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

We sit down with the CEO founders of two of the most capital efficient success stories of all time — Zoom and Veeva Systems — to understand how they grew to billions of dollars in revenue (and tens of billions in market cap) on very, very little capital invested. With the fundraising environment changing rapidly, we couldn’t think of a better topic to discuss or better sources of wisdom for founders, operators and investors all to learn from. Very special thanks to Jake Saper and our friends at Emergence Capital for inviting us and putting this conversation together at their 2022 CEO Summit! *Links:* - Peter’s great Medium blog: https://medium.com/@peter.gassner *More Acquired:* - Get email updates https://www.acquired.fm/email and vote on future episodes! - Join the Slack http://acquired.fm/slack - Check out the latest swag in the ACQ Merch Store https://www.acquired.fm/store! _Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions._

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Ben Gilbert?

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

• 0:08David Rosenthal?

  If only we had our, our notes on Viva.

• 0:11Ben Gilbert?

  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.

• 0:18David Rosenthal?

  Peter is very focused on clear and correct target markets.

• 0:22Ben Gilbert?

  Yes.

• 0:40Ben Gilbert?

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

• 0:54David Rosenthal?

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

• 1:00Ben Gilbert?

  And we are your hosts. Today, we have something very unique to share with you all. 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. It is uncommon, however, to allow anything discussed to be shared publicly. Well, today we are doing just that. The good people at Emergence Capital, in particular, friend of the show Jake Saper, 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.

• 1:43David Rosenthal?

  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.

• 1:55Ben Gilbert?

  I think Peter has never done a podcast before.

• 1:57David Rosenthal?

  I think that's right.

• 1:58Ben Gilbert?

  And he's built a $20 billion company?

• 2:01David Rosenthal?

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

• 2:29Ben Gilbert?

  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. They sell high dollar software to pharmaceutical companies. And I think biotech as well, right, David?

• 2:43David Rosenthal?

  Yep, yep.

• 2:45Ben Gilbert?

  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. And obviously, that means that we think it's going to be really great for everyone to be thinking about right now. 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. As you remember from our Zoom episode with board member Santi Subotovski, 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.

• 3:26David Rosenthal?

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

• 3:39Ben Gilbert?

  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. 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/Slack. You should join us. It is always a riot.

• 4:01David Rosenthal?

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

• 4:10Ben Gilbert?

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• 4:30David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature, or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote-unquote "shadow AI" running with no security review at all.

• 4:51Ben Gilbert?

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• 5:13David Rosenthal?

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• 5:31Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of Acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off, and just tell them that Ben and David sent you. Now, as always, this is not investment advice. Please do your own research. 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. So now, on to our interview at the

• 6:15Ben Gilbert?

  Emergent CEO Summit with Eric Yuan and Peter Gassner.

• 6:20David Rosenthal?

  So to set the stage, I thought maybe could each of you please give us a brief overview of your fundraising history up to and including Veeva and Zoom's IPOs? Which ordinarily, that would take like an hour.

• 6:34Ben Gilbert?

  This is gonna be pretty short.

• 6:35David Rosenthal?

  This is gonna be very short.

• 6:36Ben Gilbert?

  Talking about your private financing history.

• 6:38Speaker 02

  Go ahead. Our was a 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. We never actually used the emergence 4 million, but I thought, I thought we might at the time. And we got to within about 100,000 of using it. And then, and then we went public.

• 7:09Speaker 02

  The timeframe, we started in 2007 in February, and we raised in about 2008, maybe March or so. So that was the environment at the time.

• 7:18Ben Gilbert?

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

• 7:21Speaker 02

  Yeah, it was hard to even open a bank account because it was the whole know your customer thing and financial crisis. So everything's hard.

• 7:29David Rosenthal?

  And I think, you know, probably most people here, here know this, but for, for folks listening on the podcast today, you're doing about 2 billion in revenue at Veeva?

• 7:37Speaker 02

  Yeah, we're doing about 2 billion, about 30% proper, so.

• 7:43David Rosenthal?

  Amazing. Eric, could you share your fundraising journey with us?

• 7:46Speaker 03

  Sure, sure. I started company 2011. First thing I did, I opened up a Wells Fargo bank account. I thought it can, it's very easy for me to raise capital. That's why I opened up a bank account. Unfortunately, it took me for several months. No VCs wanted to invest me. Unfortunately, I do not know my brother sent any emergence capital, otherwise life would be much easier. And finally, and talking to some friends and raise the 3 million seed funding, that's how we started. And for, when it comes to A round, I tried to talk VC again. And again, nobody wanted to invest us either. So, and you know, we talked to friends and get another 6 million. And that's how we started, yeah. It's very hard.

• 8:31Ben Gilbert?

  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?

• 8:40Speaker 03

  Absolutely right. That's the thing. Everyone mentioned, Eric, you are crazy. The world does not need to have another video conference solution. And another VC friend, you know, even is his greatest friend. He told me that, Eric, I have a check for you as long as you do something else.

• 8:58Speaker 03

  Good news, I did not listen and was very stubborn. I should share your story. And once I stopped by a big VC, I do not want to mention the name. I for sure you guys do not like them. So, and he told me that, Eric,

• 9:14Speaker 03

  I do not think your strategy works. You know, look at Skype, look at Google Hangout, look at WebEx, it's dominating, right? 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 screensaver. Back in the day, I used a Windows machine. I changed the Windows screensaver. You are wrong, so.

• 9:41Speaker 03

  For several years, yeah.

• 9:43Ben Gilbert?

  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. And similar to Peter, you did not dip into any of that 130 million. Is that correct? To build the business?

• 10:00Speaker 03

  For me, actually, after the 30 million, you know, from Emergence Capital, I think, yeah, we are on the right track. You know, to be honest with you, with you, actually, we even do not need to raise a Series D, actually. Because at that time, you know, I think with that 30 million, I think the company completely into, I feel like a different game, so, yeah.

• 10:19Ben Gilbert?

  Wow.

• 10:21David Rosenthal?

  What, 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, basically, you never raised another round. Eric, you did make the decision to raise some more capital, even after you were generating cash. And Peter, you were on Eric's board when that process happened. Why did you make that decision?

• 10:46Speaker 02

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

• 11:00Speaker 03

  So, yeah, as I mentioned earlier, I offered to raise a certain amount of money from emerging capital. At that time, seriously, we had no plan or whatsoever to raise another round of capital. And the reason why we still went and moved forward to have a series D, because I thought the economy will win, will go down dramatically.

• 11:20Speaker 02

  This was 2017?

• 11:23Speaker 03

  16, 17, high frame. I was completely wrong, so, but anyway.

• 11:27Ben Gilbert?

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

• 11:31Speaker 03

  Yeah, so, and long story, but anyway, so.

• 11:35Speaker 02

  Yeah, 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. Whether you take some more money, you don't take some more money, right? It's all fine. It would all work out. That's what, yeah.

• 11:52Ben Gilbert?

  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. You know, multimillion-dollar contracts upfront on, you know, in the case of Veeva, or in Zoom, customers flocking with their credit cards for a, you know, a self-serve experience. These are two completely different models. And so I think one of the things that it illustrated to David and I is capital efficiency is a mindset and culture thing more than a business model thing. And I'm curious to hear both of your reactions to that, but also what are the things that

• 12:35Ben Gilbert?

  enabled you uniquely, more so than 99% of startups, to be so capital efficient?

• 12:42Speaker 02

  I can take that one. I guess I've seen a little bit of Zoom and a little bit of Veeva. I would say probably 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. 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? You might be able to sell it before it becomes, you know, not valuable, but you can only, there's only, there's security in long-term.

• 13:17Speaker 02

  So it starts with a mindset. I think Eric shared that. And then you have to have product excellence too, right? And that's something I think Eric and I share. We're both product people. I think also we both worked really hard, you know, and we work really hard now. 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. So worked 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. 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.

• 13:59Speaker 02

  And that's something you just have to get lucky on, right? You have to, it was the right timing for Veeva, it was the right timing for Zoom. Maybe if you started Zoom five years earlier or five years later, it would have been hard. Product excellence, real focus, mindset, and then you have to have some luck in your market. 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, and then it just wouldn't work. And that's, I think you, you have to

• 14:33Speaker 02

  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 VCs of any kind of note, except for Emergence, turned us down, right? And ours was really simple. Vertical-specific software, that's a small market and it doesn't work, right? That's what they would say. And I was encouraged by that because I thought, well, it has an opportunity to be really good because it's something non-obvious.

• 15:11David Rosenthal?

  Well, one thing that I want to double-click on that we were talking about beforehand. Yes, like, you need to be non-obvious to have a chance of a great outlier outcome, but you also need to be correct. 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. You know, I know Veeva has one of your core values, clear and correct target markets that you have written on the wall. What did each of you do, you know, ahead of time that led to you to, like, really genuinely believe, yes, the world thinks this is crazy, but I really think this is going to work?

• 15:48Speaker 02

  I'll go first. 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, you know? 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? 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. So, yeah, all four customers said it's a bad idea.

• 16:19Ben Gilbert?

  All right, so let me-

• 16:23Speaker 02

  They're all customers now, though.

• 16:25Ben Gilbert?

  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? 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 thing.

• 16:42Speaker 02

  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? What is it that you get out of it? And it's like, oh, and that's when you know.

• 16:53David Rosenthal?

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

• 17:00Speaker 03

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

• 17:14David Rosenthal?

  Did you, did you try and tell Cisco that?

• 17:17Speaker 03

  I, I, I tell my team. I do not dare, dare to tell others. So. But anyway, so Skype was also not reliable, right? Google had done all work. Every day I spent a lot of time talking to every customer. I know if I can build a better solution, I think at least I can survive. I never thought about everyone is 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.

• 17:44Ben Gilbert?

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

• 17:57Speaker 03

  I think two things. First of all, at that time, my passion was very straightforward because, you know, WebEx is more like, more like my baby, right? I feel like I worked so hard for so many years, I let a customer down. I really wanted to, wanted to fix that problem, but Cisco does not want me to, to start over. And I had no choice, you know, but to leave to build Zoom. That is the number one reason. And after I started the company, I realized, wow, it's so hard to raise capital, right? And by the way, the money that you receive, they give to you, don't think about that's money. You know, that's a trust, you know, every dollar matters, right? 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, so.

• 18:43David Rosenthal?

  The, you, you mentioned people in your, your team. When you started Zoom, you were a solo founder, but you brought a large number of people with you. You know, one of the, the kind of first sort of operational topics we wanted to dig into around this, this topic of, of capital efficient growth is hiring and people. That feels like such an important part of the culture and DNA of having people who are going to get on board with. Yeah, there's not going to be the spiritual equivalent of kind bars and exposed brick in our office here. How did you select for, maybe both of you, but Eric to start because you brought so many people with you from WebEx.

• 19:27David Rosenthal?

  How did you select for the people that you brought?

• 19:29Speaker 03

  So, all of them are very good engineers, right? Except for me, so I did not write any code. And on day one, we had around 25. Very soon, we get another 15, total of 40 people and myself included. All the certain people, they all write all kinds of code.

• 19:48David Rosenthal?

  And this was all funded with angel money?

• 19:50Speaker 03

  Yes, exactly. But probably, I know actually, you know, we can, with a run rate, probably less than two years, right? That's why Lietong had a Series A. But we only have engineers just get a product down. And I'm a product manager, UI designer, and also the facility guy, everything else. You know, seriously, on day one, I bought it, used the furniture, you know, assembled everything by myself, and also wrote down the company culture and value. That's pretty much what I did. So, I would say is, and even for the several, first several years, after product ready, and some investor mentioned, hey, you already have money in the bank now, why not build a marketing team? Look at your competitors, they spent a lot of money, or the billboard in 101.

• 20:34Speaker 03

  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, we have to be very disciplined, yeah.

• 20:47David Rosenthal?

  To just highlight this, so, you know, you started the company with 25, quickly growing to 40 people, but those were 39 engineers and you. No product managers, no marketing, no sales.

• 20:58Speaker 03

  Yeah, yeah. That's the reason why I know how to use QuickBooks. I never know how to use that. So, seriously, I had to learn how to use it.

• 21:05Ben Gilbert?

  So, it sounds very easy to say, don't buy billboards. You got to get your customers somehow. How did you get the snowball going?

• 21:17Speaker 03

  A little bit lucky, because seriously, and luck doesn't play a role because, you know, several weeks before we launched the product, seriously, we had no idea how to get a first customer. Luckily, you know, and you know, the very famous, you know, the reporter, the Morten Moseberg, right? He evaluated our service and we were so nervous, you know, he's very straightforward, right? 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 50,000.

• 21:55Ben Gilbert?

  50,000 users from that article?

• 21:59Speaker 03

  But most of them, they left, you know, after several, after several weeks.

• 22:04Ben Gilbert?

  But those who stayed, I imagine that was the kernel of the virality of telling their friends who told their friends who told their friends.

• 22:10Speaker 03

  I maintain a very good personal relationship with them, either VIP account, I send them a small gift. And some of them, they cancelled back in 2009, I personally send them an email. Why you cancel our service? What other can do differently? And yeah, we still maintain a relationship today, even today.

• 22:29Ben Gilbert?

  We had, so one of the CEOs wrote in and asked us about different metrics to track. 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? What were you paying attention to?

• 22:49Speaker 03

  To those of very early, very loyal, early adopters.

• 22:54Ben Gilbert?

  Yeah.

• 22:54Speaker 03

  You know, even 100 is good enough. They are the early, you know, I would say is the most loyal users. Double down to make sure they are happy. If they are very happy, guess what? You know, network effects, they are going to bring a lot of new users. So that's why, even nineteen, forty-nine thousand users left, as long as one hundred still stayed, we doubled on that. So, yeah, that's a strategy back then.

• 23:21David Rosenthal?

  For Peter, on the hiring and people and organizational front, you had a very, very different type of business. Your customers don't buy with credit cards.

• 23:33Speaker 02

  Right.

• 23:33David Rosenthal?

  They buy multimillion dollar deals, cash upfront in a year for a year deal. You need a sales force to sell that, which usually means you need a lot of cash comp to compensate that sales force.

• 23:47Speaker 02

  Right.

• 23:49David Rosenthal?

  How did you think about the right people to hire as you were building and how to compensate them?

• 23:55Speaker 02

  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. It's like sand machine, so no wasted people. And for us, yeah, we needed, because of long sales cycle, so we needed sales right away, right? So, yeah, I was the first salesperson, right? I started selling before I signed the Articles of Incorporation. Show up at the customer, hey, I think she'd buy something for me, this thing that I'm gonna make. Well, have you hired anybody? No. Well, okay, well, can you show us a demo of what you're gonna do? No. How about a PowerPoint?

• 24:40Speaker 02

  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 keep selling, because it's a relationship-based business. Funny story, the first customer who bought, small customer, well, actually somehow through a relationship with my co-founder, we got to this guy, he was the CEO. He wanted to buy some software for the small department just because he was really peeved with his IT team. So this guy had no idea what we're selling. He's like, I know that my IT team doesn't want you, so I'm gonna make a point and show them that I'm actually in charge here. So that's how we got our first sale. You could barely log into the system at that time.

• 25:20David Rosenthal?

  Could you, could you, I didn't know that.

• 25:23Speaker 02

  But then you gotta hustle, right? Then, just like Eric, right? Then you gotta hustle. Oh, my God, this customer wants to buy something and then you're working super hard to make them successful. And Eric, I'm not sure, I never asked you about this, but we never had customer satisfaction surveys for Veeva in the beginning. 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. Totally. You are right. I agree with you. You just, 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.

• 26:00David Rosenthal?

  How, can you tell us also the story of landing your first big customer?

• 26:05Speaker 02

  The big customer.

• 26:06David Rosenthal?

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

• 26:10Speaker 02

  Yeah. There was a set, right? There was the first, the guy who was just peeved at this IT team and then worked up to the next size deal and the next size deal. And it was always a step function, right? And so the first multimillion dollar annual deals were a big customer, Pfizer, and it was just hand-to-hand combat. There was a partner at the time, actually Salesforce.com actually at the time said, oh, you know, send a note that Veeva will never win this deal. And I replied back, I said, we will win this deal.

• 26:45Ben Gilbert?

  And they sent it to you during the bake-off?

• 26:47Speaker 02

  Yeah, they didn't want to even come in the meeting with us, right? They were like, oh, we're gonna go with this other system integrator or something like that. So 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. And so, 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 and said, we have more people in this meeting room than you have in your company, you know? Why should we buy anything from you? And I just said the same thing. We're your only shot. We're gonna make something great and we have the best people. So, seemed simple to me. And then we got lucky.

• 27:33Speaker 02

  And we won it. And then, and then I remember after winning it thinking, oh my God, now what? You know, now how are we going to make them successful? So we, the whole company got a bonus when that customer was what we called live and happy, which didn't have a formulaic metric. It was based on interviews.

• 27:52Ben Gilbert?

  So, did you use the invoice from that customer to then go fund product development?

• 28:00Speaker 02

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

• 28:12Ben Gilbert?

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

• 28:26Speaker 02

  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. I came from, my father was in the business of metalworking and machinery. And he, I remember him. He would like, oh, I gotta buy that lathe. How much is that lathe gonna cost? Is it worth it? So I would think of people like, I'm buying a million dollar machine because I gotta pay him $100,000 a year. Is that million dollar machine worth it or not? So frugal? And then make a really excellent product because that's the best way you can lower your cost of sales. 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

• 29:11Speaker 02

  didn't have to convince a bunch of people. So that's how to do it. 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. Because salespeople, that's where it's really, really expensive.

• 29:27Speaker 03

  By the way, when I read the Peter's S1 document many years ago, at that time, I still remember, wow, my God, this has been model so awesome. So, and but in our case, our first paid customer, largest paid customer, only 2,000 a year. So we cannot use that to fund the new product development. Because most of users pay us only for $9.99 a month. Right, so that's really hard, but I do think, you know, for all the founders, right? The business model very, very, very important, right? If you can figure out we do something similar as what Peter and Viva does, that's the best. Do spend time on that, right? Not only for product, but also the business model, right?

• 30:09Speaker 03

  As Peter mentioned, product excellence and how to sell the product, you know, and how to level the big enterprise customer, this is very important. Build a long-term sustainable company. In our case, actually, I can tell you, today the biggest challenge is our online business. Right, it's very profitable, however, it's very hard to predict. Right, it's come today, next two months, they might leave, they cancel the service. This is not the good business, so. But enterprise portion is very good. You know, that's why I learned a lot from Peter, you know, how to manage a big enterprise customer.

• 30:41Speaker 02

  We met at an emergence event way back when that's how we first met, Eric and I. Yeah, well. It was smaller at that time.

• 30:49David Rosenthal?

  Hopefully, there'll be some more connections like that today. One, one 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. You would think that what you would want to do with, you know, that Pfizer deal, for example, or Eric, when you started selling enterprise contracts is multi-year deals. Let's get, let's make this contract number as big as possible. Let's get as much cash upfront. Let's lock people in for two, three, four years. That's not what you did at all, right?

• 31:24Speaker 02

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

• 31:50David Rosenthal?

  Yeah, which is, you know, it 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.

• 32:01Speaker 02

  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 they end up knowing about it and feel bad, feeling bad about it. So that's something specific to this confined market.

• 32:18Ben Gilbert?

  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 100 or so that are your like really big customers.

• 32:27Speaker 02

  Yeah.

• 32:28Ben Gilbert?

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

• 32:35Speaker 02

  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. 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. So Gordon calls it layering the cake, right? We have a lot of different layers to the cake that are all into the same customer. We leverage relationships and we spend, it's fine for us to spend $100,000 a year maintaining free relationships and just putting into developing relationship.

• 33:16Speaker 02

  That's not wasteful. 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 banking is worth it in this. So it's a different type of business.

• 33:34Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 33:48David Rosenthal?

  Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 34:02Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI control tower.

• 34:12David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 34:29Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 34:45David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 35:02Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 35:11David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. 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?

• 35:34Speaker 03

  Yeah, so our case is a little bit different. Ideally, when you start a SaaS company, either focus on vertical market or focus on departments. That's probably the best business model. Unfortunately, you start from building up a horizontal collaboration solution is really hard, right? Because a lot of other competitors are already there, right? So our strategy-

• 35:55David Rosenthal?

  Including free competitors.

• 35:56Speaker 03

  Exactly. A lot of free solutions. So our strategy, more like 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. We want to make sure our product are better than our competitors. Make sure we make the company pricing also better. And they also make sure, you know, offer the best service. So you look at any time, our product always, always have better price. Across the board, any product compared with any competitors.

• 36:29Ben Gilbert?

  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 something?

• 36:40Speaker 03

  Efficiency.

• 36:41Ben Gilbert?

  Efficiency.

• 36:42Speaker 03

  Yeah, exactly. You know, see like a customer, they are, they are probably going to spend a lot of money on, on marketing. You know, what we can do to level the network effects, right? You know, they hire like a 100 sales rep. What we can do to have a 50 sales rep, you know, can deliver same value, right? So that's why it is very important to have, you know, internal, you know, the efficiency.

• 37:04David Rosenthal?

  Which is, you know, it's so funny.

• 37:07David Rosenthal?

  That efficiency translates to capital efficiency, which translates to gross margin. Well, not gross, to operational margins, which translates to cash flow.

• 37:17Speaker 03

  Totally.

• 37:17David Rosenthal?

  Which is the whole point.

• 37:18Speaker 03

  Yeah, give you more flexibility, right?

• 37:20David Rosenthal?

  Yeah.

• 37:21Speaker 02

  But I would 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, you were, you were especially very focused in the early days, right?

• 37:33Speaker 03

  Totally.

• 37:33Speaker 02

  You are not thinking about something else, right? You were thinking about video conferencing. And I would say, you know, that's why I got to know Eric. I, I got to know Eric, I thought, that's a pretty focused guy. I bet his product is good. And then I tried out his product, I go, oh, this is, this is really good. I want to join his board. So I think that so is the, product excellence can make you more efficient. Your sales cycle is more efficient. Every, everything's better. If your product was, your product was twice as good as WebX, right? If your product was only 10 times.

• 38:05Speaker 03

  10 times better.

• 38:06Speaker 02

  10, 10, 10 times better. But I guess my point is if your product was only 20% better, it wouldn't have been enough. It wouldn't have mattered.

• 38:13Speaker 03

  You're so right. That's why I always like this restaurant analogy, right? You know, you still buy in a restaurant, a brand new restaurant, it's food that don't work. Even for free, you do not stop by anymore, right? So 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. If a product does not work, forget it. Everything else, just double down, triple down on product. That's the number one thing, Peter right on.

• 38:43Speaker 02

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

• 38:47Speaker 03

  Yes.

• 38:48Speaker 02

  Eric was very particular about getting the best people.

• 38:52David Rosenthal?

  Yeah, so people, we can come back to that. You know, I remember when we talked about with Santi on the episode we did on Zoom's IPO years ago now. You know, your named executive officers in your S1 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 I think at both of your companies, the people you brought in as leaders were up and comers. They weren't, you know, the established superstars.

• 39:29Speaker 02

  Yeah, I think you, I always wanted to have some people with some range. You know, they could get very hands-on, but also grow into managing. 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. And the team is very important. The chemistry of the team is much more important than the skills of the individual players.

• 39:56Ben Gilbert?

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

• 40:14Speaker 02

  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. Otherwise, it's why you're doing the same thing you've done three times and what's the allure? Well, I can get rich. Okay, just at some point, that doesn't keep you going at the end of the day.

• 40:32David Rosenthal?

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

• 40:40Speaker 02

  No, not really, no.

• 40:42David Rosenthal?

  I was thinking of equity versus cash, but.

• 40:45Speaker 02

  I don't think so. I never really made any kind of decision on people based on that. You gotta get the right, the right person and then pay the right compensation for the right person. But always the right person first and then figure out the compensation.

• 40:59Speaker 03

  Peter, right on. Actually, back then, when we tried, we tried to make an offer, right, to some executives, right? You know, at that time, you know, the feedback, why not hire someone very experienced and seasoned leaders from outside? It's not really not about a comp package because, you know, when it comes to hiring, you know, at Zoom, we really like to hire those people with a self motivation and a self learning mentality, right? Including the senior executives. And they can grow themselves along with the company growth. And plus, you know, they are very loyal. I think that's our, that was our philosophy. I, I thought that's the best philosophy. After the COVID, I think I was, I was wrong, actually.

• 41:40Speaker 03

  There's a bigger flaw. So, because when business auto flows, auto grows your team. And guess what? The executives or team, they are not ready. You know, like usage, like fifteen times, twenty, twenty times more. Revenue like seven times more. You know, our team, even not myself included, even not twice better. This is one challenge I learned. That's a mistake. Another mistake is we think all those executives or KT members, they can learn along with the company growth. However, the pace is different, right? You know, some ways can learn quickly, some are very slow, right? That's why, also, that's another flaw, right? That's why, looking back, I feel like, ah, we should have a mixed, you know, team structure, right?

• 42:23Speaker 03

  Someone, you know, they have a potential, they can grow, grow themselves. Someone else, you have to hire some seasoned leaders. You never know, right? In case, you know, suddenly your business is going to take off. At that time, your team know already. You know, that's the challenge we are facing today.

• 42:38Ben Gilbert?

  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.

• 42:45Speaker 03

  Exactly. That's a healthy mix. You know, back then, prior to Panav, you know, I was, I think, too stubborn. I should learn more from Peter. Is, I think, everyone, you have to have a potential. You do not only have a greater background. Actually, looking back, that's not right.

• 42:59David Rosenthal?

  Interesting.

• 43:00Speaker 03

  Maybe a mix would be better. Mix is much better.

• 43:02David Rosenthal?

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

• 43:07Speaker 03

  Not early stage, right? You know, for the first four years, no need. But down the road, you already see the market effect, right, the product effect. You want to scale your business. At that time, you have to change your philosophy.

• 43:18Ben Gilbert?

  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.

• 43:27Ben Gilbert?

  And yet, here you are talking about the beauty of predictable revenue that comes from enterprise contracts. And it's, it's the same thing. It's not that experienced people are better or that in-house talent is better. It's that you need that mix.

• 43:41Speaker 03

  Totally, yeah. A healthy mix is very important, yeah.

• 43:45David Rosenthal?

  So the last, one of the last sort of disciplines within a software company that I want to talk about operationally in this context is marketing with both of you, but particularly with Eric. When we were chatting with Santi and with Peter, we sort of asked this question, really. You scaled, once you had the product developed, you scaled with such beautiful capital efficiency, but you did spend money on marketing. I mean, you joked about the billboards, but there are Zoom billboards now. I asked them, you know, how did, how did Eric and Zoom think about spending money on marketing? And, well, I'll let you tell the punchline, but how, how did you think about it?

• 44:28Speaker 03

  Yeah, that's, yeah, even today, you know, every Tuesday, you know, we have three hours, you know, stuff meeting, right? You know, this morning, the first topic, read about. Reviewing our marketing, top ten marketing programs, even today still. I think it's very tricky. The reason why is you do not have, I would say is a 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. Do not always focus on product or the sales. Marketing also is very important, right? However, when to invest in marketing is very tricky. Every business is different. In our case, we specifically, you know, made a decision, no marketing team for the first several years.

• 45:14Speaker 03

  You know, because this is not something new, right? This is a product or, you know, this is very, very mature market. Everyone understands video conferencing, you know, how, if your product works, you really don't have a marketing team, right? We, we try to prove that point. 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? We received a very consistent feedback like that. I know that's a signal, right? Then we doubled on that. Then 2015, we created a marketing team. And also even after that, we also married every marketing program spending. Early on, I spent a lot of time trying to understand. I'll give you an example, like SEM, right? Every company, you, you spend money on SEM.

• 46:00Speaker 03

  First time I, I sent a check, oh my God, this is, this is the price of paid to Google. Oh my God, this is, this is the largest check I'm going to sign.

• 46:09David Rosenthal?

  Do you remember how large that check was for a contact?

• 46:11Speaker 03

  That's more than 200,000 a month.

• 46:13David Rosenthal?

  A month? Oh my goodness.

• 46:14Speaker 03

  This is crazy. You know, that's why I see, I wanted to deep dive to understand, you know. But by the way, the marketing team is all very, very educated by Google, right? In more like a talk about our, you give me one dollar, I give one dollar fifty cents back, you know?

• 46:29Speaker 02

  Let's do that.

• 46:30Speaker 03

  Pretty cool, right?

• 46:31Speaker 02

  Yeah.

• 46:31Speaker 03

  But I tell them, no, you should have three dollars back.

• 46:37David Rosenthal?

  Well, I particularly want to ask you about the timeframe you wanted that money back.

• 46:41Speaker 03

  How to optimize that, right? And again, marketing team very important, but quite often very creative, right? If you do not know how to measure that, do not spend.

• 46:50David Rosenthal?

  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 a dollar fifty, or I'll get three dollars back. If that pays back in, within a year, I'm doing great.

• 47:07Speaker 03

  Don't believe that. That's a mistake for all the SaaS companies. It's not a one dollar fifty cents back, not a three dollars, should be four dollars, right? It's to optimize.

• 47:16Speaker 02

  Just went up in the last minute.

• 47:18Speaker 03

  That's a common mistake, I think, for most of the SaaS companies.

• 47:22Ben Gilbert?

  And Eric, when, how fast should it pay back?

• 47:26Speaker 03

  As I would say, it's as big as possible, right? It's got, everything is different, but you got to optimize and keep optimize every day. Do not feel satisfied, oh, give one dollar, get one dollar fifty cents back. No, optimize, got to get one, two dollars, you know, three dollars, right? You have to optimize. This is one example, right? For every marketing dollars, however, if it works, you have a double down. I remember, you know, first time I had, you know, the billboard in 101. You know, many customers shared a very positive feedback with us. They feel like, ah, early on, we decided to deploy Zoom. I saw the billboard, feel like you guys are a bigger company. We made the right decision, right?

• 48:03David Rosenthal?

  Which is not validating the decision then.

• 48:05Speaker 03

  Exactly. And plus employees feel very happy, right? They say, oh my God, Zoom has a billboard now. After that, I realized, why not double down on that? I told our team, how many billboard we have in 101? This is one. I said, no, three.

• 48:20Speaker 03

  It works. Yeah. So that's why you have to know when to double down, when to take step back. You know, if you know how to effectively measure that, that's very important.

• 48:30Ben Gilbert?

  Well, we spent most of today talking about how to build the castle and, you know, how to be, how to have a profitable castle. Not sure that really extends, but now let's talk about the defending the castle. I'm curious, 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?

• 48:56Speaker 03

  Yeah, so you know, I think it's more like a sports, right? We need to focus on both offense and defense, right? Both side, right? So I think back to the Peter point, you still need to, even your product is works today, even better than any other competitor, you have to be paranoid, right? You have to keep thinking about what you can do differently. Keep innovating, keep innovating. Either the new services or new features, right? That's the most important thing, right? But doing that, at the same time, you know, you also need to think about what's next, right? From our perspective, right? We started from a unified communication. The next step will be, you know, not a unified communication, it's collaboration platform, right?

• 49:40Speaker 03

  At the same time, how to build multiple new departmental applications? You know, you also need to play offensive as well. You know, the better offensive play is probably for the defense as well, right? So that's our strategy.

• 49:54Speaker 02

  Peter? Very similar. So product excellence is you can get there, but you also got to work hard to stay there, right? And keep reinventing yourself. 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 the nature of your company and the creative people, you'll do more stuff in your established area than you should, right? And that creates its own set of problems if you do more stuff. And 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.

• 50:39Speaker 02

  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 in light. That was our code name for it. Because 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. Also, we audit for integrity of the leadership team. Because when you're quite well established, that can throw you off. Integrity issues in the leadership team. So we audit myself and others. And also energy in the leadership team. 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. So.

• 51:23Speaker 02

  You know, determined to have product excellence, have a goal to be the leader in like. We actually tell our customers about that and that holds us to a higher standard. So we want to be the leader in liked and then they bring that up sometimes like, hey, that's not the leader in 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 and then avoid, avoid that arrogance. You talked about.

• 51:50Speaker 03

  But I think as related to this question, I want to share with you a conversation ahead of this Peter, I think probably can help some of the founders here as well. I think the, I've got this quarter, a year before we went public and I look at our growth plan, I realized, wow, we wouldn't have one service, right? If you have another service, also can monetize, you know, the growth trajectory will be very different. At that time, Peter told me that Eric, that's sort of like that ideal case, but that decision should be made two years ago or three years ago, right? If you wanted to have new service, you cannot have a new service today, right? You need to think about, you know, trying to make this in two or three years, you know, before that, right? I clearly remember that conversation, you know, that's why, that's looking back, that's

• 52:34Speaker 03

  the biggest mistake, biggest mistake. The reason why, you know, because you have one service. At the same time, how to think about what's the next service, right? You know, always plan ahead, right? This is probably the better way, right? Back to your question, you know, always think ahead and build another service, another service.

• 52:51David Rosenthal?

  That's, that's exactly what I was going to ask as a follow-up. Peter, I know you, Viva launched a second service after the first CRM service around, around content, CMS, content management. When did you start planning for that second product? And then when did you launch it relative to your first product?

• 53:10Speaker 02

  That was, we started thinking about it at the first part of 2010. I remember Gordon and I and others started thinking about it at the first part of 2010. So we had 150 people in the company or something like that.

• 53:21David Rosenthal?

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

• 53:24Speaker 02

  So, three and a half, yeah. 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. 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. 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. 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. Sold into the same company, but different buyer, different product, different code line, different everything. So, I thought, this is the way to become a multi-product company.

• 54:10Speaker 02

  And it'll either make us, or it'll break us. And I thought the odds were more likely that it was gonna sink us.

• 54:16Ben Gilbert?

  That's so counterintuitive. Because normally, you would think you'd wanna 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.

• 54:27Speaker 02

  But that you will do anyway. Like, if you don't go out of business, gravity will take you there, right? It's, as you go along, it's like, oh, well, maybe we should make an add-on product or not. Like, yeah, duh, you know? But if you, if you get confused, you know, and you think that add-on product is really gonna float your boat, it's not. Your, 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, but it's risky.

• 54:56David Rosenthal?

  What's the scale of the two revenue lines today?

• 54:58Speaker 02

  Uh, they're, the second one is a bit bigger. But the second one has also quite a bit more potential. You know, maybe it's a 5X or 10X potential. But it was risky, right? 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 we, right, we had to take our, I had to take my eye off that ball to start this thing. And it, it did cause that first thing to suffer. But overall, the trade-off was worth it. But... It could have worked. It was risky.

• 55:30Ben Gilbert?

  Our most recent episode was about Nvidia, which had a tiger by the tail with gaming, as everyone knows. 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. And, boy, was it a good thing they took their eye off that ball.

• 55:48Speaker 02

  You know the hidden thing there? You need a CEO that was engineering type that went to Oregon State University. Because that's what Nvidia and Viva have in common. I don't know him, but we both, there are very few of us Oregon State Beavers as CEOs, let me tell you.

• 56:07Speaker 03

  That's amazing comedy. I know Jensen well, actually. Look at Nvidia's stock price. It was flat 10 years in a row. Before they took off.

• 56:16David Rosenthal?

  That's such an amazing story. I mean, the conviction, really, he had to persevere through that decade is amazing.

• 56:24Speaker 02

  Hard work, right? He's a hard worker.

• 56:26Speaker 03

  Yeah, he's a very hard worker.

• 56:27David Rosenthal?

  He is focused.

• 56:29Speaker 02

  There's no, 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. 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?" And he very quickly said, "No, there's not." So, isn't that true, Eric?

• 56:52Speaker 03

  That's true. Good news is I do not think that's a work, because we all enjoy that, right? This is a part of life. Otherwise, what can you do? Are you going to play golf? No.

• 57:04Speaker 02

  There's no shortcut.

• 57:04Speaker 03

  Exactly, no shortcut.

• 57:06Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 57:20David Rosenthal?

  Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Ligora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 57:36Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 57:51David Rosenthal?

  And that's how you get features that customers love, like Tabular Review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Ligora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 58:15Ben Gilbert?

  And they recently launched Ligora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 58:34David Rosenthal?

  And Ligora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Ligora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Ligora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 59:04Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at ligora.com/acquired and just tell them that Ben and David sent you. All right, well, we got to wrap, but there's a quick way that we end every acquired episode, which is with grading. And for companies that are in the middle of their journey, like both of yours, we like to ask it as a little bit of an open-ended question. What makes the future of Zoom and Veeva an A+? What's the scenario where it goes incredibly well? Paint that for us.

• 59:49Ben Gilbert?

  And what's the failure case?

• 59:53Speaker 02

  Oh, let's see. I don't think about the failure case, honestly. I'm just not wired that way. A+ is we really help automate this big industry. It's a $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. There's not been anything like that before, where you're automating a whole industry in a meaningful way, right? Essential. You can be a life sciences company, you've got to use Veeva. And man, you like that. So that would be a big success. And then we have a bit of a social mission, too,

• 1:00:36Speaker 02

  to prove that you can be a good company, profitable, et cetera, but also be a good contributor to society and the employees. So that would be success.

• 1:00:47Ben Gilbert?

  You were the first public company to convert to a B corporation?

• 1:00:51Speaker 02

  To a public benefit corporation. But that's just the more the formality of it. It's 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, being an example of a good employer so that other people could copy it.

• 1:01:11Speaker 03

  Love that.

• 1:01:14Speaker 03

  Yeah, so in our case, I would say that's a good question. A+ scenario would be Zoom would be a very successful platform of a company. 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. That's probably A+ scenario for many years to come, right? In too much of a failure scenario, I would say maybe you go back to use WebEx. That's a failure scenario. So, and yeah, Peter, right. And I did not think about the failure scenario, but we just think about be very optimistic. Think about the future. Otherwise, seriously, you know, we're all founders, right? The CEOs, we all feel the huge pressure.

• 1:01:58Speaker 03

  But sometimes you cannot be, you know, too paranoid. Otherwise, every day you think about too much about a failure case, failure case. Guess what? You do not dare to move forward. Right? So that's why I say do not, do not think about that. So next time, do not ask this question.

• 1:02:14Ben Gilbert?

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

• 1:02:17Speaker 03

  Yeah.

• 1:02:17Speaker 02

  I think you're paranoid about not doing your best, right? I think Eric, you put a ton of pressure on yourself. You, you, you don't feel good if you don't do your best, right? So I think that's, I see that in Eric.

• 1:02:31Ben Gilbert?

  I love that.

• 1:02:33David Rosenthal?

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

• 1:02:43Speaker 03

  Yeah, but thank you Emergence Capital. Thank you, Sandy. Thank you, all of you. I really appreciate it. Thank you, my great mentor, Peter. Yeah, thanks, thanks, Steph. Thanks for that group.

• 1:02:53Ben Gilbert?

  Thank you.

• 1:03:00David Rosenthal?

  Thanks, thank you. Thank you, Peter. All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 1:03:10Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig. Whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:03:21David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:03:41Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:03:53David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:04:04Ben Gilbert?

  All right, listeners. Well, thank you so much for joining us for this. I actually cannot imagine a more 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 David and I don't need to debate this endlessly. Like, you can hear the drumbeats on Twitter of how much the market is changing. But, you know, the reality is, it is. And everyone has to play the game on the field. And Peter and Eric have just... It's just unbelievable and impressive what they have built on so little capital.

• 1:04:40David Rosenthal?

  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. 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, I'm like, do you people realize how much cash flow this company is generating? And it's all because of, you know, this DNA and mindset and everything we talked about with them.

• 1:05:06Ben Gilbert?

  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. 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, 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. 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. 12,000 smart, courteous, and kind people have done so before you. So you would

• 1:05:49Ben Gilbert?

  be in great company. We also have our limited partner show. 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. We have a job board, acquired.fm/jobs, where we curate the most interesting jobs that we think we should make available to the acquired community.

• 1:06:19David Rosenthal?

  Huge thanks as well to our friends at Emergence for making this possible. That's so true. I'm so happy I'm wearing my Emergence Capital fleece right now. You gotta rep the swag with pride. Gotta rep the swag. Seriously, I was thinking as you were saying that, I know we talk about the Slack at the beginning and end of every episode. It really is like, it's not just like, oh, you should join the Slack because you like acquired. 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. 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. People DM each other. There's so much vibrant discussion. Can't underline it

• 1:07:04David Rosenthal?

  enough. It's such a great part of the acquired community. And if you're not part of it, you should absolutely join. That you should. All right, listeners. We'll see you next time. We'll see you next time.