
Anti-burn: How bootstrapped Zoho survived two tech bubbles - rajuvegesna
http://pando.com/2014/10/14/anti-burn-how-bootstrapped-zoho-survived-two-tech-bubbles-and-became-a-massive-success/
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7Figures2Commas
> When everyone in the Valley was signing 10 year leases at $10 per square
> foot – a bubble indicator that we’re seeing again today – the company
> relocated to Pleasanton, where it remains today, and instead invested in
> keeping its headcount up.

> “We don’t really agree that a short-term, mercenary mindset and incentive
> structure is required to hire the best talent,” Vegesna says. “We issue cash
> bonuses at the end of a good period, whether it’s a month, quarter, or year.
> It actually ends up being a better outcome for most employees. And, of
> course, we have free lunch and all the other typical perks. We have had
> extremely low employee churn...”

Something not mentioned in the article: according to Wikipedia[1], 90% of
Zoho's employees are based in India. While I'm sure that some in the Bay Area
will scoff at this, I don't think there's any question that when the business
cycle turns, the ridiculously high costs of employee salaries and office space
will be the undoing of countless Bay Area startups.

It's nice to read stories every once in a while about companies living within
their means. Ironically, they're usually the ones that _could_ actually afford
to live large if they wanted to.

[1]
[http://en.wikipedia.org/wiki/Zoho_Corporation](http://en.wikipedia.org/wiki/Zoho_Corporation)

~~~
Dharmakirti
Zoho also hired and trained people who were usually out of normal companies
radars' (like college dropouts).

~~~
shrikant
Interview with the founder Sridhar Vembu, where he talks more about this:
[https://www.youtube.com/watch?v=Zt5EMnATY_Q](https://www.youtube.com/watch?v=Zt5EMnATY_Q)

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sridharvembu
(Zoho CEO here) My analysis of financial bubbles informs how we operate in
Zoho. I believe the Greenspan-Bernanke-Yellen era will go down in history as
one of the biggest bubbles the world has ever seen.

The economy is now fully addicted to bubbles, and the start-up ecosystem is
particularly affected. Withdrawal from this bubble-drug is going to be
painful.

A couple of anecdotes about the last big tech bubble of 2000. At that time,
there were 300+ optical networking companies in silicon valley. We had sold
our network management software to about 150 of them. By 2003, only 2 were
left standing. We survived because we had saved up some money for that
eventuality, and we reinvented ourselves using those savings.

One painful bubble memory I have is the real estate lease that we had no
option but to sign in 2000. We moved from San Jose to Pleasanton to escape the
worst of the bubble-rents but even in Pleasanton, while the rent wasn't
ruinous (about $20 per square foot per year), the landlord forced a 7 year
lease on us. Still, the rents fell to about $10 per square foot per year by
2002, but we were stuck with the higher rent for 5 more years. Fortunately,
the company was financially strong enough to withstand it but the episode
taught us a lesson in bubble-planning and bubble-survival.

I am shocked that people are signing $50-100 a square foot per year leases for
10 year terms these days.

Our goal right now is to survive the present bubble, bigger in some ways than
even the one in 2000. I tell our people that there is going to be a serious
bust and we should aim to survive it first.

~~~
7Figures2Commas
> A couple of anecdotes about the last big tech bubble of 2000. At that time,
> there were 300+ optical networking companies in silicon valley. We had sold
> our network management software to about 150 of them. By 2003, only 2 were
> left standing. We survived because we had saved up some money for that
> eventuality, and we reinvented ourselves using those savings.

That's eerily similar to the situation today. A lot of startups today count
other startups as their largest customer segment. It's not often talked about,
but accelerators have greatly contributed to this trend.

The big question is how many of today's startup-dependent startups are saving
their money and will be in a position to try to reinvent themselves when their
customer ranks are decimated.

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tejazz
Zoho is often an inspiration for Indian startups. They might have grown out of
the early days of startup grind and culture but it has continuously given
inspiring environments for future founders like girish from Freshdesk.

this article is a reflection of its growth strategy and how longevity trumps
over 'growth hacks'

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gtirloni
Spending within your means and growing organically certainly give me a good
feeling. However, I don't think it's decision to base 90% of its employees in
India maps too directly to the stereotypical SV startup. It looks more like a
Indian company with an office in the US.

~~~
sogen
So you're saying Apple (Foxxconn), Nike, Dell, The Simpsons (Rough Draft
Studios), etc. are Chinese/Korean/Mexican companies with offices in the US?

~~~
pessimizer
Apple isn't Foxconn. Zoho is a company started in India by Indians with 90% of
its workforce in India.

Of course Apple, Nike, Dell, News Corp., and Zoho are international companies,
but Zoho is as Indian as Apple is American.

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soundlab
> “We issue cash bonuses at the end of a good period, whether it’s a month,
> quarter, or year. It actually ends up being a better outcome for most
> employees."<

With all the obsession we see over the stock options/startup lottery, I think
this point bears consideration. A stable, low employee churn organization with
great cash flow can make you plenty rich if the founders and board put
aggressive profit sharing and bonuses in place. I think for bootstrapped
businesses this is a great alternative to complex options plans that have no
value until an exit/IPO. Wish this approach gained more publicity, even if
they've offshored the bulk of the operation.

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sogen
Good story, sadly won't get crazily upvoted since Zoho keeps a low and stable
profile.

Thanks

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rmsaksida
Very inspiring story, thank you.

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muaythaiguy
... and produced some shitty software in the process.

~~~
robodale
what's your definition of shitty? Useful software used by millions of people
who are glad to pay to remove this pain from their lives?

