How Zoom grew 30x almost overnight

0:00As a founder, you're constantly wearing multiple hats, usually at the same time. But the most successful leaders have learned to hand a few of those hats off to the right people. That's where Upwork shines. It's a one-stop shop to find trusted freelance talent across IT, web dev, design, and admin support. And it's built to be simple. Register for free, connect with freelancers who match your style and pace, and hire them with industry low fees. Upwork makes the whole process easier, more affordable, and way less stressful. If your business is ready for that next level, Upwork has the talent to help you get there.

0:39Visit Upwork.com right now and post your job for free. That's U-P-W-O-R-K dot com. Upwork dot com. Every year, product teams make the same promise. This is the year we get clear on our priorities. But how do you decide which ideas to prioritize? Jira Product Discovery is built to help you decide with confidence. It gives teams a single place to capture insights, prioritize the highest impact ideas, and share living roadmaps stakeholders can rally around. And because it's built on Jira, what gets prioritized becomes what gets built, with end-to-end visibility from discovery to delivery. Try Jira product discovery free at Atlassian.com slash scale.

1:24Build the right thing. The market was extremely crowded. However, I did spend a lot of time on talking with those users. Do you like Skype? Do you like WebEx? I did not see a single happy customer who told me that really liked the existing solution. Then I realized, what if I build a better solution? I think I have a chance to survive. Eric Yuan was determined to build a challenger to video call tools like Skype and WebEx, but he knew a great product would only be part of the equation. The Zoom founder, like many of the guests on Masters of Scale, believes a strong culture is essential for scaling a business.

2:14If you do not have a great culture, you really cannot scale your business. You can grow your business to a level and very soon you're going to hit the wall because you do not have greater culture. This is Masters of Scale. I'm Jeff Berman, your host. This week on the show, Zoom founder and CEO Eric Ewan reveals how feeling stuck at a big tech company led him to strike out on his own, how Zoom handled astronomical overnight growth at the start of the COVID pandemic, and how the company is now evolving in the age of AI. Eric still remembers the moment he decided to move to Silicon Valley. It was the early 1990s, and he had a chance to see Bill Gates speak.

2:56Bill's message? Computers were about to upend the world. I was so fascinated by his speech. I realized the Internet was going to change everything. I was blown away, and I thought about what should I do? And the best way to embrace the first wave of the internet revolution is to go to Silicon Valley. And I tried it so many times. I was in Beijing, China, and I applied for a visa. Long story, every time the reason is different. And they did not give me the visa. Eric's visa applications were denied eight times. His ninth attempt finally worked. I still remember that moment when they gave me the green light.

3:45So yeah, this is your visa. I was so excited because I dreamed of going to Silicon Valley for a long time. Eric, did you have a job lined up in Silicon Valley? Yeah, yeah, I did. Because that's an H1 working visa. The company, WebEx, sponsored me to come here to write software. And what was it like for you coming to the U.S. in the late 90s to join WebEx and start a Silicon Valley life? On a personal level, how did you experience that transition? Mentally, I was ready because when I was a kid, always liked reading the books about what's happening in Silicon Valley, like HP, Apple, Oracle. And Silicon Valley has a wonderful culture.

4:31I think after three or four months, I feel like already part of Silicon Valley because everyone here is so friendly. And they all want to support you, help you. And a very inclusive culture here. No matter where you came from, as long as you can contribute, you stay humble, you work hard, the culture here really welcome you. So I feel extremely excited after a few months. And Eric, you're joining WebEx. We're still in the dial-up days. We're in Web 1.0 era. I mean, we have audience members who were not born in this time frame. What was it like trying to scale WebEx in that era? Yeah, so I remember the WebEx office was very small.

5:17Our next door neighbor was Hotmail. So Hotmail was acquired by Microsoft. I think at that time, all the engineers, including two co-founders, we all realized the huge potential of Internet. However, back then, the Internet was extremely slow. The PCs was not powerful enough. and we were working so hard on optimizing the technology. Essentially, WebEx was the first generation of content sharing, the screen sharing. At that time, the way for WebEx users to use our technology is to use a phone call and share your screen. Cisco acquires WebEx. You're not a founder of WebEx, but you're early. It's your only Silicon Valley job, and you'd been there for something in order of 10 years at that point, right?

6:07You stayed at Cisco for a while. What was it like joining a big company and learning to work inside that structure rather than in the environment of a real Silicon Valley startup? So for the first two years after the acquisition, Cisco let web still run independently. And overall, the experience was great until the 2010 timeframe. Because at that time, the customer feedback, the video experience, not great. And mobile experience was not great. And WebEx became so not user-friendly. I feel like I have an obligation to fix that problem. The way to fix that problem is you got to build something from the ground up.

6:51Because WebEx architecture was not video collaboration. It's more like a data collaboration. Unfortunately, at that time, I did not get enough support. So they thought there's no need to rebuild WebEx. And finally, I decided to leave. I mean, before we get to leaving and starting Zoom, you hear this over and over and over again. You've got entrepreneurial teams that are capable of moving quickly and identifying the problems and coming up with the solutions. And they run into bureaucratic roadblocks, the sort of sclerosis that affects large organizations, the inability to get out of their own way and move quickly to the future.

7:31I'm just curious if you'd been able to sit with the Cisco leadership at the time, maybe you were able to do so. Why can they not see the need to invest in the rebuild and to build something new for this moment rather than effectively force you to leave and go do it on your own? Great question. This is pretty common, especially for large corporations. I think there's so many reasons. Later on, I realized John Chambers, such a great CEO, he really understood the importance. he didn't know I wanted to be a new solution, right? It's because of so many layers. If he knew that, very likely I'm probably still at Cisco, right?

8:09To build a solution. Ultimately, how to make sure, no matter how big your company is, make sure the bottom-up approach always can reach to the final decision maker. That's very important. If you have too many layers, quite often the senior leaders, they may not know what's going on. Okay, so what inspires you to say, I'm going to go start a brand new company for the first time in my career and go after this? I live in Silicon Valley since 1997. This is a worldwide innovation center. From very early on, I knew someday I'm going to build a new startup. I just don't know when. Mentally, I was already ready.

8:49Otherwise, I feel like how to tell my kids, oh, I work a big company for my entire career. I just did not feel good, right? So the best way to embrace the Silicon Valley culture is to either build a startup or join startup. I was ready. What was the original vision for what became Zune? I wanted to build a consumer solution. I didn't want to build another business solution. Unfortunately, it's really hard to monetize. Were you self-funding it? Were you bootstrapping it at this point? Were you raising money? How did you actually fund the new company? Yeah, so to start with, I tried to raise seed money from some VCs, and they did not think the world needed to have another solution.

9:34Luckily, I got seed funding from a few of my friends in Seneca Valley. And there were other video solutions at the time. It wasn't like a wide open space. What did you see the opportunity as that you could differentiate and build a real business there given the entrenched competition? I mean, Skype was already owned by Microsoft at this point, right? Correct. Yeah. So what gave you the confidence that there was a real opportunity here? You are so right. There were so many solutions out there. The market was extremely crowded. However, I did spend a lot of time on talking with those users. Do you like Skype?

10:13Do you like WebEx? I did not see a single happy customer who told me that really like the existing solution. Then I realized, what if I build a better solution? I think I have a chance to survive. And Eric, given the experience joining WebEx so early, being there for and helping drive so much of the scaling journey, and then being inside the large company that Cisco is, what about culture? Like, how did you think about building the culture at Zoom? Yeah, so that's very important. Zoom's culture on day one, until today, exactly the same. Deliver happiness. meaning we do all we can as a business.

10:53We make a customer happy, build a better solution to delight our customers. And that culture, I think, really helped Zoom become where we are today. And I'm the CEO. The number one thing for me to think about how to make sure all Zoom employees happy. Together, we make a customer happy. If you do not have a great culture, you really cannot scale your business. You can grow your business to a level And very soon you're going to hit the wall because you do not have great culture. How do you assess and track happiness inside the company? How do you know how you're doing on internal culture? So early on, when we were very small, right, you know, almost everyone, right?

11:38It's very easy. But later on, it becomes bigger and bigger. It's really hard. You got to look at everything, right, from a senior management team, middle-year, individual employees, also do the survey, and also based on interaction with the customers, based on the feedback, how you build a product, how you treat employees, how you recruit employees, how you retain employees. This is your virtual background, or this is your, I see a lot of books, right? This is my real background. These are my books. Real background, right? See, because Zoom, we have a book club. They're real. I can hold off the shelf.

12:11Very early on, we have a book club, and we let employees buy books. We always reimburse books. and no matter what kind of books they buy, as long as they want to learn. And even today, we have the same policy. This is a lot of a smaller thing together. Employees feel like the company does care about them. I mean, obviously, I love books. You can tell from my backdrop here. But even a very aggressive reader who might buy 40 or 50 books in a year, you know, you're talking about, you know, maybe$1 ,000 all in. And I'm not trivializing spending$1 ,000 on an aggressive reading employee. But the perceived value is far greater than a thousand dollar bonus, right?

12:53Totally. The investment the company is making in you, your growth. I love that as an insight for how to build and drive that culture. Eric, given the experience at Cisco, I'm curious how, as Zoom has grown, you've made sure that the layers that inevitably have to come in and leading a company of this scale still allow the version of you who wanted things to change at Cisco to get to you or someone on your leadership team with their idea for how to leapfrog competition and do something new at the company? So very early on, I think Zoom was very flat. I managed all those engineers. For now, actually, every day I spend time talking with those individual contributors.

13:41They do not need to worry about, hey, they have to go through their manager, feel free to reach out to any senior executives, including myself, because we have that policy. And because of the hybrid work, when we work remotely, it's really hard, right, to stop by to the individual employees' desk, right, to talk with them. But again, you know, I also told our employees, you still can send me a Zoom chat message. I leave on Zoom team chat and always respond. Still ahead, how the team at Zoom handled the sudden 30x growth of their business in 2020.

14:30This is Mike Nicholas, Capital One business customer and co-founder of Ansett Uncles, a plant-based restaurant and community space in Brooklyn, New York. and he's telling us how they started a product line. We already had a space in the community. The food was an extension of our lifestyle and our values. So we know we wanted to create something that was an offshoot to that. Our pepper sauce. That's my grandmother's recipe. That's like a liquid gold, right? If someone wants to approach us and ask us, what do we do? We provide flavor. Growing a product line is no small investment, but Mike and his wife and co-founder Nicole were able to manage with the help of their Capital One Business Card.

15:09Working with Capital One Business, we're able to leverage our limits and utilize those points, making sure we can continue the scale at the speed that we need it to go. To learn more, go to CapitalOne.com slash business cards.

15:28Welcome back to Masters of Scale. You can find this conversation and more on our YouTube channel and be sure to check out the show notes for a link to our newsletter. The first subscription business I had a chance to lead was at the NFL. I always felt that I learned more from someone who canceled their subscription than someone who kept it. I'm curious how you approach people who leave being Zoom customers and what process you have to learn from them. I still remember early on, at that time, Zoom subscription costs less than$10,$9.99 per month. And some users, they canceled the service. I personally reach out to each of them to understand what's going on.

16:12You know, sometimes they even did not believe that's a message for me. They thought it's for a marketing team. So it's very important for those customers to really understand what's going on because they spend time on going to your website, subscribe to your service, use your service, and then they cancel. It's extremely important for us to understand why is that, right? From individual subscribers, all the way to the enterprise. So even today, we have a team, dedicated team to focus on that. So many people became either familiar with or more familiar with or certainly became Zoom customers in COVID.

16:50I'm not sure that people realize how big you were before COVID hit. Could you talk about the growth journey, the scaling journey of Zoom from when you launched it up to 2020? We became a very happy public company back in 2019. Annual revenue less than$1 billion and a little bit over 2 ,000 employees. December of 2019, on a peak day, around 10 million daily meeting participants. And a few months later, all the way jumped to more than 300 million daily meeting participants. 30x growth in daily meeting participants in a few months. Yeah, more than 30x. Yeah. A billion in revenue and 10 million daily video participants.

17:36Those are not small numbers in that pre-COVID era. How'd you get there? For the first many years, we didn't have a marketing team at all. Word of mouth, you know, you cannot use Zoom by yourself, right? It does have network effects. Meaning if you are a happy user, you scheduled a Zoom call, somebody else will join. For the first time, really like, wow, I never tried this tool before. It works so well. It just works. They are going to start using that as well. They are going to invite more participants, right? So the world of most is so powerful. And later on, actually, we did recruit a marketing team.

18:15We sponsored the Warriors basketball stadium. I think ultimately, if you have a great product and make sure the customer is happy, be patient. Sooner or later, the world will recognize your product. A lot of companies would break under the kind of growth that Zoom experienced. How did you manage the hyper growth of those first few months of COVID? Number one is that Zoom's architecture was very scalable. Before we built a product, there's one guiding principle. Every engineer, they knew that. what if there's a 10x or 20x traffic? Do we need to modify our code? We have that mindset. That's the reason why during COVID, even if we have a 30x traffic, we do not need to change our code.

19:08The architecture itself was very scalable. That's number one. Number two is luckily, we heavily invested into the company culture. During COVID, a lot of Zoom employees, myself included, we worked extremely hard. I had way more sleepless nights than any time in my career during COVID. I did not see a single Zoom employee who complained about working so hard to support the world. We all realized this is once in a life opportunity to support the world, to help the world, and to delight our customers to make the world a better place. One of the things that we hear from entrepreneurs who start out with them and a couple of friends in a garage and next thing you know, I mean, fast forward, you're running a massively scaled public company, is it can be a hard transition to go from being hands-on to your point, like you know everything happened in a company, you know everyone's names, you're in it, in the minutia of it, to all of a sudden you simply can't be.

20:17And you almost have to make a choice. Am I going to be an internal-facing CEO or a largely external-facing CEO? And I'm going to have a leadership team that's managing much more of the day-to-day. How did that evolve for you? How did you experience that transition? Every day I come out, sometimes I call that a daily self-reflection. So essentially, I look at what I can do differently, especially in the age of AI. I feel like this is the best time to double down on the product or innovation. If you do not double down, triple down on AI, we're going to lag behind. So I keep thinking about it very hard what I can do differently to further scale our business.

21:00Eric, coming out of COVID, Zoom has faced unprecedented competition. Everyone appreciates that remote and hybrid work require video conferencing as part of the suite of tools that we're using. How has it changed how you've led strategically that new era of competition post-COVID? Yeah, so you are so right. You know, competition-wise, for sure, is more difficult compared to pre-COVID because all of a sudden, competitors realize this is a very important market. I think the way for us to look at a competition is, first of all, we have to innovate. We have to become better versions of ourselves, right?

21:40That's the number one thing, right? Either you build a better product or you have a better relationship with the customer. That's always number one, right? Number two is we need to build something new. Zoom today is way beyond a big conference. We have lots of other tools. Essentially, it's an AI work platform, right? We also have a business services. How are you thinking beyond Teams or other video conferencing platforms about the broader competitive landscape, particularly as we integrate more and more AI-fueled tools into our process? I think two things. Number one is we need to make sure our system is open because no companies want to standardize a single vendor.

22:23It's really not as getable, right? So we built a full collaboration platform. If a customer wants to use any of our solutions, it's awesome. At the same time, we also integrate with any other solutions, like a Google ecosystem or Microsoft ecosystem. That's the number one thing, like open ecosystem. What excites you most about this next AI-fueled era of innovation? In the age of AI, I think for now, it's a lot of startup companies focused on the technology layer, application layer, data layer. I think it's very early. Almost every industry, every business, I think, you know, goes through this AI transformation.

23:05Yeah. Eric, I'm struggling with hybrid and remote work. I'm struggling with it because I love being around people. I feed off of other people's energy. And importantly, you know, when you're leading a team, for me, reading the body language, seeing how people are walking down the hallway, interacting with each other for the more junior members of the team, giving them a chance to sit in on a meeting and listen and watch and then ask questions after. Some of this is, you know, I'm Gen X, this is how I came up and we tend to over index on what worked for us. And I appreciate the value and flexibility and the saved commute time and all of it in remote work.

23:46But for me, there's no substitute for being in person. And I'm just curious, particularly in Zoom, how you're leading the team there and making sure that you're staying in touch with people beyond the video interface and that they're staying in touch with each other. Yeah, so the way I look at this, hybrid works, five days in office works, five days fully remote also works. Every company different. But in the case of Zoom, we got to look at everything from from a customer's perspective. Meaning, we build a collaboration platform and tools. A lot of our customers, they embrace the hybrid work. So we have to embrace hybrid work as well because otherwise, how to eat our own dog food, right?

24:33That's how we decided to let employees back in office twice a week. You cannot really go back five days a week to force every employee to do that. It's not scalable. But how to level the technology, how to level the AI, still achieve the same goal. That's become important. Like a lot of companies in the last few years, Zoom had around the layoffs a couple of years ago. Could you talk about what it was like for you to lead the company through a reduction in force process? Wow, that's extremely painful. Very early on, I told our staff, no matter how small or how big Zoom will become, the one thing I didn't want to do to lay off employees.

25:18I mentioned many, many times every year. Because of that, we hired employees very slowly. We didn't want to grow a business too quickly. We did very well 2011 to 2019. Unfortunately, we made a huge mistake. I made a huge mistake during COVID. To support the traffic, to support the world, we hired over 6 ,000 employees within two years window. 6 ,000. And that's a huge mistake. And after the crisis is over, we realized it's not skittable, the cost is very high, and the productivity is not great. To address that mistake, we had to go through that very painful 15 % reduction. Looking back, it's very difficult, right?

26:07Because they join you. They are Zoom employees. This is my mistake. So, and we're not as well, very, very careful in terms of recruiting employees. Well, and I think it's important to note, you also assessed yourself a huge reduction in compensation as a part of your layoff process, which I know it doesn't solve the challenge for the people who lost their jobs or for their colleagues who remain, but is a sign of real leadership and something folks can learn from as they contemplate how they're going to lead through those moments as well. Eric, I'm conscious of not having a political conversation.

26:40I'm also aware that you didn't get the chance to come work in Silicon Valley until your ninth visa application. And you have helped build one iconic company. You have built, with the help from your team, another iconic company. You've worked at one of the most iconic companies in Silicon Valley. You've created thousands of jobs, built billions of dollars in value as an immigrant here. When you look at what's happening with visa policy in the U.S. and both the challenge and opportunity of immigrants coming to the U.S. to help build this next generation, what advice would you offer lawmakers who are struggling to find the right balance with immigration policy right now?

27:23The right balance is very important. The reason why you can today, the large companies, right? The Google CEO and Microsoft CEO, a lot of great CEOs, they are immigrants. One of the reasons America is so successful, because of this inclusive culture, no matter where you were born, as long as you think you can contribute, you think you have a greater vision and you really want to be part of this American dream. So I think the key is really about the balance. I'm not saying, you know, it should open up to everyone. That's not scalable either. But I trust government leaders. They will figure out a way, right?

28:05Because they will talk with all those private sector leaders, you know, look at all those immigration policies, look at all those success stories. I'm pretty sure they are going to have a very, very balanced policy. Otherwise, where all those AI startup, the engineers or founders are coming from, right? Eric, wonderful being in conversation with you. Thank you so much for being on Masters of Scale. My pleasure. Thank you for having me. The meteoric rise of Zoom offers so many valuable lessons. It is, of course, an inspiring story of immigrating to America, becoming a startup founder in your 40s, and building an iconic company.