Capital-Efficient Growth (with Zoom CEO Eric Yuan & Veeva CEO Peter Gassner)

Speaker 1 Yes, it is very appropriate to be on here on Zoom with you recording these before going into the interview with Eric.

Speaker 3 If only we had our notes on Viva.

Speaker 1 Although I think it's a little bit out of our strike zone in terms of like perfect market, we would be the only podcasters in the world using Viva.

Speaker 3 Peter is very focused on clear and correct target markets.

Speaker 4 Yes. Who got the truth?

Speaker 4 Is it you? Is it you? Is it you? Who got the truth now?

Speaker 4 Is it you, is it you, is it you? Sit me down, say it straight. Another story on the way.
Who got the truth?

Speaker 1 Welcome to this special episode of Acquired, the podcast about great technology companies and the stories and playbooks behind them.

Speaker 1 I'm Ben Gilbert, and I'm the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures.

Speaker 3 And I'm David Rosenthal, and I am an angel investor based in San Francisco.

Speaker 1 And we are your hosts. Today, we have something very unique to share with you all.

Speaker 1 It is common for top venture capital firms in Silicon Valley to get all their CEOs together once a year in one room for a CEO summit and speak frankly with them.

Speaker 1 It is uncommon, however, to allow anything discussed to be shared publicly. Well, today we are doing just that.

Speaker 1 The good people at Emergence Capital, in particular, friend of the show, Jake Saber, invited invited David and I to interview two very heavy hitters at their CEO summit last week, Eric Yuan, the founder and CEO of Zoom, and Peter Gassner, the founder and CEO of Viva Systems.

Speaker 3 I think this is the first time that any content from any venture firm CEO summit has been specifically created for podcast public consumption. It's so cool.

Speaker 1 I think Peter has never done a podcast before.

Speaker 3 I think that's right.

Speaker 1 And he's built a $20 billion company.

Speaker 3 Yeah. The Viva System story is amazing.
As you will hear, we talk about they raised $4 million. That's four, like one after three.

Speaker 3 And on just that $4 million that they didn't even consume all of that capital, they've now built a $2 billion revenue business with incredible margins. It's such a cool story.

Speaker 3 And Peter is on the board of Zoom. And so as you'll hear, he and Eric know each other very well.

Speaker 1 And it's a super different company that we normally talk about too. It's vertical specific.
So it's just in the life sciences industry.

Speaker 1 They sell high dollar software to pharmaceutical companies and I think biotech as well, right, David?

Speaker 4 Yep. Yep.

Speaker 1 So the topic that we discussed with both of them is capital efficient growth. And that's something we felt would be super valuable for all the CEOs in the room.

Speaker 1 And obviously that means that we think it's going to be really great for everyone to be thinking about right now.

Speaker 1 So rapid scaling on very little capital is something they obviously both know a lot about. David mentioned the 4 million total funding that Viva raised before going public.

Speaker 1 As you remember from our Zoom episode with board member Santi Subatovsky, also an Emergence Capital partner, Zoom raised $30 million from Emergence and another $100 million from Sequoia afterwards, and they never touched the vast majority, if not all of those funds.

Speaker 3 I think they didn't touch any of that $130 million.

Speaker 3 Eric had raised, as you'll hear about, he'd raised some money from Angels along the way, and that funded product development, but none of the venture money was consumed.

Speaker 1 It's crazy. So if you're excited to learn about how these companies managed to pull off enormous impact with very little capital to do so, you are in the right place.

Speaker 1 And if you want to discuss these topics with us after you listen, you should come join the rest of the acquired community. I think we're 12,000 strong now, David, at acquired.fm slash slack.

Speaker 1 You should join us. It is always a riot.

Speaker 3 This will be a great one to discuss in there with the community and other founders, and including Jake Saber himself from Emergence, who's active in the Slack.

Speaker 6 It's true.

Speaker 1 Okay, listeners, now is a great time to introduce a new friend of the show who many of you will be familiar with, Claude.

Speaker 1 Claude is an AI assistant built by Anthropic, and it's quickly become an essential tool for us in creating Acquired and the go-to AI for millions of people and businesses around the world.

Speaker 9 Yep.

Speaker 8 We're excited to be partnering with them because Claude represents exactly the kind of step change technology that we love covering here on Acquired.

Speaker 11 It's a powerful tool that fundamentally changes how people work. I know, Ben, you have used Claude for some acquired work recently.

Speaker 1 Yes. So listeners, I used to take four plus hours the day before recording to take all the dates from my raw notes and put them in a table at the top of my script for recording day.

Speaker 1 On the Rolex episode, I actually fed my raw notes into Claude and asked it if it could do that for me, which was amazing.

Speaker 1 I just got my most important 100 dates for the episode done in like 20 seconds.

Speaker 5 You texted me this table. It was awesome.

Speaker 1 Yeah, that freed up an extra half day that I used instead to focus on explaining how a mechanical watch works, which I'm so glad I got to spend the time doing that instead of making the table.

Speaker 8 Totally. So cool.

Speaker 5 I was actually just chatting with Claude to brainstorm ideas for something big that you and I are working on for later this summer, and it was insanely helpful.

Speaker 11 Listeners, stay stay tuned to hear all about that.

Speaker 1 Yes. So listeners, by using Claude as your personal or business AI assistant, you'll be in great company.

Speaker 1 Organizations like Salesforce, Figma, GitLab, Intercom, and Coinbase all use Claude in their products.

Speaker 1 So whether you are brainstorming alone or you're building with a team of thousands, Claude is here to help.

Speaker 8 And if you, your company, or your portfolio companies want to use Claude, head on over to claude.com. That's C-L-A-U-D-E dot com or click the link in the show notes.

Speaker 1 Now, as always, this is not investment advice. Please do your own research.

Speaker 1 David and I may hold positions in things we discuss on this show, and this is certainly not investment advice from anybody that we had on the show today.

Speaker 1 So, now on to our interview at the Emergent CEO Summit with Eric Yuan and Peter Gassner.

Speaker 7 So, to set the stage, I thought maybe

Speaker 7 could each of you please give us a brief overview of your fundraising history up to and including Viva and Zoom's IPOs?

Speaker 7 Which ordinarily that would take like an hour.

Speaker 13 This is going to be pretty short. This is going to be very short.

Speaker 6 It's private financing history.

Speaker 12 Go ahead. Go ahead.

Speaker 13 Our simple angel investors when we just started, and then emergence about 15 months in. So angel investors, I think that was 3 million.
And emergence was 4 million.

Speaker 13 We never actually used the emergence 4 million, but I thought we might at the time. And we got within about 100,000 of using it,

Speaker 13 and then we went public.

Speaker 13 The time frame, we started in 2007 in February, and we raised in about 2008, maybe March or so.

Speaker 12 So that was the environment at the time.

Speaker 6 Another very simple time to be fundraising and company building in.

Speaker 13 Yeah, it was hard to even open a bank account because it was the whole know your customer thing and financial crisis.

Speaker 7 So everything's everything hard yeah and i think you know probably most people uh here here know this but for for folks listening on the podcast today you're doing about two billion in revenue at viva yeah we're doing about two billion about 30 percent profit so

Speaker 12 yeah amazing eric could you uh share your fundraising journey with us sure i started comedy 2011 the first thing i did i opened up a well go bang account I thought

Speaker 12 it's very easy for me to raise capital. That's why I opened up Bank ACON.
Unfortunately, it took me for several months. No VCs wanted to invest me.

Speaker 12 Unfortunately, I do not know my brother Sandy and emergency capital. Otherwise, life would be much easier.
And finally, and

Speaker 12 talk to some friends and raise the three million state funding. That's how we started.
And for Ada Capital Air on, I tried to talk to VC again.

Speaker 12 And again, nobody wanted to invest us either. So, and

Speaker 12 we talked to the friends and get another six million, and that's how we started. Yeah, it's very hard.

Speaker 6 And nobody wanted to talk to you at that point because most people assumed video conferencing was either a settled frontier or a race to the bottom. Am I thinking about that right?

Speaker 12 Absolutely right. That's a thing.
Eric mentioned, Eric, you are crazy. The world does not have another video conference solution.
And another VC friend, you know, even is his great friend.

Speaker 12 He told me that, Eric, I have a check for you as long as you do something else.

Speaker 12 Good news, I did not listen. I was very stubborn.
I should share your story. And once I stole by a big VC, I do not want to mention the name.

Speaker 12 For sure, you guys do not like them.

Speaker 12 And he told me that, Eric,

Speaker 12 I do not think your threat works. You know, look at Skype, look at the Google Hunt, look at the web apps dominating, right?

Speaker 12 And I debated with him a little bit. I failed.
And I cannot convince him. On the way back, I told myself, I'm going to change my Windows screen server.
Back then I still use a Windows machine.

Speaker 12 I changed the Windows screen server.

Speaker 12 You are wrong.

Speaker 12 For several years.

Speaker 6 And if just to make sure I have my facts straight, I believe you raised a $30 million round led by Emergence and then another $100 million round after that.

Speaker 6 And similar to Peter, you did not dip into any of that $130 million. Is that correct?

Speaker 6 To build the business?

Speaker 12 For me, actually, after a certain meeting, from emergent capital, I think we are on the right track.

Speaker 12 To be honest, with you, actually, we even do not need to raise Cirus D actually, because at that time,

Speaker 12 I think with that certain meeting, I think the company is completely into, I feel like a different game.

Speaker 12 Wow.

Speaker 7 That's one thing we wanted to ask is a difference between your two companies. Peter, you obviously, once you got to cash flow profitability, which was immediately,

Speaker 7 basically you never raised another round. Eric, you did make the decision to raise some more capital even after you were generating cash.

Speaker 7 And Peter, you were on Eric's board when that process happened.

Speaker 7 Why did you make that decision?

Speaker 13 Well, for Viva, I didn't raise more just because I thought I don't need it. You know, it's just that simple, right?

Speaker 13 So, and then as far as for Eric, right, when you're on the board, right, that's really Eric's decision. So, you know.

Speaker 12 So, yeah, as I mentioned earlier, after the raise a certain meeting from emergency capital, at that time, seriously, we had no plan whatsoever to raise another run of capital.

Speaker 12 And the reason why we still

Speaker 12 move forward to have a series of D is because I thought our economy

Speaker 12 will go down by dramatically.

Speaker 12 This was 2016, 17 timeframe. I was completely wrong.
But anyway.

Speaker 6 It had been the the seven-year bull run. Of course, the end was near, right?

Speaker 12 Yeah, so. And long story, but anyway, so.
Yeah.

Speaker 13 I think that raising that money at the time, I thought, yeah, maybe we don't need to do it. But also I thought it doesn't matter, right? What matters for Zoom is the great product and the customers.

Speaker 13 Whether you take some more money, you don't take some more money, right? It's all fine.

Speaker 7 It would all work out.

Speaker 6 That's why, yeah.

Speaker 6 So as we were preparing for this interview, our first thought was if we just had one of you up here and we were interviewing you about capital efficiency, it'd be easy to chalk it up to business model and cash flow cycle.

Speaker 6 You know, multi-million dollar contracts up front on, you know, in the case of Viva or in Zoom, customers flocking with their credit cards for a self-serve experience.

Speaker 6 These are two completely different models. And so I think one of the things that it illustrated to David and I is

Speaker 6 capital efficiency is a mindset and culture thing more than a business model thing.

Speaker 6 And I'm I'm curious to hear both of your reactions to that, but also what are the things that enabled you uniquely, more so than 99% of startups, to be so capital efficient.

Speaker 13 I can take that one. I guess I've seen a little bit of Zoom and a little bit of Eva.

Speaker 13 I would say probably

Speaker 13 it starts with a mindset, you know, just run a profitable lemonade stand. From my point of view, for me, it was there's safety in that.

Speaker 13 Cash generating business is always going to be valuable to somebody. At some point, a business that's not cash generating is going to be valuable to nobody, right?

Speaker 13 You might be able to sell it before it becomes

Speaker 13 not valuable, but you can only, there's only, there's security in long-term.

Speaker 13 So it starts with a mindset. I think Eric

Speaker 13 shared that. And then

Speaker 13 you have to have product excellence too, right? And that's something I think Eric and I share. We're both product people.

Speaker 13 I think also we both worked really hard, you know, and we work really hard now.

Speaker 13 I think especially Eric, probably in the first five years, I worked really hard and I saw, you didn't see me working really hard, but I saw you working really hard.

Speaker 13 So work really hard, worked really focused. Anything that wasn't related to the product or the customer was just BS, you know, and just don't do it.

Speaker 13 Like first five years, I was not at a conference like this, for example, right? I was just maniacally focused. And then the market really helps too.

Speaker 13 And that's something you just have to get lucky on, right? You have to, it was the right timing for Viva, it was the right timing for Zoom.

Speaker 13 Maybe if you started Zoom five years earlier or five years later, it would have been hard. So product excellence, real focus, mindset, and then you have to have some luck in your market.

Speaker 13 I'm sure there are some things that I could have tried to do or Eric could have tried to do, and it was, we might have picked a bad market, and then it just wouldn't wouldn't work and that's I think you

Speaker 13 you have to so we're outlier right and so is Eric you have to pick something that most people think is going to fail to be an outlier otherwise by definition you're picking something that most people think is going to work and therefore a lot of people are picking it therefore you're not an outlier so just like Eric you know most VCs all VCs except for emergence all all VCs of any kind of note except for emergence turned us down right And ours was really simple.

Speaker 13 Vertical specific software, that's a small market and it doesn't work, right?

Speaker 12 That's what they would say.

Speaker 13 And I was encouraged by that because I thought, well, it has an opportunity to be really good because it's something non-obvious.

Speaker 7 Well, one thing that I want to double-click on that we were talking about beforehand,

Speaker 7 yes, like you need to be non-obvious. to have a chance of a great outlier outcome, but you also need to be correct.

Speaker 7 But I think what you did, what you both did, was not, hey, I'm going to pick some random idea that other people think is crazy.

Speaker 7 You know, I know Viva has, as one of your core values, clear and correct target markets that you have like written on the wall.

Speaker 7 What did each of you do

Speaker 7 ahead of time that led to you to really genuinely believe, yes, the world thinks this is crazy, but I really think this is going to work.

Speaker 13 Also, of course, it's real easy. I talked to three or four potential customers for our first product, and they all said, we don't need that.

Speaker 13 that's not interesting, it's not a good thing to do. But I wasn't listening for that, I was listening: are they emotionally attached to where they're getting their product now?

Speaker 13 Are they emotionally attached to those people? Do I feel like they're getting value out of that thing? And I could tell in their responses that they weren't attached and they weren't getting value.

Speaker 13 So, yeah, all four customers said it's a bad idea.

Speaker 12 All right, so let me. We're all customers now, though.

Speaker 6 Let me understand the Peter formula to build a business. Ask a customer if they want your product, they say no.
You dig deeper and say, What are you using now?

Speaker 6 And they say, Oh, yeah, because I have a solution for this, but they just don't love it. So you build for them anyway on the bet that you can be better than their current.

Speaker 13 Yeah, you have to listen to what they feel, not what they say. They would say, Yes, we're very happy with this solution, but then you dig, oh, tell me more.
Why is that?

Speaker 13 What is it that you get out of it?

Speaker 12 And it's like, oh, well,

Speaker 13 and that's when you know.

Speaker 7 That sounds like the video conferencing market, circa about 2015, 2016.

Speaker 12 Yeah, so for me, it's very straightforward because I was an original founding team member of WebEx. So the two years before I started a company, I know actually, you know, WebEx really sucks, right?

Speaker 12 So

Speaker 12 and

Speaker 7 did you try and tell Cisco that?

Speaker 12 I tell my team. I do not dare to tell others.

Speaker 12 Anyway, so

Speaker 12 Skype also not reliable, right? Google Howard does not work. Every day I spend a lot of time talking to every customer.
I know if I can build a better solution, I think at least I can survive.

Speaker 12 I never thought about everyone's going to standardize on Zoom platform. But at least I know for sure is if a customer, they do not like something, if you can build something better, you have a chance.

Speaker 6 Eric, did you think from the outset that you were trying to build Zoom as a big company?

Speaker 6 Or did you just think that you wanted to build a profitable company to survive and then you would sort of see where it went from there?

Speaker 12 I think two things. First of of all, at that time my passion was very straightforward because you know WebEx more like my baby, right?

Speaker 12 I feel like I worked so hard for so many years, I let a customer down. I really

Speaker 12 wanted to fix that problem. But Cisco does not want me to start over.
And I had no choice but to leave to build a Zoom. That is the number one reason.

Speaker 12 And after I started a company, I realized, wow, it's so hard to raise capital, right?

Speaker 12 And by the way, the money that invested, they give to you, don't think about that as money. You know, that's a trust.
You know, every dollar matters, right?

Speaker 12 That's why every day I was thinking about how to survive, how to survive, how to survive. Even today, seriously, I still think about, I woke up at night, you know, how to survive.

Speaker 7 You mentioned

Speaker 7 people in your team. When you started Zoom, you were a solo founder, but you brought a large number of people with you.

Speaker 7 You know, one of the kind of first sort of operational topics we wanted to dig into around this topic of capital efficient growth is hiring and people.

Speaker 7 That feels like such an important part of the culture and DNA of having people who are going to get on board with,

Speaker 7 yeah, there's not going to be the spiritual equivalent of kind bars and exposed brick in our office here.

Speaker 7 How did you select for maybe both you, but Eric to start because you brought so many people with you from WebEx. How did you select for the people that you brought?

Speaker 12 So all of them are very good engineers, right? Except for me. So I did not write any code.

Speaker 12 And on Devine, we had around 25. Very soon we get another 15, total of 40 people, and myself included.
All the 139 people, they all write all kinds of code.

Speaker 7 And this was all funded with angel money.

Speaker 12 Yes, exactly. But

Speaker 12 I know actually, you know, we can, we run rate probably less than two years, right? That's why later on we had a series A.

Speaker 12 But we wouldn't have engineers just get a product done. And I'm more like a product manager, UI designer, and also the facility guy, everything else.

Speaker 12 Seriously, on day one,

Speaker 12 I bought the used furniture, assemble everything by myself, and also write it down the company culture and value. That's pretty much what I did.

Speaker 12 So I would say it's, and even for the first several years, after product ready, and some investor mentioned, hey, you already have money in the bank now, now why not build a marketing team look at your competitors they spend a lot of money in all the you know billboard and one-on-one at that time i think no for the first four years we do not have any marketing team only until 2015 we started you know building up a marketing team so i just want to make sure you have to be very disciplined yeah

Speaker 7 to just highlight this so you know you started the company with twenty five quickly growing to 40 people but those were 39 engineers and you no product managers no marketing no sales Yeah, yeah.

Speaker 12 That's the reason why I know how to use QuickBooks. I never know how to use that.

Speaker 12 Seriously, I had to learn how to use that.

Speaker 6 So it sounds very easy to say don't buy billboards.

Speaker 6 You got to get your customers somehow.

Speaker 6 How did you get the snowball going?

Speaker 12 A little bit of lucky, because seriously, and luck does play a role because

Speaker 12 You know,

Speaker 12 several weeks before we launched a product, seriously we had no idea how to get a first customer. Luckily, you know, when you know, the very famous

Speaker 12 reporter,

Speaker 12 Walter Mossberg, right, he evaluated our service. And we were so nervous, you know, he's very straightforward, right?

Speaker 12 And the good news, he did write down a very nice article published in Wall Street Journal. And also, he personally recorded a video.
And over the night, we got

Speaker 6 50,000

Speaker 6 users from that article.

Speaker 12 But most of them, they left, you know, after

Speaker 12 several weeks.

Speaker 6 But those who stayed, I imagine that's the kernel of the virality of telling their friends, who told their friends, who told their friends.

Speaker 12 I maintain a very good personal relationship with them, either VIP account or sending them a small gift. And someone they canceled, back then would be $9.99.
I personally sent them an email.

Speaker 12 Why you cancel our service? What if we can do differently? And yeah, we still maintain a relationship today, even today.

Speaker 12 We had,

Speaker 6 one of the CEOs wrote in and asked us about different metrics to track.

Speaker 6 Did you have a North Star after you had those 50,000 people where you realized, okay, I'm holding something in my hand and the sand could slip through my fingers, but is there something I can measure to see if this 50,000 can turn into something?

Speaker 6 What were you paying attention to?

Speaker 12 To those

Speaker 12 very early, very loyal. early adopters.
You know, even 100 is good enough.

Speaker 12 They are the early, you know, I would say, is the most loyal users, double down

Speaker 12 to make sure they are happy. If they are very happy, guess what? Network effects, they are going to bring a lot of new users.
So that's why.

Speaker 12 Even 49,000 users left, as long as 100 still stayed, we double down on that. So

Speaker 12 that's a strategy back isn't it?

Speaker 7 For Peter on the hiring and people and organizational front,

Speaker 7 you had a very, very different type of business.

Speaker 7 Your customers don't buy with credit cards. They buy multi-million dollar deals, cash up front in a year for a year deal.

Speaker 7 You need a sales force to sell that, which usually means you need a lot of cash comp to compensate that sales force.

Speaker 7 How did you think about the right people to hire as you were building and

Speaker 12 how to compensate them?

Speaker 13 Yeah, I think one thing Eric and I have in common are, you know, in the early days, there's no wasted people, like no optional people, no wasted people, because it just adds, A, it'll burn through your money, and it'll just make your decision-making smaller and, sorry, more complicated.

Speaker 13 It's like sand in the machine, so no wasted people. And for us, yeah, we needed, because a long sales cycle.
So we needed sales right away.

Speaker 12 right?

Speaker 13 So yeah, I was the first salesperson, right? I started selling before I signed signed the articles of incorporation. Show up at the customer.

Speaker 13 Hey, I think you should buy something from me, this thing that I'm going to make. Well, have you hired anybody? No.
Well, okay, well, can you show us a demo of what you're going to do? No.

Speaker 13 How about a PowerPoint? No. Okay, and then come back a month later.
I got a PowerPoint now. Have you hired anybody? No, not yet.
You know, and then just...

Speaker 13 keep selling because it's a relationship-based business.

Speaker 13 Funny story, the first customer who bought small customer, actually somehow, through a relationship of my co-founder, we got to this guy, he was the CEO.

Speaker 13 He wanted to buy some software for this small department just because he was really peeved with his IT team. So this guy had no idea what we're selling.

Speaker 13 He's like, I know that my IT team doesn't want you, so I'm going to make a point and show them that I'm actually in charge here. So that's how we got our first sale.

Speaker 12 And

Speaker 13 you could barely log into the system at that time.

Speaker 7 I didn't know that.

Speaker 13 But then you got to hustle, right? Then just like Eric, right, then you got to hustle. Oh my God, this customer wants to buy something, and then you're working super hard to make them successful.

Speaker 13 And Eric, I'm not sure I never asked you about this, but we never had customer satisfaction surveys for Viva in the beginning.

Speaker 13 I always thought if I talk to those early adopter people, I will know, I will get the feeling. And if I have some survey, maybe I won't get the feeling.

Speaker 12 Totally. You are right.

Speaker 13 I agree with you.

Speaker 12 You just,

Speaker 13 you can hide behind, when it's small, you can sort of hide behind metrics sometimes and it doesn't work. But if you actually talk to the human and you figure it out, you'll know what's going on.

Speaker 7 Can you tell us also the story of landing your first big customer, the big customers?

Speaker 7 Which I believe is probably the deal that really made the business.

Speaker 12 Yeah.

Speaker 13 There was a set, right? There was the first, the guy who was just peeved to this IT team and then worked up to the next.

Speaker 13 size deal and the next size deal and it was always a step function, right? And so the first multi-million dollar annual deals were a big customer, Pfizer, and

Speaker 13 it was just hand-to-hand combat.

Speaker 13 There was a partner at the time, actually,

Speaker 13 Salesforce.com actually at the time, said, oh, you know, send a note that Viva will never win this deal. And I replied back, I said, we will win this deal.

Speaker 6 They sent it to you during the bake-off.

Speaker 13 Yeah, because they didn't want to even come to the meeting with us, right? They were like, oh, we're going to go with this other system integrator or something like that.

Speaker 12 So

Speaker 13 I sent an email back and said, we will win this deal. Why? Because we have better people that'll work harder and we're Pfizer's only shot at greatness and I think they want to shoot for greatness.

Speaker 13 And so,

Speaker 13 and I remember there was this big meeting with Pfizer. There was a guy in there in charge of it and we had a certain amount of people in the meeting and the guy stood up for Pfizer.

Speaker 13 He said, we have more people in this meeting room than you have in your company.

Speaker 13 Why should we buy anything from you? And I just said the same thing. We're your only shot.
We're going to make something great and we have the best people. So, it seems simple to me.

Speaker 13 And then we got lucky and we won it. And then I remember after winning it, thinking, Oh my god, now what? You know, now how are we gonna make them successful?

Speaker 13 So, we the whole company got a bonus when that customer was what we called live and happy, which didn't have a

Speaker 13 formulaic metric, it was based on interviews.

Speaker 6 So, did you use the

Speaker 6 invoice from that customer to then go fund product development?

Speaker 12 Yeah.

Speaker 13 I thought, oh, we've just raised a $3 million round of capital here and it didn't cost us any dilution, right? The check came in. So that's exactly what happened.
Yeah.

Speaker 6 Do you think that's still doable today? Like I imagine there's lots of folks out there that are like, well, I would love to go invoice a customer and get cash in the bank. And

Speaker 6 what situations is it possible to fund your product with customer revenue versus not?

Speaker 13 I think it's, first of all, you can't be wasteful. Every person has to matter.
I would almost think about, oh, we're hiring that person. Let's say we have to pay them $100,000 a year.

Speaker 13 I came from, my father was in the business of metalworking and machinery. And he, I remember him, he would like, oh, I got to buy that lathe.
How much is that lathe going to cost? Is it worth it?

Speaker 13 So I would think of people like, I'm buying a million dollar machine because I got to pay them $100,000 a year. Is that million dollar machine worth it or not?

Speaker 13 So frugal, and then make a really excellent product because that's the best way you can lower your cost of sales.

Speaker 13 So like Eric's product, you probably all notice it that it's easy to use, but he made it easy to consume, the whole product. So he didn't have to convince a bunch of people.
So that's how to do it.

Speaker 13 Excellent product, get a good price, easy to consume. You don't have to spend your money on salespeople because you have a differentiated product.

Speaker 13 Because salespeople, that's where it's really, really expensive.

Speaker 12 You didn't

Speaker 12 when I read the the Peter's

Speaker 12 S1 document many years ago at that time I still remember wow my god this is a business model so awesome so and but in our case our first repeated customer largest paid customer only 2,000 a year so we cannot use that to fund a new product development because most of us pay us only for 999 a month right so that's really hard but i do think you know for all the funders right the business business model is very, very, very important.

Speaker 12 If you can figure out way to do something similar as what Peter and Weaver does, that's the best. Do spend time on that.

Speaker 12 Not only for product, but also the business model. As Peter mentioned, product excellence and how to sell the product, you know, and how to leverage a big enterprise customer as very important.

Speaker 12 build a long-term sustainable company. In our case, actually, I can tell you, today the biggest challenge is our online business.

Speaker 12 It's very profitable. However, it's very hard to predict.

Speaker 12 They come today, next two months, we might leave, they cancel the service, this is not the great business. But enterprise portion is very good.

Speaker 12 That's why I learned a lot from Peter, how to manage a big enterprise customer.

Speaker 13 We met at an emergence event way back when that's how we first met, Eric and I.

Speaker 12 It was smaller.

Speaker 7 Hopefully there'll be some more. connections like that today.

Speaker 7 One

Speaker 7 thing I want to highlight on this topic of contracts and funding development, because I think it's really counterintuitive. Again, the topic is capital efficient growth.

Speaker 7 You would think that what you would want to do with the Pfizer deal, for example, or Eric, when you started selling enterprise contracts is multi-year deals.

Speaker 7 Let's make this contract number as big as possible. Let's get as much cash up front.
Let's lock people in for two, three, four years.

Speaker 7 That's not what you did at all, right?

Speaker 13 Yeah, we didn't do that because I was always optimizing for the long-term value, which is the annual value per customer.

Speaker 13 So if I had to give the customer terms that would lock them in, I thought that's actually shrinking my market, because they'll pay less if they're locked in. That's one thing.

Speaker 13 Then the other one, I didn't want us sort of getting lazy. I wanted us to earn the business every year.
So it was just sort of like that.

Speaker 13 The driver was really optimizing to the long-term value.

Speaker 7 Yeah, which is, you know,

Speaker 7 makes so much sense now thinking about it that you would have had to have given a, I don't know, 30% annual discount or lock in the price, then raising prices is harder later.

Speaker 13 And that's unique to us. I think we're selling in a very confined vertical.
So it's not really fair if there's two companies and one's paying 30% less than the other, and

Speaker 13 they end up knowing about it and feeling bad about it.

Speaker 13 So that's something specific to this confined market.

Speaker 6 And to put some shape around it for folks that don't know Viva's business as well, you've a couple thousand customers of which there's a hundred or so that are your like really big customers. Yeah.

Speaker 6 And there's basically no one else out there who could be a customer without you expanding the market.

Speaker 13 Right, we have a we sell into a defined set of customers, life sciences industry, there's kind of top 20 and then there's another thousand or so that are doing smaller things and we've just expanded our product footprint.

Speaker 13 So when we sell to a customer we might have 20 things that we can sell to them. They start in this area, they start in that area.

Speaker 12 So

Speaker 13 Gordon called it layering the cake, right? We have a lot lot of different layers of the cake that are all into the same customer. We leverage relationships.

Speaker 13 It's fine for us to spend $100,000 a year

Speaker 13 maintaining free relationships.

Speaker 13 Just putting into developing relationships. That's not wasteful.

Speaker 13 So because we have a lot of, we're showing up the door with $100 million worth of product. So if you have a relationship, it's worth it.
Like a bank, a bank, investment bank ain't worth it in this.

Speaker 13 So it's a different type of business.

Speaker 1 Now is a great time to thank good friend of the show, ServiceNow.

Speaker 1 We have talked, listeners, about ServiceNow's amazing origin story and how they've been one of the best performing companies the last decade.

Speaker 1 But we've gotten some questions from listeners about what ServiceNow actually does. So today, we are going to answer that question.

Speaker 10 Well, to start, a phrase that has been used often here recently in the press is that ServiceNow is the quote-unquote AI operating system for the enterprise.

Speaker 10 But to make that more concrete, ServiceNow started 22 years ago focused simply on automation.

Speaker 10 They turned physical paperwork into software workflows, initially for the IT department within enterprises.

Speaker 14 That was it.

Speaker 10 And over time, they built on this platform, going to more powerful and complex tasks.

Speaker 10 They were expanding from serving just IT to other departments like HR, finance, customer service, field operations, and more.

Speaker 10 And in the process, over the last two decades, ServiceNow has laid all the tedious groundwork necessary to connect every corner of the enterprise and enable automation to happen.

Speaker 1 So when AI arrived, well, AI kind of just by definition is massively sophisticated task automation.

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Speaker 1 We mean it when they say they connect and power every department. IT and HR use it to manage people, devices, software licenses across the company.

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Speaker 10 ServiceNow was named to Fortune's World's Most Admired Companies list last year and Fast Company's Best Workplace for Innovators last year.

Speaker 5 And it's because of this vision.

Speaker 10 If you want to take advantage of the scale and speed of ServiceNow in every corner of your business, go to serviceenow.com/slash acquired and just tell them that Ben and David sent you.

Speaker 1 Thanks, ServiceNow.

Speaker 7 Eric, for you, I'm curious, maybe you can talk to us both in the beginning days and then also now at Zoom. How do you think about pricing and account strategy?

Speaker 12 Yeah, so you know, our case is a little bit different. You know, ideally, when you start a SaaS company, either focus on vertical market or focus on departments.

Speaker 12 That's probably the best business model. Unfortunately, you start from building up a horizontal collaboration solution.
It's really hard, right?

Speaker 12 Because you know a lot of other competitors are there right so our strategy free competitors exactly a lot of you know free solutions so our strategy you know more like you know you open up a new restaurant business right so and you have a better service right and a better price and a better food that's pretty much even today you know we want to make sure our product better than our competitors make sure when it comes to pricing also better

Speaker 12 and also make sure you know offer the better service so you look at any time our product always, always at better price

Speaker 12 across the board, any product, compared to any competitors.

Speaker 6 So life is about trade-offs. And if you're telling a customer, oh, we're better, faster, and cheaper, what has to give? Is it something organizationally? Is there some

Speaker 6 efficiency? Yeah, exactly.

Speaker 12 You know, see, like, a customer, they are probably going to spend a lot of money on marketing, you know, what we can do to leverage the network effects, right?

Speaker 12 You know, they hire like 100 SILS rep, what we can do to have a 50 SIS rep, you know, can deliver same value, right? So that's why it's very important to have internal

Speaker 12 efficiency.

Speaker 7 Which is, you know, it's so funny

Speaker 7 that efficiency translates to capital efficiency, which translates to gross margins, not gross margin, to operational margins, which translates to cash flow.

Speaker 12 Totally good. Which is the whole point.
Yeah, it gives you more flexibility, right? Yeah. Yeah.

Speaker 13 But I would say say the key also is just the product excellence, right? And that comes from the core set of engineers you hired, I think. And then also the,

Speaker 13 you were especially very focused in the early days, right? Totally. You were not thinking about something else, right?

Speaker 12 You were thinking about video conferencing. And I would say, you know, that's why I got to know Eric.

Speaker 13 I got to know Eric. I thought, oh, that's a pretty focused guy.
I bet his product is good. And then I tried out his product.

Speaker 12 I'm like, oh, this is really good.

Speaker 13 I want to join his board.

Speaker 13 So I think that's so is the product excellence can make you more efficient. Your sales cycle is more efficient,

Speaker 13 everything's better. If

Speaker 13 your product was twice as good as WebEx, right? If your product was only

Speaker 12 10 times better.

Speaker 12 Ten times better.

Speaker 13 But I guess my point is if your product was only 20% better,

Speaker 13 it wouldn't have been enough.

Speaker 12 It wouldn't have matters.

Speaker 12 That's why I always like this restaurant analogy, right? You know, you store buying a restaurant, a brand new restaurant, if food doesn't all work.

Speaker 12 Even for free, you do not want to store by it anymore, right? So,

Speaker 12 again, I think back to Peter's point, it's extremely important. Everything starts from one thing, the product.
Product excellence, that's a foundation. You can optimize a lot of things.

Speaker 12 If a product does not work, forget it. Everything else.
Just double down, triple down on product. That's the number one thing, you know, Peter write on.

Speaker 13 And that's a lot about people, right, Eric? About which people you put on the product. Yes.

Speaker 12 Totally.

Speaker 13 Eric was very particular about getting the best people.

Speaker 7 Yeah, let's so people, we can come back to that.

Speaker 7 You know, I remember when we talked about with Santi on the episode we did on Zoom's IPO years ago now,

Speaker 7 you know, your named executive officers in your S1

Speaker 7 were not like you think typical, oh, here's high-flying SaaS company, there's going to be a VP of sales from Salesforce, there's going to be a chief marketing officer from HubSpot, you know, whatever, like nothing wrong with those companies and those people, but

Speaker 7 I think at both of your companies, the people you brought in as leaders were up-and-comers. They weren't

Speaker 7 the established superstars.

Speaker 13 Yeah, I think you,

Speaker 13 I always wanted to have some people with some range. You know, they could get very hands-on, but also grow into managing.

Speaker 13 I guess I've always thought to try to get people to do something that they haven't done before, you know, so they would have a little bit more mojo, have an opportunity to do something that they haven't done before.

Speaker 13 And the team is very important. The chemistry of the team is much more important than the skills of the individual players.

Speaker 6 In a lot of ways, that comment reminds me, there's a parallel between you not signing multi-year deals where you're forcing the product to earn the customers

Speaker 6 and you promoting internally where you're keeping people hungry and forcing them to do their best work to earn that job.

Speaker 13 Well, it's more thrilling when you can give somebody a chance to do something that they haven't done before for me and for them. There's more fulfillment.

Speaker 13 Otherwise, it's well you're doing the same thing you've done three times and what's the allure? Well, I can get rich.

Speaker 13 At some point that doesn't keep you going at the end of the day.

Speaker 7 Would also come, I imagine there's an element of compensation to this strategy too, which translates to capital efficiency.

Speaker 12 No, not really, no.

Speaker 7 I always think of equity versus cash, but...

Speaker 13 I don't think so. I never really made any kind of decision on people based on that.
You got to get the right person and then pay the right compensation for the right person.

Speaker 13 But always the right person first and then figure out the compensation.

Speaker 12 Peter right on, actually back then, when

Speaker 12 we tried to make an offer to some executives,

Speaker 12 at that time, the feedback, why not hire someone very experienced and seasoned leaders from outside is really not about a calm package because

Speaker 12 when it comes to hiring,

Speaker 12 at a Zoom, we really like to hire those people with a self-motivation and a self-learning mentality, right? Including the senior executives.

Speaker 12 And they can grow themselves along with their company growth. And plus, you know, they are very loyal.
I think that was our philosophy.

Speaker 12 I thought that's the best philosophy. After the COVID, I think

Speaker 12 I was wrong, actually. There's a big flaw also.
Because when business

Speaker 12 auto-grows your team,

Speaker 12 and guess what? The executives, our team, they are not ready. You know, like usage, like 15 times, 20 times more.

Speaker 12 Revenue like seven times more. You know, our team, even not myself included, even not twice better.
This is one challenge, right? I learned. That's a mistake.

Speaker 12 Another mistake is we think all those executives or key team members, they can learn along with the comp growth. However, the pace is different.

Speaker 12 Somewhere you can learn quickly, somewhere very slow.

Speaker 12 That's why also that's another flaw. That's why looking back, I feel like, ah, we should have a mixed team structure, right? Someone, you know, they have a potential, they can grow themselves.

Speaker 12 Somewhere else, you have to hire some seasoned leaders. You never know, right? In case suddenly your business is going to take off, at that time, your team is not ready.

Speaker 12 That's a challenge we are facing today.

Speaker 6 So you need to have some members of the team who have experienced scale bigger than your company, but other people that you're developing.

Speaker 12 Exactly. That's a healthy mix.
Back then, prior to the pandemic,

Speaker 12 I think too stubborn. I should learn more from Peter.

Speaker 12 I think everyone, you have to have a potential. You do not even have a great background.
Actually, looking back, that's not right.

Speaker 13 Interesting. Maybe a mix would be better.

Speaker 12 Mix is much better.

Speaker 7 Do you think that applies even? Do you think you should have done that even in the early stages of the company?

Speaker 12 No, early stage, right? You know, for the first four years, no need. But down the road, you already see the market fit, right? The product of fit.
You want to scale your business at that time.

Speaker 12 You have to change your philosophy.

Speaker 6 There's another, I just keep, these parallels keep popping up for me where Zoom is one of the greatest product-led growth companies of all time.

Speaker 6 And yet here you are talking about the beauty of predictable revenue that comes from enterprise contracts.

Speaker 12 And it's the same thing.

Speaker 6 It's not that experienced people are better or that in-house talent is better. It's that you need that mix.

Speaker 12 Totally. Yeah.
Hierarchy mix is very important.

Speaker 7 So the last

Speaker 7 One of the last sort of disciplines within a software company that I want to talk about operationally in this context is marketing

Speaker 7 with both of you, but particularly with Eric.

Speaker 7 We were chatting with Sati and with Peter.

Speaker 7 We sort of asked this question. We're like, you scaled once you had the product developed, you scaled with such beautiful capital efficiency.
But you did spend money on marketing.

Speaker 7 I mean, you joked about the billboards, but there are Zoom billboards now.

Speaker 7 And I asked them, you know,

Speaker 7 how did Eric and Zoom think about spending money on marketing?

Speaker 7 And, well, I'll let you tell the punchline, but

Speaker 7 how did you think about it?

Speaker 12 Yeah, that's,

Speaker 12 even today, you know, every Tuesday, you know, we have three hours stuff meeting, right? You know, this morning, the first topic, read about reviewing our marketing, top 10 marketing programs.

Speaker 12 Even today, still. I think it's very tricky.
The reason why is

Speaker 12 you do not have, I would say,

Speaker 12 sort of like a formula, right? You know, when to spend more, when to spend less. It's not like that.
As a founder, you know, you have to spend time on marketing as well.

Speaker 12 Do not always focus on product or the sales. Marketing also is very important.
However, when to invest in marketing is very tricky. Every business is different.
In our case, we specifically

Speaker 12 made a decision, no marketing team for the first several years.

Speaker 12 Because this is not something new, right? This is a product or this is very, very mature market. Everyone understands video conferencing.

Speaker 12 if your product works, you really don't need to have a marketing team, right? We try to prove that a point.

Speaker 12 You know, after that, after we have paid a customer, a lot of customers, a customer told us, Eric, I never heard about Zoom, but I tried your product, the product works, right? Why is that?

Speaker 12 We received a very consistent feedback like that. I know that's a signal.

Speaker 12 Then we doubled on that. Then 2015, we created a marketing team.
And also, even after that, we also measure every marketing program spending. Early on I spent a lot of time trying to understand.

Speaker 12 I'll give one example, like SEM, right? Every company, you spend money on SEM. First time I send a check, oh my god,

Speaker 12 this is the price of pay to Google. Oh my god, this is the largest check I'm going to sign.

Speaker 7 Do you remember how large that check was for a company?

Speaker 12 That's more than 200,000 a month.

Speaker 7 A month? Oh my goodness.

Speaker 12 This is crazy. You know, that's why I see I wanted to deep dive to understand.

Speaker 12 By the way, marketing team is all very well educated by Google, right?

Speaker 12 They talk about our way. You give me $1, I give $1.50 back.

Speaker 12 Let's do that. It's pretty good, right?

Speaker 12 But I tell them, no, it's $3 back. Why $1.45?

Speaker 12 Well, I particularly want to ask you about

Speaker 12 how to optimize that.

Speaker 12 And again, marketing team is very important, but quite often very creative.

Speaker 12 If you do not know how to measure that, do not spend.

Speaker 7 The stories we heard were, you know, most founders, CEOs, marketing teams think about CAC to LTV with marketing, you know, and there's more complexity to it than that, but I'm going to spend a dollar, I'll get $1.50, or I'll get $3 back.

Speaker 7 If that pays back within a year, I'm great.

Speaker 12 I don't believe that. That's a mistake for all the SaaS companies.

Speaker 12 It's not $1.50 back, not a $3. It should be $4, right? It should optimize.

Speaker 6 Just put up in the last minute.

Speaker 12 That's a common mistake, I think, for most of the SaaS companies. And Eric, when, how fast should it pay back?

Speaker 12 As I would say it's as big as possible, right?

Speaker 12 Every bin is different, but you got to optimize and keep optimized every day. Do not feel satisfied.
Oh give one dollar, get one dollar fifty cents back.

Speaker 12 No, optimize, go to get one two dollars, two, you know, three dollars, right? You have to optimize. This is one example, right? For every marketing dollars.

Speaker 12 However, if it works, you'll have a double down. I remember the first time I had

Speaker 12 the billboard in one, Walmart.

Speaker 12 Many customers shared very positive feedback with us. They feel like, ah, early on, we decided to deploy Zoom.
I saw the billboard. I feel like you guys are a bigger company.

Speaker 12 We made the right decision, right?

Speaker 12 It's not validating the decision then. Exactly.
And plus, the employees feel very happy. They say, oh my god, Zoom has a billboard now.

Speaker 12 After that, I realized, why not double down on that? I told our team, how many billboards we have in Walmart? This one. I said, no, three.

Speaker 12 It works. Yeah.

Speaker 12 So that's why you have to know when to double down, when to take step back.

Speaker 12 If you know how to effectively measure that, that's very important.

Speaker 6 Well, we spent most of today talking about how to build the castle and

Speaker 12 how to have a profitable castle. Not sure that really extends.

Speaker 6 But now let's talk about the defending the castle. I'm curious,

Speaker 6 maybe let's start with Eric and then go to Peter since we've been on a good Zoom streak. Where do you see the source of Zoom's defensibility as a business over the next 30 years?

Speaker 12 Yeah, so

Speaker 12 I think it's more like a sports, right? We need to focus on both offense and defense, right? It's both sides, right?

Speaker 12 So I think back to the Peter report, you still need to, even your product works today, even better than any other competitor. You have to be paranoid, right?

Speaker 12 You have to keep thinking about what you can do differently. Keep innovating, keep innovating, either the new services or new features.
right?

Speaker 12 That's the most important thing, right? By doing that,

Speaker 12 at the same time, you know, you also need to think about what's next, right? You know, from our perspective, right?

Speaker 12 We started from a unified communication. The next step will be, you know, not a unified communication, it's a collaboration platform, right?

Speaker 12 At the same time, how do you build multiple new departmental applications? You know, you also need to play offensive as well. You know, the better offensive play is probably

Speaker 12 for the defense as well, right? So that's our strategy.

Speaker 12 Peter?

Speaker 13 Very similar. So product excellence is

Speaker 13 you can get there, but you also got to work hard to stay there, right? And keep reinventing yourself.

Speaker 13 Also, you do want to expand to different areas because if critically, and I think something that people don't realize, if you get a high market share in an area, and you don't expand to another area, what will happen, just because of the nature of your company and the creative people, you'll do more stuff in your established area than you should, right?

Speaker 13 And that creates its own set of problems. If you do more stuff,

Speaker 13 you know, if Eric is constantly rewriting his codec unnecessarily, right, it's disruptive. So, you got to expand to give yourself a creative outlet.

Speaker 13 And then, this may be more particular to us, I don't know, but we also have a goal that we set out about five years ago to be the leader and light. That was our code name for it.
Because

Speaker 13 if you get to be quite dominant, arrogance is your, there's a few things that will knock you off. Arrogance, the customers will get turned off over that and they'll naturally find an escape hatch.

Speaker 13 Also, we audit for integrity of the leadership team because when you're quite well established, that can throw you off.

Speaker 13 Integrity issues in the leadership team, so we audit myself and others, and also energy in the leadership team.

Speaker 13 Because these are things that you got to audit for them, because if you wait for the results to show those things, it's too late.

Speaker 12 So,

Speaker 13 you know determined to have product excellence have a goal to be the leader and liked we actually tell our customers about that and that holds us to a higher standard so we want to be the leader and liked and then they bring that up sometimes like hey that's not the leader and liked oh god why did i tell you that you know but i mean it's a way to be set yourself out there right not only do we want to be the leader we want to be liked product innovation as an outlet

Speaker 13 And then avoid that arrogance.

Speaker 12 You talked about it. But by the way, I think related to this question, I want to to share with you a conversation I had with Peter.
I think probably can help some of the founders

Speaker 12 as well. I think I forgot which quarter, a year before we went public, and I looked at our growth plan.
I realized, wow, we wouldn't have one service, right?

Speaker 12 If we have another service, also can monetize, you know, the growth

Speaker 12 trajectory will be very different. At that time, Peter told me that, Eric,

Speaker 12 that's sort of like the ideal case, but that decision should be made two years ago or three years ago, right? If you wanted to have a new service, you cannot have a new service today, right?

Speaker 12 You need to think about trying to make a decision two or three years before that.

Speaker 12 I clearly remember that conversation.

Speaker 12 Looking back, that's the biggest mistake, the biggest mistake. The reason why,

Speaker 12 because you have one service, at the same time, how to think about what's the next service, right?

Speaker 12 Always plan ahead. This is probably the better way, right? Back to your question.
Always think ahead, build another service, another service.

Speaker 7 That's exactly what I was going to ask as a follow-up.

Speaker 7 Peter, I know you, Viva, launched a second service after the first CRM service

Speaker 12 around

Speaker 7 content, CMS, content management.

Speaker 7 When did you start planning for that second product? And then when did you launch it relative to your first product?

Speaker 13 That was, we started thinking about it the first part of 2010.

Speaker 13 I remember Gordon and I and others started thinking about it the first part of 2010, so we had 150 people in the company or something like that.

Speaker 7 That was four years into the company, three, four years into the company?

Speaker 12 So three and a half, yeah.

Speaker 13 And then we made our first hire in the fall of 2010, and that's when we started going. So I viewed that as critical.
It was a turning point.

Speaker 13 I thought, hey, I could have a single product company, do really well of that, maybe go public, but then it probably has to be sold to somebody or something like that, or I can try to make it a multi-product company.

Speaker 13 And the decision was to pick something that was clearly not an add-on to our first product. Like it was clearly so far away from our first product.

Speaker 13 I was worried that our second product would maybe become an add-on to our first product. And so I just picked something that was just way out here, just way, way different.

Speaker 13 Sold into the same company, but different buyer, different product, different code line, different everything. So I thought,

Speaker 13 this is a way to become a multi-product company and it'll either make us or it'll break us. And I thought the odds were more likely that it was going to sink us.

Speaker 6 That's so counterintuitive, because normally you would think you'd want to give the same sales rep something that they could sort of bundle in for an incrementally higher ticket price and leverage what assets you already have.

Speaker 13 But that you will do anyway. Like if you don't go out of business, gravity will take you there, right? As you go along, it's like, oh, well, maybe we should make an add-on product or not.

Speaker 12 Like, yeah, duh.

Speaker 12 But

Speaker 13 if you get confused,

Speaker 13 you know, and you think that add-on product is really going to float your boat, it's not.

Speaker 13 Your new product, if you have a chance, it should be way out here and maybe have the potential to be bigger. So that's

Speaker 12 risky. What's the scale of the two revenue lines today?

Speaker 13 The second one is a bit bigger,

Speaker 13 but the second one has also quite a bit more potential. You know, maybe it's a 5x or 10x potential.

Speaker 12 Wow. But it was risky, right?

Speaker 13 We debated that at the board level because that could have sunk the company because our rocket ship on our first product was going up. And

Speaker 13 I had to take my eye off that ball to start this thing. And it did cause that first thing to suffer.
But overall, the trade-off was worth it. But

Speaker 13 it could have worked. It was risky.

Speaker 6 Our most recent episode was about NVIDIA, which had a tiger by the tail with gaming, as everyone knows.

Speaker 6 They totally took their eye off that ball to start building for life sciences, for scientific computing, for what became neural networks and machine learning.

Speaker 6 And boy, was it a good thing they took their eye off that ball.

Speaker 13 You know the hidden thing there?

Speaker 13 You need a a CEO that was an engineering type that went to Oregon State University.

Speaker 12 Because that's what Nvidia and FEMA have in common. I don't know him, but

Speaker 13 there are very few of us Oregon State Beavers as CEOs, let me tell you.

Speaker 12 That's an amazing comedy. I know Jensen well, actually, look at NVIDIA stock price.
It was flat 10 years in a row

Speaker 12 before they took off.

Speaker 7 That's such an amazing story.

Speaker 7 I mean, the conviction, really, he had to persevere through that decade is amazing.

Speaker 12 It's hard work, right? He's a hard worker. He's a very hard worker.
That's he is focused. Yeah, there's no.

Speaker 13 I remember when starting Viva, the first time I started a company, I asked a friend who had started some other companies because I realized about three months in, God, this is really hard work.

Speaker 14 I'm working every day, really hard, every hour. So I asked my friend, is there any way to do this without working that hard?

Speaker 13 And he very quickly said, no, there's not.

Speaker 12 So isn't that true, Eric?

Speaker 12 I do not think that's a work because we all enjoy that, right? This is a part of life.

Speaker 12 Otherwise, what can you do? Are you going to play golf? No.

Speaker 13 So there's no shortcut.

Speaker 12 Exactly, no shortcut.

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Speaker 1 Vanta has become the always-on AI-powered security expert that scales with you. And as Vanta puts it, they are the best security hire you'll never have to make.

Speaker 1 And of course, the fastest growing companies in the world like Cursor, Snowflake, Replit, Linear, and Ramp all use Vanta to make sure that their security programs are always a step ahead and function as a real driver of growth for the business.

Speaker 8 Makes total sense. It's funny.

Speaker 9 When we first started working with Vanta almost five years ago, I think it was, we thought, oh, this is one of those great acquired universe products that lets you focus only on what differentiates your product and outsource the things that don't.

Speaker 9 But over the last couple of years, their product has advanced so much that it's not just Vanta does that for you. It's now actually Vanta does that better.

Speaker 9 Without a real-time monitoring system, there's just no way that you could give your vendors and customers this level of confidence and trust.

Speaker 8 Yep.

Speaker 1 So if your company is ready to go back to making your beer taste better better and leave the compliance and security reviews to Vanta's AI-powered automation, join their now 12,000 customers around the globe.

Speaker 1 You can just head on over to Vanta.com slash acquired and tell them that Ben and David sent you, and you'll earn $1,000 of free credit. That's Vanta.com slash acquired.

Speaker 6 All right. Well, we got to wrap, but there's a quick way that we end every acquired episode, which is with grading.

Speaker 6 And for companies that are in the middle of their journey, like both of yours, we like to ask it as a little little bit of an open-ended question. What makes the future of Zoom and Viva an A-plus?

Speaker 6 What's the scenario where it goes incredibly well? Paint that for us. And what's the failure case?

Speaker 12 Oh, let's see.

Speaker 13 I don't spend any time thinking about the failure case, honestly. I just not wired that way.
A plus is we really help. automate this big industry.
It's a

Speaker 13 $2 trillion industry. And if we can help to automate it and be that trusted partner that is essential to that industry, and using that word very specifically, essential, and appreciate it.

Speaker 13 There's not been anything like that before, where you're automating a whole industry in a meaningful way, right? Essential. You're going to be a life sciences company, you've got to use Viva.

Speaker 13 And man, you like that.

Speaker 13 So that would be a big success. And then We have a bit of a social mission too, to prove that

Speaker 13 you can be a good company, profitable etc but also be a good contributor to society and and the employees so that would be success and you were the first public company to convert to a b corporation

Speaker 13 to a public benefit corporation but that's just the more the formality of it it's you know the way we've operated the company is always like that so that's success essential appreciated really automating this industry and contributing to a good you know

Speaker 13 being an example of a good employer so that other people could copy it.

Speaker 12 Love that.

Speaker 12 Yeah, so in our case, I would say the that's a good question. A plus scenario will be, you know, Zoom will be a very successful platform company.

Speaker 12 We are going to introduce multiple new services and people can count on Zoom to achieve more. At the same time, we can also grow our revenue every year.

Speaker 12 That's probably A plus scenario for many years to come, right?

Speaker 12 In terms of a failure scenario, I would say maybe you go back to use WebEx. That's a failure scenario.

Speaker 12 And

Speaker 12 yeah, Peter, right. And I do not think about the failure scenario, but we just think about it, be very optimistic, think about the future.
Otherwise, seriously,

Speaker 12 we are all founders, right, the CEOs. We all feel the huge pressure.
But sometimes you cannot be too paranoid. Otherwise, every day you think too much about a failure case, failure case.
Guess what?

Speaker 12 You do not dare to move forward.

Speaker 12 So that's why I say

Speaker 12 do not think about that. So next time do not ask me this question.

Speaker 6 So only the paranoid survive, but don't let it consume you.

Speaker 13 I think you're paranoid about not doing your best, right? I think Eric, you put a ton of pressure on yourself.

Speaker 13 You don't feel good if you don't do your best, right?

Speaker 12 So I think that's,

Speaker 13 I see that in Eric.

Speaker 12 I love that.

Speaker 12 Thank you all.

Speaker 7 Thank you for being here in the room with us. And mostly, thank you to both of you.
Thank you to to Emergence for facilitating this, making it happen.

Speaker 12 Yeah, but thank you, Emergent Capital. Thank you, Sandy.
Thank you, all of you. I really appreciate it.
Thank you, my great mentor, Peter.

Speaker 13 Yeah, thanks. Thanks, Stephen.
Thanks.

Speaker 6 Thank you.

Speaker 6 Well done. Thank you.
Well done. Thank you, Peter.

Speaker 1 All right, listeners, it's time to talk about another one of our favorite companies, StatSig. Since you last heard from us about StatSig, they have a very exciting update.

Speaker 1 They raised their Series C, valuing them at $1.1 billion.

Speaker 11 Yeah, huge milestone.

Speaker 8 Congrats to the team.

Speaker 9 And timing is interesting because the experimentation space is really heating up.

Speaker 1 Yes. So why do investors value StatSig at over a billion dollars? It's because experimentation has become a critical part of the product stack for the world's best product teams.

Speaker 5 Yep. This trend started with Web 2.0 companies like Facebook and Netflix and Airbnb.

Speaker 8 Those companies faced a problem.

Speaker 11 How do you maintain a fast, decentralized product and engineering culture while also scaling up to thousands of employees?

Speaker 5 Experimentation systems were a huge part of that answer. These systems gave everyone at those companies access to a global set of product metrics, from page views to watch time to performance.

Speaker 11 And then every time a team released a new feature or product, they could measure the impact of that feature on those metrics.

Speaker 1 So Facebook could set a company-wide goal like increasing time in app and let individual teams go and figure out how to achieve it.

Speaker 1 Multiply this across thousands of engineers and PMs and boom, you get exponential growth. It's no wonder that experimentation is now seen as essential infrastructure.

Speaker 9 Yep.

Speaker 5 Today's best product teams like Notion, OpenAI, Ripling, and Figma are equally reliant on experimentation.

Speaker 8 But instead of building it in-house, they just use StatSig. And they don't just use StatSig for experimentation.

Speaker 5 Over the last few years, StatSig has added all the tools that fast product teams need, like feature flags, product analytics, session replays, and more.

Speaker 1 So, if you would like to help your teams, engineers, and PMs figure out how to build faster and make smarter decisions, go to statsig.com/slash acquired or click the link in the show notes.

Speaker 1 They have a super generous free tier, a $50,000 startup program and affordable enterprise contracts for large companies. Just tell them that Ben and David sent you.

Speaker 1 All right, listeners. Well, thank you so so much for joining us for this.
I actually cannot imagine a more

Speaker 1 useful topic right now than dissecting how to build great companies on little capital based on the era that we're going into. I think, you know, David and I don't need to debate this endlessly.

Speaker 1 Like you can hear the drum beats on Twitter of how much the market is changing. But,

Speaker 1 you know, the reality is it is. And everyone has to play the game on the field.
And Peter and Eric have just,

Speaker 1 it's just unbelievable and impressive what they have built on so little capital.

Speaker 3 They're two of the greatest of all time, literally two of the goats at this, which is so funny. You know, now everybody thinks of Zoom as the pandemic, you know, high flyer.

Speaker 3 And it's like, I was just thinking every time over the last few years, like that people would talk about Zoom in whatever context.

Speaker 11 I'm like, do you, you people realize how much cash flow this company is generating?

Speaker 3 And it's all because of, you know, this DNA and mindset and everything we talked about with them.

Speaker 1 And after spending time with Eric, I mean, it feels to me like the amount of time that he spends thinking about, oh, no, the stock was going crazy.

Speaker 1 And, oh, no, now it's going down is like approximately zero. They're thinking about how do you build a great company and how do you generate happiness for customers.

Speaker 1 build a profitable enterprise and grow that profitable enterprise. And it was a nice, refreshing viewpoint to get to spend time with him and Peter.

Speaker 1 Well, if you want to chat about this with us, we would love to do that with you. You should join the acquired community Slack at acquired.fm slash Slack.

Speaker 1 12,000 smart, courteous, and kind people have done so before you. So you would be in great company.
We also have our limited partner show.

Speaker 1 And if you want more acquired between now and our next special, which we have recorded and is awesome and we are very excited to release, you can search Acquired LP Show in any podcast player, Spotify, Overcast, Apple Podcasts, anywhere you listen to podcasts and find that there.

Speaker 1 We have a job board, acquired.fm slash jobs, where we curate the most interesting jobs that we think we should make available to the acquired community.

Speaker 3 Huge thanks as well to our friends at Emergence for making this possible.

Speaker 1 That's so true.

Speaker 3 I'm so happy I'm wearing my Emergence Capital Fleece right now.

Speaker 1 You got to rep the swag with pride.

Speaker 3 Got to rep the swag. Seriously, I was thinking as you were saying that, and I know we talk about the Slack at the beginning and end of every episode.

Speaker 3 It really is like, it's not just like, oh, you should join the Slack because you like acquired.

Speaker 3 Like, you know, if you're listening to this, you are probably a founder, an employee, an investor, you know, working at companies of any size where this is relevant. And so is everybody else.

Speaker 3 And people are, like, this community is amazing. People are talking about this in Slack.
Jake from Emergence is right there in Slack to talk about this. You know, people DM each other.

Speaker 3 There's so much vibrant discussion. Can't underline it enough.
It's such a great part of the acquired community. And if you're not part of it, you should absolutely join.

Speaker 1 That you should. All right, listeners.
We'll see you next time.

Speaker 3 We'll see you next time.

Speaker 4 Who got the truth?

Speaker 4 Is it you? Is it you? Is it you? Who got the truth now? Huh?