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Zoom S-1 (sec.gov)
219 points by wwwdonohue 64 days ago | hide | past | web | favorite | 123 comments

Zoom charged us a fraction of what we paid other more traditional video conferencing companies (GoToMeeting, WebEx) and provided I think a better product in many regards. Not only that, they paid out our previous contract too (worth tens of thousands of dollars). At the time I thought either (a) they're losing tons of money to close deals and grow or (b) traditional video conferencing companies are built on infrastructure that was required 10 years ago but with modern advances in web technology they either didn't lower their operating costs by upgrading or did and just take more money off the top. Either way, they're overcharging. Based on Zoom's financials, I think it's the latter.

If I recall correctly, the founder of Zoom came from Cisco. This all strikes me as someone technical seeing all the waste at their existing job and trying to make change happen. Cisco couldn't see the forest for the trees and never took them up on their ideas. The employee believed there was a large enough technology gap so they left and totally undercut them by delivering the same (or better) product for a fraction of the cost.

you hit the nail in the head. Companies like Cisco only thrive on acquisitions, there has not been a single decent product launched from within.

Thanks! I also always felt like I was being ripped off by other companies too. The cost severely outweighed the value I received. With Zoom, I pay a lot for Zoom rooms but they are magical. Normal user accounts are affordable and they work. All in, I feel like I pay for the value I’m receiving and it feels like an equitable deal.

Ps. I swear this isn’t a Zoom ad. It’s like the cops - if I say it this has to be true?! That’s how this works, right?

Or the FTC comes like a bag of bricks.

I think Cisco has done some pretty cool stuff on the networking and hardware side of things.

I write software for IOS-XR, an in-house, service provider-oriented OS. More specifically, my team works on the ASR9K series of routers.

The founder from Cisco is Eric Yuan. He's been working this thing for a long time and it'a awesome to see them get to this.

You can get more details from his interview at last year's startup conference.

The video is on youtube (watch at 1.25X speed if you are like me)https://www.youtube.com/watch?v=8FiXQ0htcvE

1.25x? Aim to get accustomed to 2x+. So much time savings. I have a friend who’s blind and super proficient on his laptop using screen readers. He runs all the speech at 3x+. It sounds like gibberish to me, but he’s crazy productive. He inspired me to learn how to understand and follow significantly sped up audio. Saves so much time.

> Not only that, they paid out our previous contract too (worth tens of thousands of dollars).

I am curious, does that mean Zoom paid you guys for the losses incurred due to your original VC contract? If yes, that seems like an aggressive and maybe really loss making way to grow.

$7M profit is superb, especially in a domain which many folks claimed was saturated and a commodity.

Another example that execution is still underrated. Everyone looks for the what do you (startup x) do that is so different and unique from the rest of the world to enable you to win. Feature-focused conversation.

Often the real answer is "simply" world class execution at scale, including business model, UX, GTM etc - as it remains the most difficult task.

Nice work, Zoom.

well said. Being innovative and smart seems to dominate mindshare more than high quality execution.

I'm surprised by the negative comments on Zoom's profitability. The return on sales/marketing investment is exceptional. Net income is a poor indicator of high growth SaaS company health.

See this deck for a detailed view on SaaS metrics that shows the cashflow benefit of investing in quality growth. https://www.slideshare.net/DavidSkok/the-saas-business-model...

This is dead on. What's interesting is that capital flows strongly underprice this in late-stage companies (until they're 12 months from an IPO) and even pre-indexation. It's exactly why I started this - https://lembascapital.com/strategy/.

If you read any of SEG's quarterly benchmarks, you'll see that a company like Zoom really does stand on its own. You can see that here: https://softwareequity.com/research/

I’m impressed by their financials.

$330m total revenues and $7m profit.

Rarely do we hear these days about a tech company IPO who’s profitable.

Which might make this the best buy of all the recent IPOs

Qualtrics did too, but SAP bought it literally right before it IPO’d.

I agree, but damn, what a low bar though...

We've tested so many video conference solutions (Cisco, Starleaf, Skype, Google Hangouts, etc) and landed on Zoom. Nice to see this!

Zoom is great, have been using it for a couple years now. Congrats to the employees at Zoom!

Zoom is objectively a good software solution but being de facto forced to install yet another piece of software just to take business meetings has left a sour taste in my mouth.

It's objectively impressive that they managed to "force" me to install software. Hats off... but I plan on ditching them as soon as a viable alternative appears.

I have no real point here, other than this: I wonder if my sentiment is general, and whether or not this might bite them later down the road? Probably not.

I like HN because you see such a diversity of views and realize there's no "best" solution out there. So many people here complain that everything is run through the browser or Electron and that nobody makes native apps anymore. Here's Zoom with a native app and someone complains that they _have_ to install something new.

I suspect the desire to not install new software is the dominant market position (HN is clearly biased sample).

It’s interesting. I think the bias against app installs is a psychological holdover from the “Add/Remove Programs” era of Windows where a program could install weird drivers, CPU-sucking daemons, software license protection crap—once you finally open the app up—a bloated and confusing GUI that ignores the platform’s sensible UI rules.

iPhone apps aren’t perfect but at least you know that they’ll uninstall cleanly and completely.

Generally I prefer not to install apps, but with zoom the cost of installing the apps is worth the value it provides, which is good sound, good screen sharing, good video, all of that even with lowish bandwidth, and without eating all my memory and CPU.

I spent 5 mins installing it once and it becomes transparent and reliable.

Can I ask what your reason for not wanting to install it is? I don't think it took me nearly 5 minutes to install it...

>Zoom is objectively a good software solution but being de facto forced to install yet another piece of software just to take business meetings has left a sour taste in my mouth.

No kidding. I can't tell conferencing clients apart anymore. I have the following installed: GotoMeeting, WebEX, JoinMe, Zoom, Hangouts Meet, BlueJeans and every other week I'll get invited to a meeting hosted by yet another one (last week someone hosted a meeting with one called 'ringcentral'). They are all about the same, and I can't tell them apart anymore.

Just want to warn people about RingCentral. We were a paying customer for years but usage was quite low so we decided to replace it with Twilio for telephony and Zoom for video conferencing. Saves us $100/Mo or so.

I called RingCentral to cancel the service (can’t cancel online) and was assured we wouldn’t be billed again. What do you know, we were indeed billed again. I called in to dispute this and was told they had no record of my previous call and my service was not canceled. They refused to refund the money. I hung up and called back 1 minute later. They changed my security questions so that nobody would be able to talk to me about my account. I ended up filing a chargeback.

Never buy RingCentral. What an awful company.

I'm seriously thinking about refusing to take meetings on software I don't already have.

I strongly suspect it won't actually change anything, but so far I've been too chicken to actually try.

It isn't worth the hassle. If you do push back, the other party won't care. They'll have you book the meeting and set up the conference call instead.

I believe that ring central now just white labels zooms infra

If you are a chrome user, you don’t need to install Meet.

I thought so too ... but everyone I work with at other companies has switched to zoom in the last 24 months ... so it really feels like the last install needed for teleconferencing. And it's far better than the web-based solutions.

Running video in an app instead of a browser enables a better experience. It's partly why they've succeeded.

I tend to agree, but unfortunately none of the WebRTC based video conferencing solutions seem to work without hiccups for >5 participants

Jitsi Meet is not perfect, but better about this. It doesn't make a P2P mesh (where I have the same experience, parts will always fail), but instead WebRTC connections to central servers that distribute the streams, so each participant has only one upstream. They have a public testing instance on https://meet.jit.si/, but running your own is better.

Won't you feel the same way about the next viable alternative forcing you to install yet another piece of software? (unless someone completely figures out something that's entirely browser-based)

Yes (and yes!) ;)

I really hate the way zoom on full screen works on macos (while listening to a meeting but also working on a laptop). Trying to switch and it nmitr to answer a question is still fairly painful.

One interesting metric to think about is valuation vs. money raised.

Zoom will go public at $3b+ after only raising $145m. That's a 20x+

Compare to Lyft. $25b valuation after $5b in capital. That's 5x.

Lyft requires a lot more capital to work (lyft drivers).

Does it matter when you're talking about multiples?

Zoom and Lyft are like apples and oranges, the comparison is not fair.

We use slack and zoom. And I have to say: Zoom is so, so much better than Slack re quality and stability. And it’s not even a close call. Slack calls are simply poor quality and unstable.

A tight integration between the two would be magical for me.

Its kinda saying, zoom chats doesn't have enough feature.

Not a fair comparison.

I will say slack has gotten better. At one point it was unusable.

I've used zoom before but never hosted with it. It's always been great. I just looked at their pricing page and was shocked that they give so much on their free tier!

It seems like a small company could get away with the free tier for a long time. My only question is, for that 40 minute time out on meetings, does that mean you can just rejoin after 40 minutes, or is that a lifetime limit on the account? Is the only thing stopping you from having a longer meeting really just the hassle of rejoining every 40 minutes?

Seems to me a built in 40 minute timeout on meetings could be a feature, rather than a limitation.

Seriously, usually people are pretty good at fitting stuff into the allotted time, however long that may be. 40 mins actually seems like a pretty good limit too, enough to accommodate most meetings without compromise.

A lot of people could easily get away with only ever using the free tier.

Like other commenters said, you can also start a new meeting after that 40 minutes is up. It's great for 1:1 video chats as well.

Screen sharing also beats slack and webex with quality, as well as the ability to only share a portion of your screen. I've been getting fed up with Slack's screen sharing because it always looks so compressed and terrible (even though screenhero was great.)

We probably have abused the free plan and have been warned about >40 min calls but never disconnected. Builds loyalty.

Yes. But also the hassle of having whoever you're talking to rejoin the meeting as well (hiring candidates, customers, etc.)

I have hosted a short course with 3,400 attendees and three presenters. I was in Michigan, most of the attendees where in AsiaPac. Worked flawlessly.

You can restart the meeting after 40 minutes.

We have been a very happy user of zoom. Thankfully they have a native client for Ubuntu. I'm glad to see them go public.

+1 for their Linux support. Literally the only screen sharing tool that detects my i3 workspaces across multiple monitors correctly.

Profitability is underrated. I am jelly for those who have Zoom stock options :)

Congratulations to the Zoom team! I use Zoom at work and it's a fantastic product (maybe a little rough around the edges for UX IMHO but the video/audio is excellent). If it doesn't get acquired I would be looking out to acquire some stock :)

> Since our founding in 2011, we have experienced rapid growth. For example, our headcount has grown to 1,702 full-time employees as of January 31, 2019,

WOW. That's a lot of people

Yeah for a video conferencing tool. Makes you wonder what 1652 of those people are actually doing.

Probably building and selling a video conference tool worth billions of dollars.

Sales, marketing, support, compliance (relevant for literally any large company), etc. You can safely assume this is the answer in most cases.

Not really. B2B requires lots people that aren't engineers like sales.


As an avid user of Zoom, this makes perfect sense. We've had meetings with upwards of 600 participants without any issues, it's impressive software.

As someone who has never been super-impressed with the Zoom experience, I'm impressed.

Also, what is their moat exactly?

It really Just Works. We’ve used Skype previously and literally every group call had issues, 75% of the time requiring everyone to restart the app entirely.

We’ve been using Zoom for a year now and have had zero issues. None at all.

FWIW, we use AWS chime. It's absolutely fantastic. Call quality is always good to great, super easy to use for all parties. We found skype and zoom didn't work well for conference calls such as NYC to Cape Town.

Being able to walk in to a room and dial a room at a different site and then have individuals connecting for screen share has been such a quality of life improvement.

not a moat per.se. - seems they have powerful enterprise sales team. Ability and luck in building it is a kind of a quasi-moat ( that for example Google still can't cross in their enterprise endeavors like the Cloud)

That sales team makes them (at the current multiples - see Mule, Qualtrix, GitHub, etc) into a $4B public or a $6-8B acquisition (my bet is that somebody of a big ones will snatch them before the IPO).

We are G-Suite at work so obviously use Hangouts Meet everywhere. However, whenever we need a company-wide meeting we switch to Zoom as apparently HM can't handle this.

They fixed this. It can do 100k participants now: https://gsuiteupdates.googleblog.com/2018/09/live-stream-han...

Hangouts breaks after ten people. Zoom works well with hundreds, that’s why we seitched over.

High (sound, screen sharing, video) quality, low men and CPU usage.

none. as gsuite becomes more widespread, people will switch to it. I'd be more worried about msft building something similar compared to zoom.

disclaimer: Used zoom couple times, use hangouts every day. google employee, opinions are my own.

I've got to say that I've always wanted to love hangouts but it always makes my laptop (reasonably powerful macbook pro) immediately max out CPU and make fan noise like a spaceship taking off, and for comparatively worse AV quality than the competitors. The only thing that kept me using it was that I didn't have to install crap. Just used meet for the first time yesterday, reserving judgement there, but honestly I didn't need yet another rebrand from google.

Zoom is the exact opposite: You have to get the client but it client works with minimal resources, on many platforms (phone / laptop is seamless for me) scales perfectly with large meetings / screenshare and video at the same time, laggy mobile connections etc etc. Most importantly it ALWAYS works. I never have to futz with it ever (whether in terms of connections, or "your link doesn't work", "you have to invite me", "user is from a different organization than you" etc). Just get the meeting ID and connect. This is how technology should work in 2018.

Meet isn't exactly a rebrand, it's an enterprise-oriented product variant. It includes a bunch of extra features that the consumer one doesn't have, and isn't free.

Zoom works more reliably than hangouts does. I use hangouts every day for some business calls, but I pay for Zoom. If you're looking for something that will work so you can close a sale, Zoom wins. Potential customers struggling to hear you on a hangout isn't a winner.

Scheduling, calendars, easy phone dial ins, and way better mobile performance make it clutch. I'm a GSuite customer, but it's still better to pay Zoom.

Zoom is also focused on one thing. Hangouts/chats/meet/whatever Google wants call it /do with it is an afterthought. If Google wanted to make a real run at the market, they should buy Zoom immediately.

disclaimer: Used hangouts and zoom extensively, for several years now.

Unless Google rewrites or majorly reworks hangouts, it's not going to touch zoom. You do need to be worried about msft building something though, almost anything is better than hangouts right now.

I use zoom regularly (and have for more than a year). Paid customer.

I've the equivalent from google... horrible experience both times I've used it. UI is a mess. Quality of call was terrible.

As a g suite customer, I will stay far away from the google offerings.

Hangouts has been a miserable experience for me. My CPU fans spin up instantly when I start using it, and as a multi-account user I'm often greeted with "There's no one in the meeting" messages (not "you don't have permission for this meeting", just a false "no one here") because I forgot to put ?authuser=1 in the URL to switch to my work account.

Totally, there are only 10-20 features missing to make me do that, and then the surveillance part and maybe support. The 10:1 energy consumption advantage is also there but maybe not as relevant.

I use both very frequently, frankly Hangouts is crap compared to Zoom. The only thing it wins on is that it doesn't require a client download.

> The only thing it wins on is that it doesn't require a client download.

Well, sorta. On Firefox, Hangouts refuses to function. On Safari, it requires a plugin.

meet.google.com seems to work fine in Firefox, oddly enough.

True, my statement needs a big asterisk :-)

One yield curve inversion and everyone rushes to press submit on their draft S-1

I have been using Zoom for the past 2 years after using GoToMeeting, Hangouts video (now google meet), WebEx, Fuze etc. and I must say Zoom is the best of the lot. I don't know what they do differently that Google cannot, but the product works amazingly well.

Look at that positive cash flow!

Can't wait to dig in deeper. But they show that execution and business strategy (like HIPAA compliance) are still important.

Unlike WebEx and some others, Zoom has a Linux client that's not terrible. It'd be nice if it just worked with webrtc though...

Recently though I've found Zoom sessions to crash gnome shell as soon as I try to switch workspaces in the middle of a meeting. Probably a more technical issue than overall design but it's forced me to boot into Windows for Zoom meetings for now (because I'm too lazy to try diagnose the crash myself).

Interesting... works perfectly on my laptop (intel graphics + Wayland), although of course screen sharing only works for XWayland applications.

Literally signed up for Robinhood for this. I think Zoom is a potentially transformative/disruptive product - at our organization it is essentially enabling us to become more and more remote, with all the benefits that brings, and no downsides. I would honestly use whatever tool they rolled out - email client, chat/slack competitor, whatever. Their products just work.

Looks like they are running their own data centers and colos?

They have PSTN hookups, which a cloud vendor would not allow. You have to go colo for those. Bandwidth is also not cheap in the cloud, video conferencing would eat bandwidth. Looks like they spend 61 million a year for data centers, phone connections, software dev, personal expenses or pay another ~$20 million and you get just Lyft's AWS bill.

Why wouldn't they use VOIP instead of direct PSTN connection?

With the amount of country codes they support for call in numbers, it could just be availability, costs and scale. Not all countries have a 100% Voip network. It could also be call quality because they seem to have the better dial-in audio than others. They seem to have their tech stack setup well, so I'm sure there is a very valid reason that is just not common knowledge to those outside of the phone industry.

Guessing it's because you call a normal telephone number and join a meeting. Handy if you don't have any internet connection.

VOIP (on the provider side) has let you do that for ages. Services like Twilio, etc. let you set up normal numbers people can call.

Zoom is one of the few web meeting solutions that just works - even for people without the client. I was surprised to see that they seem to skipped WebRTC and have a custom implementation instead: https://webrtchacks.com/zoom-avoids-using-webrtc/

I have used zoom and it is by far the best experience for teleconferencing .

Zoom is the best conferencing solution right now, hands down.

Excited about this. Surprisingly good product overall and what looks like profit!

i hope they grow to eat skype. will be justice for what MS did to skype

I can't speak much towards Zoom's quality at videoconferencing relative to their competitors (I think it's bad, but I've never had any VC solution that I thought was good), but as a chat client, using it with the combination of Linux and Android is utter garbage, and I say that after seeing significant improvement in the Linux client in the past ~6 months or so. Something about how those two clients try to sync with each other is broken, to the point where it's not reliable at all as a chat client, and I have to tell people to just text me if there's anything urgent. Other people in my company who are on iOS/Mac say it's fine, though.

- Get a chat directly to you? It might show up on your phone. Or maybe not. There are plenty of times where I show up to work in the morning and notice that somebody's tried to get a hold of me the night before.

- Actually answer a message on your phone? Usually the chat history will show up on the Linux client. Eventually. Probably. (This is a wild improvement from last year where it was guaranteed to never show up at all, and there appeared to be no way to refresh chat history. I spent way too much time copy and pasting text from chats on my phone to some place where I could use it on desktop). Possibly worse, sometimes the chat history is just missing some lines with no indication of where.

- Even now, sometimes chat history just completely disappears on the desktop client. Restarting generally fixes this. It seems like whatever triggers the load for older chat when you scroll up in history sometimes just breaks entirely.

- Speaking of scrolling, have fun with that. It's always a fun surprise to see where the cursor ends up. I think maybe it's trying to target the last read message but it fails pretty badly, possibly from loading images and rerendering? All I know is that I scroll up a couple pages, wait a little while for all the text to stop jumping around, and then try to figure out where I am and scroll back to where I'd originally targeted.

- Answer a message on the desktop client and continue a conversation in chat on the desktop? Have fun having your phone buzz with notifications for maybe half the responses you receive.

- Have someone @me in a chat somewhere? I'll probably get that notification. Somebody does @all in another chat? Well, that takes priority, so I'll just kill the @all notification and never notice the one targeted for me. Admittedly this is partially a culture problem with people abusing @all in our chats.

- There a bunch of other functional things that are/were left out of the Linux client that I can at least understand as being lower priority (gif support, code formatting), but still make it clear that the Linux client is a second class citizen at best.

The whole experience has been bad enough that I get actively annoyed at seeing giant Zoom ads plastered all over 101, on buses, at T5 at JFK, etc. and think about what those cost compared to allocating some engineering time to fixing really basic bugs. Maybe it's a cheaper solution than the other options, I don't really know. But if the decision was up to me, Zoom would be basically last on my list if any significant portion of the company was using Linux.

Zoom supporting Linux (albeit not as well as the like) should put them towards the top of your list, not the bottom. Most vendors in this space don't bother at all AFAIK.

Blue Jeans has pretty good Linux support as well.

blows my mind that video conferencing software with such low switching costs can be worth so much.

Have you seen their fully integrated video conference systems for meeting rooms? Or their scheduling integration (e.g. Calendly)? They are the first company to truly solve remote meeting and calendaring for me without any gotchas.

I haven’t but I recently used their video conferencing software on calls with 40+ people and it was really buggy.

All of those things sound great and important but there are many competitors who also do those and again, the switching costs for the user are low.

Meeting room support and scheduling integration don’t sound like they justify the massive valuation but I’m totally open to the possibility that I just don’t “get it”.

The cost to switching is low until you lose an enterprise sale because your video teleconferencing software sucks.

I understand that and perhaps it justifies the valuation but it blows my mind that in 2019 there isn’t an open source solution that works just as well (or better - again, Zoom is buggy) and is easy to deploy and control yoursef.

I know the same could be said for many public companies but that doesn’t change my feeling that they many of them are overvalued and overrated.

I got that feeling when I first started off working, it goes away once you see how the sausage gets made.

I think this is a good blog post describing the scale of the problem: https://danluu.com/sounds-easy/

I don't think their value is in having a "moat", per se. It's just that despite the plethora of options most still suck for whatever reason and based on experience they seem to provide a better experience than google, cisco, blue jeans, etc.

I think you’re right - it’s just surprising that 50 years after humankind put someone on the moon (allegedly lol) we still can’t get video conferencing right.

I know it’s a hard problem but is it really that hard?

I know Zoom, they are making guitar effects!

arent they? or who cares about "company" making internet videoconferencing - technology already DONE at least 15 years ago. all companies today only worsen actual performance and completely destroy user experience.

One of the first mainstream, non-gaming applications for VR has got to be meetings.

How's that going to work? Am I going to see avatars of my colleagues in 3D, or alternatively am I going to see actual images of my colleagues all wearing Oculus Rifts? Either way it's going to be weird.

The technology already exists to show lifelike avatars of meeting participants. https://www.wired.com/story/facebook-oculus-codec-avatars-vr...

Avatars. The main benefit over videoconferencing today would be meetings for remote collaboration e.g. hard to do remote "brainstorm together on a white board" type meetings remotely.

Zoom's questionable

They have 1702 employees and $7.6m profit (net income) on $331m revenues for 2019. Their financial statement shows that of their $263m in 2019 operating expense, $186m is in sales and marketing. $33m in R&D. And nearly $2m of that $7.5m in net income comes from interest income and other income.

The gross margin figures (82% for 2019) are defined as "revenue - cost of revenue". And cost of revenue is:

> Cost of revenue primarily consists of costs related to hosting our video-first communications platform and providing general operating support services to our customers. These costs are comprised of co-located data center costs, third-party cloud hosting costs, integrated third-party public switched telephone network (PSTN) services, personnel-related expenses, amortization of capitalized software development costs and allocated overhead costs. Indirect overhead associated with corporate facilities and related depreciation is allocated to cost of revenue and operating expenses based on applicable headcount.

While I do like that they are profitable and have a plan for profit, unlike the other glitzier tech IPOs, it does seem like the return on capital is low. They have received $146m in funding to date (https://www.crunchbase.com/organization/zoom-video-communica...) after all, and in the end, $7.6m/year is not much to show for it. This is really a bet that in the long term, the costs in sales, marketing, R&D, and General Administration can be cut severely so that the revenue can be realized as mostly profit. Hard to know if that day will actually come.

They haven't spent all of that $146: "Much of the primary capital that we have raised in recent years remains on our balance sheet" in fact it looks like they actually have more cash on hand than they raised (due to pre-pays for contracts, even if they can't recognize it).

Profitable + Net dollar expansion of 140% + Growing 118% YoY at over 100MM in revenue + 4%-ish penetration in the F500 so there's room to grow, this is an amazing set of numbers.

The curse of being profitable. Everyone always laments how "little profit" is made, whereas wildly unprofitable companies are seen as big opportunities (e.g. Lyft).

I think this is an interesting observation. I am curious to know, what would you say an ideal net income pre-IPO for a tech company aiming for profitability should be? I have no idea. I thought it might be enough to simply prove profitability in the pre-IPO phase, and then use additional capital raised post-IPO to flesh out their moats and prepare for faster growth in the future. I don't see why the public markets might demand an immediate cost cutting, unless they seriously are that short-sighted (but I don't know anything about public markets).

I'm hoping that Zoom can prove you can be profitable and still succeed in the public markets. That piqued my interest coming to this post. It sucks how many companies just stay unprofitable and private, or go public only for employees/founders/investors to dump shares and run.

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