WebEx when he left in 2011. As he said, "I was paid very well as a VP at Cisco. But WebEx was my baby. In 2010 and 2011, I did not see happy customers. I was very embarrassed that I spent so much time on the technology. Why are the customers not happy?"

 

He could not convince Cisco management to fix the problems. As Yuan explained, "Cisco would not change its collaboration strategy. I said I had a different view and left Cisco. 35 to 40 WebEx engineers left with me. Six years later we are doing well with 750,000 customers [up 67% from 450,000 in January]. We are growing thanks to our simplicity, quality, features and price and we have a very high net promoter score of 69."

 

2. Hire Happy People.

Zoom has 670 people in four offices and has been hiring aggressively. As he said, "We hired 114 people in the second quarter of 2017 alone. We have offices in San Jose, Denver, Santa Barbara, and Kansas City. Our customer support operation is in Kansas City where we hire young talent working under a great leader was head of IT at Kansas State and a former WebEx customer. He said he could help us hire people there and we offer great support and our people have a lower cost of living."

 

Zoom hire DevOps engineers, sales and support people from Cisco and Polycom. He wants self-motivated, self-teaching people with a background in selling to small and medium sized businesses. As he said, "The best salespeople join us because our product is easy for them to sell and they feel like they are moving the needle here -- a feeling that they do not get from working at a big company."

3. Raise Money From Investors Who Can Help You Grow

Zoom has attracted plenty of investor interest. According to Yuan, "We have raised $145.5 million in four rounds. Sequoia led our Series D -- and we like Sequoia - they invested in Apple, Google, and Oracle. Emergent Capital is also an investor. We have raised Series A, B, and C but have not touched the money. Sequoia is helping us with customers and connections. We were very honored that Sir Michael Moritz of Sequoia spoke at our first Zoomtopia conference. And Emergent knows Software as a Service and gives us great feedback on our operational metrics."

4. Invest in Future Growth

How will Zoom keep growing? As I wrote in Disciplined Growth Strategies, companies can grow along five dimensions -- current or new customers, products, geographies, capabilities, and culture.

And Zoom is pursuing several such growth vectors in parallel. "We are doubling down on our U.S. productivity focus; expanding in Europe and Australia while getting organic growth in the U.S. and Canada and we are continuing to innovate our current product by adding cool new features -- [it recently announced AI and AR features, according to TechCrunch] -- and making it simpler. We have a culture of happiness. We care about the community, about customers, about winning, our teammates, and ourselves," he said.

You may never be a billionaire but you can benefit from applying the lessons from Yuan's success.