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Zoom’s founder on how it beat the competition

Zoom has become essential for our new reality of work and school from home. Here’s how founder Eric Yuan created the platform that quickly rose above the competition.

Zoom’s founder on how it beat the competition
[Photo: 3DSculptor/iStock]

Startup stories are usually told in one of two ways. The first: an entrepreneur is struck by sudden inspiration. There’s a montage of the founder scribbling ideas on a whiteboard and shaking hands with investors, and then boom—the founder stands triumphantly with confetti falling around them at Nasdaq. The second: a struggling entrepreneur eats Ramen noodles in their garage, works long and tedious hours, makes awful hires and questionable decisions, until ultimately, the company crashes and burns.

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In reality, neither of these stories accurately depicts what it’s like to build a business. Every company experiences successes and failures almost every day. I started Zero to IPO with Joshua Davis, the cofounder of Epic Magazine, to share what happens somewhere in between these two extremes. In the podcast, we dig into the nuances of the startup journey.

In the first episode of the second season, we spoke with Eric Yuan, the cofounder and CEO of Zoom, the videoconferencing app that’s become everyone’s go-to solution while social distancing. Joined by Rachel Tipograph, founder and CEO of MikMak, Yuan shares his advice for competing against legacy players, and how long-term thinking and company culture play a role.

Standing up to established competitors

Tipograph founded MikMak, a marketing e-commerce platform, in 2014. From day one, software giants like Adobe and Oracle have been sniffing around the company. Whether they are gathering competitive intelligence or toying with the idea of an acquisition, she isn’t always sure. This is a situation that smart newcomers often find themselves in. If you’re doing something exciting, big companies with big wallets are going to want in. They’ll try to copy your product or scoop up your business so they can get that revenue for themselves.

Yuan faced this exact problem when he was starting Zoom. His advice? Build a great product, sell it at a low price, and move fast. While big players have a lot of resources, they’re also very slow. If a customer shares a new pain point, a small, agile startup can pivot to address this demand much more quickly than a large corporation. So if you offer the best solution on the market for a competitive price, you’ll stand a fighting chance. And who knows, maybe one day you’ll end up like Yuan, the “king of remote working.”

Achieving your desired exit

There are many roads a founder can travel down when they build a startup. They can set their sights on an acquisition, hoping one of those aforementioned bigger companies will buy them out, or they can aim to go public and work toward an IPO. Either way, Yuan says, the key to getting to the exit is to be honest about your intentions—with yourself and your employees—from day one. Communicating your goal is critical because it impacts your business strategy from the start.

Standing up to competitors and understanding your end goal are important objectives, but neither will matter to your long-term success if you don’t have a robust company culture.”

For example, if you want another company to acquire yours, as is the case with Tipograph and MikMak, you’ll need to be cash-flow positive very quickly. Otherwise, you might not find a buyer. But if you want your business to be sustainable in the long term, you’ll probably need more help from institutional venture capitalists. VC funding allows you to delay profitability so you can focus on market share and innovation.

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There’s no right answer when it comes to an exit, but however you approach it, early alignment is vital.

Measuring employee happiness

Standing up to competitors and understanding your end goal are important objectives, but neither will matter to your long-term success if you don’t have a robust company culture. Yuan says employee happiness is just as critical as your product. In fact, at Zoom, he tells his employees to check in with themselves every morning and to only come into work if they’re feeling happy. If they aren’t, he’d prefer they stay home and figure out why before they return to work.

Tipograph also puts a high value on employee contentment and is diligent about sending out quarterly engagement surveys. She started this practice when MikMak had only six employees and has continued it to this day. At Okta, we conduct similar surveys now, but didn’t in our early days. In retrospect, I wish we had. There are many moving parts when you’re a startup founder, but measuring employee sentiment, learning from it, and addressing concerns should always be a priority.

While you’re warding off the competition, you’ll simultaneously feel the pressure to find an exit and to make sure your employees are happy with their day-to-day work. The key to success lies in your ability to be agile and communicate—and, of course, to believe in your product.

Frederic Kerrest is the executive vice chairman, chief operating officer, and cofounder of Okta. You can listen to Zero to IPO and the full “Zoom and MikMak” episode wherever you get your podcasts.

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