A Deep Dive on Zoom’s IPO

👋 In today’s update, we’re talking about Zoom.

  • What do they do, what products do they sell, and who are their competitors?
  • Are they an economic franchise or just a business?
  • What’s their ceiling? Risks?

Resources used in this article:

  • Zoom’s S-1: Management’s discussion about their business starts on page 54.
  • Alex Clayton’s breakdown of Zoom’s S-1.

An Overview of Zoom

What do they do?

Zoom was founded in 2011 by Eric Yuan. Eric was a lead engineer for Cisco Systems Webex product (collaboration product similar to Zoom). Zoom helps companies communicate through video. They enable face-to-face communication through video, audio, and chat in a single meeting across different devices (desktop, iPhone, iPad) and different locations. For example, they’ve helped one customer with 1,000 all-remote employees, grow and maintain their culture.

Their goal is simple: To make Zoom meetings better than in-person meetings.

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IPO Profile: Roku + A Podcast Recommendation

Even though I don’t regularly invest in IPO’s, I keep a watch on ones I think are interesting.

Here’s one I am thinking about.


Roku

Quick facts

Roku (ROKU) is the market leader for internet TV devices with 37% market share. This is the same as last year and up from 33% two years ago.

• Apple is in second with 15% market share; down from 19% two years ago.

• Google’s chromecast slipped to 14% market share; down from 18% a year earlier and 21% two years ago.

• Of all households with broadband internet, 40% own a TV streaming device; up from 6% in 2010.

Roku’s origin story

Roku has an interesting origin story.

From a 2013 article in Fast Company:

“Roku began life inside Netflix as project Griffin. Netflix wanted to build a player that subscribers could hook up to their TV to stream movies and TV shows from the web.

Netflix believed it could fundamentally change how the company delivered content to its customers, who were used to waiting days for DVDs to arrive by mail.

In December 2007, the device was weeks away from launching and Netflix CEO Reed Hastings was having serious second thoughts.”

The problem? Hastings realized that if Netflix shipped its own hardware, it would complicate potential partnerships with other hardware makers. “Reed said to me one day, ‘I want to be able to call Steve Jobs and talk to him about putting Netflix on Apple TV,’” recalls one high-level source. “‘But if I’m making my own hardware, Steve’s not going to take my call.’”

In the end, Hastings decided to spin the company out into a sperate entity called “Roku”.

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