Lessons for a Low Burn Rate from Zoom: How to Get 500,000 Businesses Using Your Product While Burning Almost Nothing

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By Eric S. Yuan, Founder & CEO of Zoom Video Communications

When Zoom was founded six years ago, video conferencing was a crowded market. But none of the existing solutions were making customers happy. We saw the opportunity to make a much better solution — and the customers quickly followed. Here are six lessons we learned along the road to getting Zoom into the hands of 500,000 businesses and millions of users.

#1 – SEEK INVESTORS WHO WILL INVEST IN YOU
Even if you’re fortunate enough to have access to investors, finding the right investor isn’t easy. Our goal was to find an investor who wanted to invest in our team, not in the business. A business can go up and down, like a marriage. So you need to find an investor who wants to be married to you. Finding the right investor is a process. You need to test investors to find the best one to support your business.

#2 – DON’T WAIT UNTIL YOU NEED MONEY TO RAISE MONEY
It’s one of those sad truisms that if you don’t need the money, you’re more likely to get it. So even when we had money in the bank, we still raised. The goal isn’t to just have the money sit in your bank account, but to ensure that you have the necessary funds to capitalize on opportunities when they arise.

At Zoom, we’re serious about spending our money smartly. We made it a goal to be both fast growing and cash-flow positive, so we raised and spent smartly to achieve that goal.

#3 – SPEND MORE, BURN LESS
Our first deal that really gave us huge confidence was Stanford Continuing Studies. At that time, we had no sales and marketing, just engineers — and they sold the solution. But even with that jolt of confidence, getting to that first million is difficult because nobody knows you and you likely don’t have a solid sales and marketing function.

In the beginning, our marketing strategy was just word-of-mouth based on customer success, which didn’t require additional spend. A lot of our lead gen came from organic leads from existing happy customers.

Freemium is a huge driver for us as well. In a crowded market, you need to give customers the opportunity to test out your product. Our freemium product essentially functions like our Pro paid product, but with a time limit on group calls (it’s unlimited for 1-1 calls).

Research has shown that the most effective meeting is 45 minutes, so we cut off our freemium calls at 40 minutes. I firmly believe in testing everything. We conserve cash by refusing to fund anything until it’s proven that it works.

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#4 – DON’T GROW TOO FAST
I like to make this analogy: If I drive 80mph from San Jose to San Francisco, I’ll get there faster…but the risk is much higher. Likewise, at Zoom, we’re focusing on sustainable growth, not growth at any cost.

We don’t want to grow too fast. We’re less focused on valuation and more focused on making our existing customers happy. We don’t aggressively pursue new customers. Instead, we prioritize features that existing customers want over what new prospects might want.

Existing customers are our top priority. Our Net Promotor Score (NPS), measuring customer satisfaction, is between 67-69, dozens of points ahead of our competitors. We’ve focused on NPS since day one.

#5 – HIRE PEOPLE WITH POTENTIAL FOR GROWTH
I hate the idea of hiring people who are overqualified. If you hire individuals with potential for growth, they’re loyal to your company, will adapt to your company, and are more humble, rather than resting on what they accomplished in the past.

I was told at one point to hire a VP of Sales who had worked for another company in that role, and I said “No.” For every single position, from management down, I hire for potential. I think this strategy is serving us well — not only did we reach a billion-dollar valuation in six years, but our original management team has remained. Nobody has left.

#6 – CULTURE IS THE #1 PRIORITY
Before I even started a company, I always thought about what kind of company I wanted to build, and what kind of company I wanted to work for. We’re all working hard at Zoom. When you work so hard on something for so many years, you want to be able to look back at all your work and feel a sense of accomplishment. The process is more important than the outcome, and every day is as important as those few days when you celebrate your successes.

If you don’t build a company around delivering happiness to your employees, it’s like torture to be at work every day. I truly want employees who will be able to look back on their work with sweet shared memories of our time at Zoom.

TO 600,000 BUSINESSES AND BEYOND…
Building Zoom has been difficult. I have my days when I encounter a problem, or worry that our customers aren’t happy, or our employees aren’t happy. There are mornings when I wake up and think everything is wrong. And about once a year, I worry that we’re not going to make it!

But then I remind myself that if we can deliver the first million businesses using Zoom, we can deliver the second and the third. In the end, it all comes down to our customers. We’re committed to customer happiness — and that commitment will continue to serve us.

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