THE STARTUP CHAT

[0:00:00]

Steli Efti: Hey everybody, this is Steli Efti.

[0:00:02]

Hiten Shah: And this is Hiten Shah. Today on The Startup Chat we’re actually going to talk about, I think a company that both Steli and I are big fans of, the company Zoom. I’m sure many of you listening are also big fans of the company. Many of you might know, I do these long write ups about companies just because I feel like a historian sometimes and I like really documenting kind of the history of a company and give my take on it. The company I did a little bit ago was Zoom, and it’s a blog post, it’s on the FYI blog. It’s at usefyi.com/zoom, Z-O-O-M dash history. And you’ll be able to get to it and you’ll read, I don’t know how many words it is, probably five, six, 7,000 words or something like that about Zoom, if you’re interested. But you can also listen to us now as we talk about Zoom. One of the most interesting things about the company to me is that they went into an existing category and actually set the bar on something very basic, which is reliability. It’s really reliability with this idea of video conferencing and being able to see people on video, and even the audio part of it. Now, ironically or not, we’re also on Zoom right now as we’re recording.

[0:01:18]

Steli Efti: That’s very true. Now, this is the funny thing, when Zoom first launched, or when I first became aware of them, I remember, and there’s an important lesson in this, I remember thinking, who wants to go into the video conferencing or web conferencing space now? Right?

[0:01:43]

Hiten Shah: Right.

[0:01:44]

Steli Efti: It was both, although I knew that all the web conferencing solutions sucked, it was not a single one that was out there that I thought was awesome or that I knew anybody else thinking is awesome. Although I knew all that, there was still something inside of me that went, this is a crowded and established market. There’s a few winners. Who’d want to get into this right now? Then I also remember checking out Zoom and the first impression … Now, I’m probably not as sophisticated or as smart at evaluating products on day one, but when I looked at it, it was not immediately intuitively clear to me why this is amazing. I was searching for something that stood out. But what Zoom did was very subtle, right? The interface was not different. They didn’t do anything that was flashy, right, and in your face, “Wow, they’re innovating because they’re doing web conferencing with [inaudible 00:02:41].” No, it was basic web conferencing. But from the start you realize that this kind of just works. Then when you used it a couple of times, you’re like, “This actually works every time. I’ve had five web conferencing calls and none of them had issues.” Then you had to start using it a little bit to start realizing this is actually really good. Then you started noticing little details that it just seemed like the team behind it was a bit more thoughtful. Although it was a simple product when they started, simple from a usability point of view, it seemed to have answers to some problems that were there for years and years and years, that no other competitor on the technology side of things could solve. So that was kind of my experience with Zoom early on was, “Huh, why would you want to go into that market?” And then, “It seems too simple. What’s different about it?” Then, “Oh, this just works always. Well shit, let’s just use this forever.” Right? We’ve never looked back. We use Zoom extensively within the company. We use Zoom extensively as a sales tool within talking to our prospects and our customers. We obviously use Zoom extensively and on this podcast to do the recordings between Hetin and I. But that’s my perspective, which is very far removed. I didn’t do the research. I didn’t do the detailed work that you did. What am I missing? What are the things that are not as obvious that they did? Or what was your analysis in a piece of like the details that made Zoom become such an amazing company in a space that when they entered it was pretty established already?

[0:04:28]

Hiten Shah: Yeah. So the founder, Eric had worked at WebEx, and he had worked at WebEx as an engineer. The thing is he, I mean he was part of the team that built WebEx and actually that company ended up being sold to Cisco, and basically Cisco wasn’t improving the product. And so yeah, I think Eric just had an itch to scratch. It was an itch about, “Hey, this product’s not being improved. It needs to be improved.” And he quit and went after it and decided to work on improving it. This is why we end up with this sort of game changing product in a very crowded and an early kind of online market of web conferencing. It’s amazing. When you look at the old homepage, it was literally cloud HD video meetings. They had an iPhone on that home page and literally it said start video meeting. It was free for iPad, iPhone, Windows. So that was it. It was just a very simple value proposition early on. And you know what? The biggest thing is what you just said, which is compared to any other alternative, excuse me, it just works and it works better. What I learned as I started digging in and it has become a little more common knowledge is they spent a lot of time, I think the first couple of years, it might’ve even been prelaunch, perfecting the technology and building a bunch of proprietary technology to make sure that the product worked really, really well. Better than the competitors. So what I think is when he said they weren’t improving it and I need to come out and do that is basically reliability, something really fundamental. And so that was the key. The key was the fact that they spent all their effort solving the big problem that everyone had with all the video conferencing products that came before Zoom.

[0:06:57]

Steli Efti: That’s crazy-

[0:06:58]

Hiten Shah: That is simple. Reliability. Make sure it just works.

[0:07:03]

Steli Efti: See the interesting one funny note is that when you said, we’ve talked about WebEx. I thought, there’re some listeners right now that don’t even know WebEx. Have never heard of it, right? Because there’s kind of a younger generation of startup founders that have just lived with Zoom forever or with whatever, maybe they were using Skype or something else more heavily. That’s another thing that I notice, a lot of personal use was Skype and then Zoom really killed a lot of that as well. But WebEx used to be the game in town. It used to be the dominant web conferencing tool and everybody hated it but it was the most dominant player in town. Then I remember Adobe came into that market heavily with the rise of Flash, and they did a Flash based web conferencing thing. Then there was some Indian start up that did an open source based web conferencing thing that Salesforce ended up buying and then never doing anything with. So many others. BlueJeans, I don’t even know. Blue jeans I think is a newer player that’s still successful and around but I’m not sure. So many players, but Zoom, I wonder how hard it was for them to pitch people. Oh we’re going to do web conferencing. Okay, what’s different about it? It’s just going to work. Okay, but what’s different about it? How are we going to kill all the competition that’s already hundreds of millions in revenue and has massive sales teams? It’s just going to work.

[0:08:35]

Hiten Shah: What’s going to work?

[0:08:36]

Steli Efti: But why does it matter? What is the marketing going to be? What is the virality? How is the distribution? We’re not just going to kill all these other solutions even when they suck. They have all these advantages in terms of sales and distribution and marketing and this, that and the other. What are we going to do? Well ours just going to work. And then how difficult was it to convince investors and other people to join and work for years, as you said pre-launch, on building the stuff to make it just work? There’s a big lesson in here, but I am amazed that they were able to pull this off.

[0:09:15]

Hiten Shah: It’s insane. The thing is like when you look at this business of Zoom, there’s one key advantage that it has that the other folks weren’t able to figure out, which is their R&D cost is a lot lower than any other company in the market. And it’s probably a lot lower than any other SAS company that’s gone public in recent years. The reason for that is that the R&D happens in China and it has since the early days.

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Steli Efti: What?

[0:09:42]

Hiten Shah: Yeah, the tech they needed to build was built there. That I think gives them a massive capital advantage where it’s just cheaper for them to build their product and apparently they can build faster too. Because you walk into conference rooms now and it’s powered by Zoom. There’s some hardware and stuff like that. It’s not like Zoom is just software online, even though that’s what most of us see it as. So this is a really fascinating thing, because the business is basically predicated on really good technology that just works and also that the costs for them to build that technology, it’s much lower than most companies. So, that combination is really the key. That’s really the key to the whole business is the fact that they can build product cheaper than anybody else.

[0:10:42]

Steli Efti: Incredible. I mean, Zoom is one of my favorite companies of the past decade, especially in the B2B world. Hit people up again with the URL for the blog post if they want to go even more in depth on the how Zoom became the best of our conference and product in a decade.

[0:10:59]

Hiten Shah: Yeah, it’s a usefyi.com/zoom-history and you’ll see it.

[0:11:07]

Steli Efti: Beautiful. And then what … Oh go ahead.

[0:11:09]

Hiten Shah: No, I’m just going to say. It’s there. It’s long. Read it.

[0:11:14]

Steli Efti: Definitely read it. Then one thing in Close related news, so I mentioned Close, my company and my team, we’re big fans of Zoom. We use Zoom extensively in our sales process. We know that screen-sharing and web conferencing and video conferencing is becoming a bigger and bigger part of the sales process. But up until now it was very disconnected from the CRM world. So you use your CRM and then when you wanted to have a screen share or online demo or video call with prospects, that information that happened in Zoom was completely disconnected from all the other information you had in your CRM. We wanted to change that. So we just launched the tightest and the best integration with Zoom that any CRM in the world has, which basically allows you to within the CRM launch a Zoom room, have a video call or have a demo and all the information of that demo is automatically tracked and put into the CRM. So you have statistics on how many demos you’ve given, what the show rate is. You can watch the recordings of those demos. You can get all the information around any kind of communication that happens within Zoom natively in your CRM without doing any manual data entry. So if you use Zoom extensively in a sales context, you might want to check out our recent integration and check out close.com. All right. That’s it from us for this episode. Check out the article. Checkout Close and our integration with Zoom and big fans of Zoom. What they’ve done the test. There’s a lot of lessons to be learned here that are very subtle when it comes to entrepreneurship and startups. So definitely a company to watch and learn from. That’s it from us for this episode. We’ll hear you very soon.

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Hiten Shah: See ya.

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