Posted on Monday, Apr 9th 2018
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According to a MarketsandMarkets report, the enterprise video market is forecast to grow at a CAGR of 20.1% from $16.34 billion in 2017 to $40.84 Billion by 2022, primarily driven by the rising demand for video as a tool to enhance communication and collaboration across enterprises and the rising adoption of cloud technology. Zoom Video Communications is a Billion Dollar Unicorn that is reporting growth rates of 150%.
Zoom Video Communications’ Financials and Offerings
San Jose, California-based Zoom Video Communications was founded in 2011 by CEO Eric Yuan. He was one of the founding engineers at WebEx Communications, which was acquired for $3.2 billion by Cisco in 2007. He stayed on as the Corporate Vice President of Engineering at Cisco. In 2011, however, he quit Cisco to start his own company and create a new video service on top of modern cloud architecture.
Zoom unifies cloud video conferencing, simple online meetings, group messaging, and a software-defined conference room solution into one easy-to-use platform. It offers meeting solutions in a freemium model. It offers the free basic plan for one-to-one meetings of up to 40 minutes and charges between $14 and $20 per month for premium plans targeting small teams, medium, and large enterprises. It also offers software-based conference room solutions for $49 per month.
Tech companies are a top market for Zoom, but it also works with 90% of the top 200 universities. Its customer base includes over 700,000 businesses and 6,900 educational institutions.
It has recently announced augmented reality features that can be used to enhance online teaching. It recently announced that its AI-driven automated platform Zoom.ai has been integrated with Microsoft Teams and Office 365. Zoom.ai helps employees offload and automate everyday tasks including searching for files, scheduling meetings, generating documents and transcripts.
Zoom does not disclose the details of its financials, but it has disclosed that its revenue grew 150% in 2017. In 2016, it had reported 300% revenue growth. It was profitable in the third quarter of 2016.
Its customer base has increased by 100% and it has hosted over 20 billion annualized meeting minutes, up from 6.9 billion in 2016. It has secured large-scale deployments from customers such as 21st Century Fox, Stanford University, Pandora, and Cornell University.
Over the fiscal year 2017, it has expanded internationally by opening UK and Sydney offices, as well as more international data centers. It has established partnerships with Polycom and Crestron, as well as optimized its integration with Cisco video endpoints. It has introduced new features and enhancements to its platform, including Zoom Rooms Scheduling Display, Zoom for Telehealth, and an increased default capacity of 100 participants.
Zoom has been hiring aggressively. It hired 114 people in Q2 2017 alone. It has 670 people in four offices in San Jose, Denver, Santa Barbara, and Kansas City.
It has raised $145.5 million from investors including AME Cloud Ventures, Emergence Capital Partners, Horizons Ventures, IT-FARM, Qualcomm Ventures, Maven Ventures, Sequoia Capital, Bart Swanson, Bill Tai, Carmen Elizabeth Sanchez C., Dan Scheinman, Matt Ocko, Mike Everett, Patrick Soon-Shiong, and Subrah Iyar (founder of Webex). In January this year, it raised $100 million from Sequoia Capital in a Series D round that valued it at $1 billion. Sequoia partner Carl Eschenbach, who led the investment, has joined the Zoom board.
Questions for the Board
Apart from legacy vendors Cisco and Polycom, Zoom competes in a crowded market for enterprise web-conferencing services where you do not just have startups like Highfive, Join.Me, Vidyo, and BlueJeans but also larger players like Adobe, Citrix, and Microsoft.
According to Gartner, web conferencing will be used for 15% of enterprise voice and video communications by 2019, up from less than 1% in 2016 and the space has seen quite a few acquisitions.
Microsoft bought Skype for $8.5 billion in 2011 while IBM bought Ustream for $130 million in 2016. Will Zoom get acquired and become part of a larger software suite or stay independent? Salesforce.com, for example, tried its hand at web conferencing a long time back with the acquisition of DimDim, but they shut the company down. Will they take another shot with Zoom?
And if they stay independent, how will Zoom keep growing? Is the natural growth rate of their core product adequate to deliver the high growth expectations of the public market?
How will it keep innovating? How will it leverage the unprecedented opportunity in SaaS?
This segment is a part in the series : Billion Dollar Unicorns
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