Zoom reveals secret to IPO success: Wall St knows it works

Video conferencing software provider Zoom has managed to buck the trend of lacklustre tech IPOs.

Zoom CEO and founder Eric Yuan.

Video conferencing software provider Zoom has managed to buck the trend of lacklustre tech IPOs this year, with the company trading at double its $US36 offer price.

While the likes of Lyft, Uber and Pinterest have all plunged on their public debuts this year, Zoom was a clear outlier, surging 72 per cent on its debut in April.

Zoom CEO and founder Eric Yuan, speaking to The Australian at Dropbox’s Work in Progress conference in San Francisco, said that one key factor in his company’s favour was that many Wall Street investors were Zoom customers themselves.

“We have many customers across Wall Street,” Mr Yuan said. “So our product wasn’t something new from their perspective, they’d been using us for many years and they’d always ask ‘when are you guys going to go public?’

“And plus, you know, we are profitable. And that, combined with the growth we’ve had, is relatively rare. Normally when you focus on growth you cannot be profitable, but we’ve been able to focus on both.

“The stock price is out of our control, but we are working very hard to make sure we really care about our shareholders.”

Mr Yuan added that Zoom’s executives decided early on to focus on profits over burning cash, not just to get it ready for Wall Street but to help build a sustainable enterprise.

“We want to make sure that we can be cashflow positive, and we wanted to be profitable, and prove that we could do that over the past several years,” he said.

“That’s why we’re not going to be spending money like crazy, because it’s money from investors, right? It’s not our money. So you’ve got to spend it carefully.”

Video conferencing software is notorious for being clunky and often a difficult experience, and for Mr Yuang his product’s point of difference is its reliability.

He first came up with the idea for Zoom as a freshman in college in China, where he’d regularly take 10-hour train rides to visit his girlfriend, who is now his wife.

It was taking those trips that he decided to help build video chat software. “The reason there are so many different solutions out there, and the reason a customer generally hears about them, is ­because they’re so hard to use,” he said. “It’s hard to make it work, and the quality is bad. We focus on ease of use, quality, security, and it just works anytime, and anywhere. A customer can count on us for their mission-critical calls. They might have a very important meeting with a customer or partner and they know it just works.”

Zoom is based in San Jose, part of the California Bay Area’s major tech hub, but Mr Yuan said innovation was no longer confined to the Valley and would increasingly come from places like Australia.

“It used to be that, if not all, most innovation would come from Silicon Valley. Things are changing now,” he said. “Innovation is now coming from other ­places, like say Australia, you have Atlassian and Canva. And you now have the likes of India and China, which are huge for e-commerce and digital payments … Innovation is coming from all over the world, due to AI and 5G in particular. It is still Silicon Valley-driven, but other countries are complementing it.”

He declared that Australia would continue to be a crucial market for Zoom, in no small part thanks to the company’s partnership with local tech darling ­Atlassian.

“Hi-tech companies like Canva and Atlassian, they’re our customers,” Mr Yuan said. “A lot of universities too, like the University of Western Sydney, AARNET, they’ve been our customers for many years. We do well for education, and hi-tech companies. And I know the founders of ­Atlassian very well, Michael and Scott, they’re our customers, our partners, and Atlassian is an investor in Zoom too.”

David Swan attended Work in Progress as a guest of Dropbox