Transcript

How Zoom grew 30x almost overnight

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0:53 Hey folks, Jeff Berman here. I am thrilled to share some of the new names who will be joining us at this year's Masters of Scale summit. This may be our biggest stage yet. Reed Hastings, Meredith Whitaker, Van Jones, Amjad Masad, and more. Will be there with us October 20th through 22nd in San Francisco. If you're building something great, or you want to build something great, We want you there with us too.

1:20 Join us at masters of scale dot com slash apply twenty six. That's mastersofscom slash apply. Twenty six. The market was extremely

1:36 Craved it. However, I did spend a lot of time. on talking with those users. Do you like a sky? Do you like a wear backs?

1:46 Айдиносія синкопі кастама. Or to be that. Really like the existing solution. Then I realized. What if I put a better solution?

1:58 I think I have a chance to survive. Eric Ewan 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. If you do not have a greater culture you really cannot scale your business. You can grow your business to a level

2:25 And uh where soon you're going to hit at the war. 'Cause 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.

2:57 It was the early 1990s and he had a chance to see Bill Gates speak. Bill's message. Computers were about to upend the world. I was so fascinated by his sp. I realised

3:14 Internet was going to change everything. I was throwing away and I thought about what should I do? And the best way to embrace the first wave of internet revolution. Is it good to

3:27 Seneca Wiley. And I tried it so many times. I was in Beijing, China. and I apply the phone visa. Long story every time the reason's different And they did not give me the visa. Eric's visa applications were denied eight.

3:43 Times. His ninth attempt. Finally worked. I just still remember that a moment. When they gave me the green light, so yeah, this is always uh

3:53 I was so excited'cause I dreamed off uh going to Silicovale for a long time. Eric, did you have a job lined up in Silicon Valley? Yeah, yeah, I did. Because that's a H Y Воркін віса на компанії Вебекс. sponsor me to come here to write a software

4:11 And what was it like for you coming to the US in the late nineties 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 uh liked reading the books about what's happening in Silicon Valley, like uh H P, Apple, Oracle, and Silicon Valley has a wonderful culture I figure after three or four months I feel like already part of a Cinco Wiley because

4:43 Everyone here so friendly. And they all want to support you, help you, and a very inclusive culture here. No matter where you came from, and 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.

5:04 And Eric, you're joining WebEx. We're still in the dial up days. We're in web one point oh era. I mean, lit we have 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. I was next door neighbor was Hotome. So Hotome was acquired by Microsoft. I think at that time All the engineers, including two co founders, we all realized

5:35 the huge potential of the internet. However, back then the internet was extremely slow The PC was not powerful і naf And we were working so hard on optimising the technology. Essentially WebEx was the first generation of content sharing, the screen sharing. And that time the way for WebEx users to use our technology is to use a phone call. And share your screen.

6:03 Cisco acquires WebEx. You're not a founder of WebEx, but you're early. It's your only Silicon Valley job and you've been there for Something on order of ten years at that point, right? You 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 of a real Silicon Valley startup?

6:24 So For the first two years after the acquisition, Cisco let Webers still run independently. And overall the experience was great. Until a two thousand ten time frame because at that time the customer feedback, the video experience not great.

6:43 And mobile experience not great and WebEx became so not user friendly. I feel like I have a obligation. To fix that problem. The way to fix that problem is you got to build something from the ground up because web as architecture was not video collaboration. It's more like a data collaboration.

7:03 Unfortunately at that time I did not get enough support. So they thought there's no needed 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 identify 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 and move quickly.

7:37 I'm just curious, if you'd been able to sit with the Cisco leadership at the time, and 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 readings. Later I realized John Tibet says great see you, he really understood the importance. He didn't know I want to be a new solution.

8:09 Why? It's because of so many layers. If he knew that. Very likely I would probably still at a Cisco, right, to build a solution. Uhly how to make sure no matter how big your company is, make sure the Bottom up reports.

8:23 always can reach to the final decent maker. That's very important. If you have too many layers. And quite often the senior leaders they may not know what's uh going on.

8:34 Okay. So what inspires you to say, I'm gonna go start a brand new company for the first time in my career and and go after this? I lived within Sirk Valley since nineteen ninety seven. This is worldwide innovation center. From Very early on I knew someday I'm going to build a new startup. I just do not know when. Mentally I was already ready. Otherwise I feel like how to tell my kids, oh I work a bigger company for my entire career.

9:01 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 want to be the consumer solution. I Uh fortunately.

9:20 It's really harder 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 res save that money from uh some VCs. And they did not think The word

9:37 needed it to have another solution. Luckily I got the say the funding from a few of my friends in Seneca Marty. 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? Like 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.

10:09 The market was extremely craved. However, I did spend a lot of time. Uh talking with those users. Do you like a sky? Do you like Webex?

10:21 I did not see a single happy customer who told me that. Really like the existing solution. Then I realized What if I put a better solution? I think I have a chance to survive.

10:35 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 is cotcha on the one. Until today exactly the same.

10:54 Deliver happiness. Мені ви ту Овикан а за бенес. We make a custom happy, be the best solution to delight our customers. And that culture I think really helped Zoom become where we are today.

11:09 And I'm gonna see you N number one scene for me. to think about how to make sure all Zoomy's Zoomy Pro is happy. Together we make a castle happy. If you do not have a greater culture you really cannot scale your business. You can grow your business to a level

11:25 And uh very soon you're going to hit the wall. 'Cause you do not have greater culture. How do you Assess and track. happiness inside the company.

11:36 How do you know how you're doing on internal culture? So really on we we were very small, right? You know almost everyone, right? It's very easy. But later it becomes bigger and bigger, it's really hard. You gotta to look at everything, right? From a senior management team Medalair. individual employees.

11:55 Also to 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 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 real background. Right? So Zoom we have uh book a club. They real, I can pull off the shelf. Very early on we have a booker club and we a let employ buy books. We always Reimbursed books. Mm-hmm.

12:25 And no matter what kinda books they buy, as long as want to learn. And even today we have the same policy. This is a lot of a smaller scene together. In probably feel like The company does care about that. I mean, obviously I I love books, you can tell from my backdrop here, but even a very aggressive reader who might

12:42 buy forty or fifty books in a year. You know, you're talking about, you know, maybe a thousand dollars all in, and I'm not trivializing spending a thousand dollars on an aggressive reading employee, but The perceived value. Is far greater than a thousand dollar bonus. Right.

12:59 Totally. The investment the company's making in you, your growth. I love that as an insight for how to build and drive that culture. Er given the experience at Cisco I'm curious how as as Zoom has grown, you've made sure that the layers that inevitably have to come in in in leading a company of this scale. still allow

13:22 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 with the company. So Very early on, I think uh

13:37 Zo was very flat. I managed all those uh engineers. For now actually every day I spend the time. talking with us an individual Contributors. You need to not need to worry about hey they have to go through their manager, they feel free to reach out to any senior executives, including myself.

13:55 Because a 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 channel message.

14:12 I leave our Zoom team chat. And always respond. Still ahead how the team at Zoom handled the sudden thirty X growth of their business in twenty twenty. Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show. Because every Friday we release a second rapid response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely from Ford's CEO to NASA's administrator to the lessons from The Devil Wears Prada. It takes about

15:01 10 seconds to find, just search rapid response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there. Humans will never be more intelligent than AI. There's gonna be two types of companies.

15:18 Those were great at AI and those that went out of business because they weren't. How do we build a future? That is human centered. I'm Rana El Khayubi. And on my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone.

15:41 Every week, I sit down with the pioneers shaping our future. And we take you behind the scenes of the AI that's transforming our lives. Find pioneers of AI wherever you tune in. Welcome 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.

16:26 I still remember early on, at that time Zoom subscription cost is uh less than ten dollars, nine ninety nine per month. And some users of the cancer service. I personally Richard to each of them. to understand what's going on. You know, sometimes they even did not believe that's a message for me. They thought it's for a marketing team. So

16:48 This is very important. for those customers really understand what's going on. Because No, they spend a tie on going to your website, subscribe to our service, use use your service and then they canceled. It's extremely important for Us to understand why that.

17:03 Right, from individual subscribers. All the way to the interpretes. So even today we have a T Dedicated team. To focus on that. So many

17:13 People became either familiar with or more familiar with, or certainly became Zoom customers in COVID. I'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 twenty twenty?

17:32 We became a very happy public company back in twenty nineteen. Anual revenue less than one billion. and little bit of over two thousand employees. uh december of twenty nineteen. on a peak day around ten million.

17:48 Day the meeting participant. And a few months later all the way jumped to more than three hundred a million. Daily meeting participate. thirty X growth in daily meeting participants in a few months. Yeah, more than thirty acts. Yeah.

18:02 A billion in revenue and ten million daily video participants, those are not small numbers in that pre-COVID era. How'd you get there? For the first many years. Wait. They didn't have a marketing team at it all.

18:15 Mm. Word of a mouth. You know, you cannot use Zoom by yourself, right? It does have uh net rookie effects, mini. If you are a happy user

18:25 You're scared of them call somebody else who will join. For the first time really like wow. I never tried this truth before. It works so well. It just works. they are going to start using that as well. They are going to invite a more participant, right? So the water moss is so powerful. And uh later on actually we did a recruited a marketing team, we sponsored a warriors basketball stadium. I think ultimately that they if we have a greater product And it makes sure it costs him happy.

18:53 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?

19:10 Number one is uh the Zoom's architecture. Was very scalable. Before we build a product. There's one Guiding principle.

19:19 Every engineer they knew that. What if There's the ten X. Or twenty X traffic.

19:27 modify the code. We have that mindset. That's reason why during the COVID you have a city X traffic. We do not need to change our code.

19:38 The architecture itself. was very scalable. That's the number one. Number two is luckily We heavily invested into the company culture. Do you include a lot of Zoom employees, myself included.

19:52 We work it extremely hard. I had a way more Silly police nice. than any time in my career. during the Covid. I did not see a single Zoom employees.

20:03 Who complained about working so hard to support War. We all realised. This is a once in your life opportunity. to a supported word. To have the word And two

20:16 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, you know, fast forward You're running a 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 minutiae of it.

20:45 to all of a sudden you simply can't be. And 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 gonna have 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 I cover all the sometime. I call that a daily self reflection. So Essentially I look at it what I can do differently.

21:10 especially in the age of AI. I feel like This is a Based at high. to double down on the product. Uh innovation.

21:20 If we do not double down, triple down on AI, where give you legal behind. So I keep thinking about it very hard. Mm. What I can do differently to further scale up in this. Yeah. Eric, coming out of Covid, Zoom

21:34 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 competitor to realize this is a very important market I think the way for us

22:03 to look at the competitions, first of all We have to innovate. We have to become better working of ourselves, right? That'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 needed to build something new. Zoom today is way beyond a video conference. We have a lot of other truths. Essentially is a AI work platform, right? We also have a business services. How are you?

22:31 Thinking beyond schemes 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 they want to standardize a single vendor. It's really not scalable, right? So we builded a full collaboration platform.

22:58 If Castle want to use any of our solutions, it's also At the same time, we also integrated with any other sources like a Google ecosystem or Microsoft ecosystem. That's the number one thing. open ecosystem. What excites you most about this next AI fueled era of innovation.

23:17 In the age of AI, I think if for now It's a lot of a start up a company's focused on the technology layer. Application layer. Data leader. It's very early. Uh almost every industry

23:30 Every business I think you know, go through this AI. Transformation. Yeah. Yeah.

23:37 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.

24:03 Some of this is, you know, I'm Gen X, this is how I came up, and we tend to over index on on what worked for us. And I appreciate the value and flexibility and the saved commute time and all of it in remote work. But 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

24:28 the video interface and that they're staying in touch with each other. Yeah, so The way I look at it is Highbody Works Five days in your office works. Five days for day remote also works.

24:41 Every company different. But in the case of Zoom. We gotta look at it everything from customers perspective. Meaning We built a collaboration platform. And it tours.

24:53 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? That's how we decided to let employee back in office twice a week. You cannot

25:10 Really go back five days a week to force every employee to do that. Yeah. It's not as scalable. But how to level the technology, how to level the AI, still achieve the same goal. That's it become important. Like a lot of companies in the last few years, Zoom had a round of layoffs a couple of years ago. Could you talk about what it was like for you to lead the company through a reduction force process.

25:34 Wow, that's extremely painful. Very early on. I told all your stuff. I no matter how small or how big Zoom we become. The one thing I didn't want her to do

25:47 To lay off employees. I mention it many, many times every year. Because of that, we hide employees You know, very slowly. We didn't want to grow our business too quickly. We did very well.

26:00 twenty eleven to twenty nineteen. Unfortunately, we made a huge mistake. I made a huge mistake during Covid. To support the traffic, to support the world. We hard over six salad employee. Within two years window six thousand.

26:16 And that's huge a mistake. And after the you know crisis is over, we realised It's not skiddable, the costs are very high. And the productivity not a great to address that mistake. We had to. goes with a very painful

26:32 Fifteen percent. Reduction Looking back very difficult, right? Because They join you. They are Zoom Pro Is.

26:41 This is a my mistake. So and we now this we're 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 gonna lead through those moments as well. Eric, I'm conscious of not having a political conversation. I'm also aware that You didn't get the chance to come work in Silicon Valley until your ninth visa application and

27:19 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 US and both the challenge and opportunity of immigrants coming to the US 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? The right of balance is very important. The reason why you could today the larger companies, right?

27:59 The Google CEO And Max of C you A lot of the greatest deals they are immigrants. One for the reasons America's so successful. Because of this inclusive culture, no matter where you were born.

28:14 As long as You think it can contribute. But you're saying you have a greater vision? And he really wants to and be part of this uh American trip. So I I think uh the key is really about the balance. I'm not saying you know you should open up to everyone. That's not scalable either.

28:31 What uh I trust government leaders, they will figure out a way, right? Because They will talk with all those private sector leaders, you know, look at all those uh immigration policies, look at all those uh success stories. I'm pretty sure they are gonna have uh very well balanced uh policy. Otherwise Where all those startup the engineers or founders are coming from, right?

28:53 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.

29:16 Авторал, і снари компании whose name becomes a verb. It's also a cautionary tale. What happens if your scaled company can't keep its brightest talent? As Eric shared, if he had been able to convince his old boss to let him build a better tool at Cisco, He never would have had to leave to start Zoom.

29:36 I'm Jeff Berman. Thank you for listening. Masters of Scale is a Wait What original. Our executive producer is Eve Tro. Our senior producer is Trisha Bobida. Associate producer is Masha Makatanina. Senior talent executive is Stephanie Stern. Mixing and Mastering by Aaron Bastanelli and Brian Pugh. Original music by Ryan Holliday. Our head of podcasts is Letal Molad. Visit mastersofscale.com to find the transcript for this episode, and to subscribe to our newsletter. And please make sure. to check out our YouTube channel.