Sridhar Vembu Curated
Founder and CEO, Zoho
CURATED BY :
Tell us some of the reasons as to why you do not want to raise money.
One of the reasons people really want to IPO though is to give their their employees the ability to liquidate. What do you think of it?
According to you why are StartUps looking for VC money today and how important is funding?
What is your biggest learning as an entrepreneur?
How do you take in competition?
You have a problem that most startups don’t. How do you actually manage to market your extensive 44 products?
How many products are you planning to add to your product line?
You even build semi-conductors. But why and how is it even a product-line fit for Zoho?
Why does Zoho needs to have its own data centers?
How so stay focussed with such diversity to your business?
You say finding the right talent is critical. Does your Zoho University solve it for you?
Tell us about the expansion of Zoho University.
Which kind of entrepreneurs should choose to bootstrap?
You are bootstrapped and many a times you have been called unambitious. What do you have to say?
Which were your most challenging times as an entrepreneur? How did you overcome it?
What advice would you like to give to upcoming entrepreneurs, who wish to bootstrap their business?
When you look at the Indian startup scene today, which aspects hearten you? What disappoints you? Many startups have burnt VC money for customer acquisition—is that a legitimate practice? How did you innovate to win customers with no VC money to burn?
The most heartening thing is that we have so many ambitious young people who want to make a mark in the world. The concern I have is that VCs can end up using young men and women as cannon fodder, even if that is not their intent. That comes from the relentless push to grow, grow, grow—grow faster than human systems can scale, grow faster than the founders can manage. In the world view I subscribe to, making mistakes is inevitable. The key is to survive those mistakes and learn from them, which is easy to do if you make those mistakes when you are small. If you are a new driver and you are going 150 km/hour on a super-highway, even a small mistake can kill you—a mistake you would survive on a slower road. A lot of young founders and VCs don’t appreciate this natural speed-limit and that is even before we come to the cash-burn problem, which is also very real. I won’t be comfortable at all burning the kind of cash companies routinely burn these days. The primary challenge today is the cost of customer acquisition, which has been inflated due to the sheer amount of money that is floating around. It would be foolish for a bootstrapped company to go into a pissing contest on who can spend the most money. There are plenty of ways to innovate on fairly small amounts of money. Software development need not be hyper-expensive.
Why Zoho exists? How you actually pull it off?
Actually, almost from the early days, Zoho exists because in a way India exists. Meaning, I have always said that if I were born in a different country, in a different circumstance, I may not have been even an entrepreneur. That’s possible. Actually, I wanted to become a professor, I wanted to teach, I wanted to do research, I wanted to publish papers. It was my dream. But in a way, growing up here, you grow up and you are surrounded by what you see. At some point, I would engage or ask, ‘Why are we so poor?’ And then, I figured out that the answer is, you have to be building a lot of things in order to escape poverty. Then, I am the type of person who says, ‘Well, you can’t say that other people should be doing it. What am I doing about it?’ Then I said, ‘Ok, we have to be doing this then.’ Then I set aside my interest in publishing papers or doing research and said, ‘Let me jump into this.’ So in a sense, Zoho exists because India exists and it continues to exist because there are ‘27 million kids born in India.’ I keep quoting that number. Thankfully, it’s now stable, it is not increasing further and further. I think it is going down. It’s probably starting to go down… South Korea has about 45 million people and Tamil Nadu has about 72 million people. Which brands are popular worldwide? Right? But it’s not just about popular brands, it is also that it correspondingly translates into jobs, incomes, infrastructure, all of that. We are not able to create world-class products and world-class companies here. Then we will never have world-class incomes or world-class healthcare, any of that. In other words, we cannot consume if we don’t produce. So for us, always the vision for Zoho is, how do we take this talent pool and do something with it that is worthwhile. So that is why Zoho exists. So it’s a broad idea and so that’s why the company has reinvented itself. If you see the product line, product portfolio, we don’t feel bound by only this particular market, this particular product. We see it as there is a talent pool and what could we do with that talent pool, given the resources that we have, in terms of our financial, our managerial skills, all of that, what can we do? That is the question we ask. And if we feel that there is an opportunity in the market where we can employ our talent pool well, and we have the financial resources to compete, we can do that. That’s how we have done it.
How Zoho works?
Well, what has changed is we have a lot more people and skill sets and experience, so we are able to attempt and do more sophisticated products than ever before compared to, say, 20 years ago. And what has not changed is that core, still that sense of mission that was there, that is still there in the company. And that’s one reason actually we retain experienced talent well and we retain that because that mission is still there among our people. So it’s a kind of a mission-driven company. A lot of our people, take any of our senior people, they could have easily migrated abroad, that is actually a very common thing in India, right! Why are they staying here? That is because they at some deep level they share that and that matters because if we don’t retain that type of talent then you cannot create opportunities for the younger talent that doesn’t have all the experience and the skills. We don’t know how to produce planes, I mean, I am talking about commercial aircraft. We don’t know how to produce bullet trains, we don’t know how to produce even ultrasound yet. There may be some Indians working on these projects abroad but as a country, we don’t, and if we don’t, then we are only passive consumers of all these. Then the macro effect of that is we run a trade deficit. But at the microeconomic level, we don’t have enough skills in our workforce. We don’t have enough skills because we are exporting the people to get those skills and, therefore, the skills don’t deepen here under the newer generation gaining those skills. We don’t have enough people who train in those skills. Just simply saying, ‘we have colleges’ is not enough because you cannot teach a person how to build an MRI machine in a college, you have to learn by doing it. There are some core concepts, physics, all of that, but ultimately it has to come from the deeper process of doing it. And we have not created enough such companies here. So we want Zoho to be that company, we are doing that in software. We are not building MRI machinery, we are building mail software or a CRM (customer relationship management) or any of these but they are of similar complexity. If we go into a world-class email system, it took us actually about 10 years to really do that work. Now we say that we actually know email. I wouldn’t have said that even 5 years ago or 7 years ago. We were still learning. But to do that, we need the people who are building that mail to gain expertise and stay on the problem. and in our country we have not stayed on the problem, we keep exporting. And this also actually influences the (business) model and all of that because one of the reasons we have not taken venture capital funding is, it is very hard to communicate to the VC that it will take 10 years to build an email. It does take 10 years to build an email, it does take more than 10 years to build a world-class spreadsheet. You know we use spreadsheets all the time, so if nobody puts a stake in the ground and says, ‘we are going to build a world-class spreadsheet here,’ it will never be built in India.
Take me through the way you build products. How do you identify what problems to solve and how you pick one area over another?
There are infinity problems. If I had another 200 years to live, I have another 200 problems to solve, so you never run out of problems, right! Like we didn’t start building email in 1998. Part of the reason was we had no skills and it would take too long and we’d go out of business, so we had to sequence it. So we only started building email 10-12 years ago and that’s because by then we had enough resources and enough experience to attempt that problem. And even then, knowing that it would still take a long time. Same thing with the spreadsheet, same thing with our presentation software or word processor, any of these. Some problems are easier, CRM system is actually technically easier than, for example, a spreadsheet. You know this when you evaluate the technology behind it. And which is actually why there are hundreds of CRMs in the world but only two or three spreadsheets in the world because technically it’s a harder problem. And so we balance between the technically hard problems that require long-term investment and problems that are easier to solve, and maybe there is a market but also there are going to be a lot of people in that market. Then your question is, ‘can you penetrate that market? What is your differentiation of that market?’ In a spreadsheet, the differentiation is building a product well. Then there is a market, just the complexity is building the product well. In a CRM, the challenge is, you have to build a product – that is a challenge but you also have to find the market because there will 500 CRMs in the market. So we evaluate all those and then we commit resources and one of the things in Zoho is, when we commit to something after evaluation, we stick to it. We only exit something under the condition that we don’t see any opportunity here. It’s not only that we don’t see an opportunity, that probably the market doesn’t exist or it’s going away and in that case, we will shift our resources as well. But if we continue to see a market or an opportunity, even if we have not cracked it, we stick to it. That’s something that we are good at doing and this has to benefit because SWOT engineers want to crack a problem. And if you bring in too much of the pink counter thinking in it, it’s evaluated in 3 years if I am not making money, I will cancel it. It’s not a very good way to retain world-class talent. Smart engineers want to continue to work on hard problems and solve them. That’s what gives you satisfaction as an engineer. And if we don’t retain the smart engineers, then you don’t build the depth of the technologies I talked about. And so, they want the assurance of a company that’s true in our spreadsheet, that’s true in our email, that’s true in our word processor, that’s true in our CRM, that’s true in our AI, all of them, that we get into a project and then we stick to it in spite of a lot of challenge. In India, in my opinion, we ape the West too much, particularly America too much. I lived in Silicon Valley so I know both the strengths and the weaknesses. The weaknesses, the short-termist thinking. Very few companies stay the long haul and we have taken more inspiration from the Japanese on these than from the Americans, in this particular area.
How does Zoho make money? Help me understand the engine, the philosophy behind making money. How do products make money at Zoho?
So we have over 100 products now, so some make more money than the others, it’s always a mix of that. Again, all my philosophies are worth nothing if we don’t actually make money as a company. That keeps at grounded, I mean, even I cannot have flakes of philosophical fancy unless we ground it and actually build a business. That’s a good discipline to have, always. If you look at our products, we have a mixture of some things that are easier to crack markets, some things that are harder, and we persist on them. Initially, in the early days, we tried to find opportunities where we could sell over the internet because we don’t have a field, sales force, we don’t have a brand, any of those that could be sold over the internet. That’s how we specialized but more and more we now have the resources to actually also build our sales force, build all of these. So we are moving up the chain in this. We still, of course, the lot of it is on the internet, our websites bringing a lot of traffic, that is how we bring in the business but complemented with also sales force and all of those things. So that is how we make money. And the key here is always, you know in business you have to figure out, product management is a challenge of making what people want. And how do you figure that out? There is not any secret formula or recipe for it. It always begins with, you look at an opportunity and you see what is the state of the market now. Who are the players in it and can we make a difference here? What is our angle here? What is our opportunity here and can we build it in reasonable time or reasonable budget? Can we price it attractively? Can we attract customers? What is the marketing challenge, and all of this? And then go in after some deliberative process. We don’t do this lightly but we don’t sit and over analyze it either. It’s moderation, moderate analysis. All things in moderation. You don’t want to just randomly go off under different directions but you don’t want to analyze it to death where you are paralyzed, where you never actually do anything. So you need moderation and that’s how we start new ideas.
Most of the products that you have built or the problems that you are solving having been solved, there are companies with offerings. In going forward, having done what you have done so far, would you look at solving something unsolved or would you look at creating a market?
You know again, for example, Zoho Creator, there wasn’t a product like that when we launched. Now there are some products, they came after we came. So we actually ended up pioneering that market where you create online business apps. We launched it in November 2006. That time, nothing like that existed. And the second is Zoho One, the whole operating system for business. I mean, no one, not even Microsoft and not Google, not Salesforce, no one offers the breadth and depth of what we offer, and we are putting all this together. So the key today, to us, productivity in work is, how you integrate a lot of these data in your organization? How do you enable people to collaborate seamlessly and bring the collaboration part and the data part, like the CRM, all that, together? So today if you see the product portfolios, you have the whole collaborative documents to chats, all of that. They have the business apps, they have never come together. We are the ones bringing all that together. So that is a new innovation and we are knitting all these together. So in that sense, there is quite a bit of innovation going on. And we are also building some new things that or our goal is to revolutionize the way even the software is built. Those are things we are working on but those are longer term, I mean. They may never launch but depends on what internally we feel. But we are betting on a lot of these technologies, things like technology trends and we see data centres, we see some opportunities there. So there is a lot of such effort going on, there is a lot of R&D going on. I mean we are hiring more than 1,000-1,500 engineers a year now. That gives us a lot of R&D.
How do you look at artificial intelligence? Is it like a threat to the whole SaaS model like some people are beginning to read at it? Will it be an existential threat?
First it is going to give you more insights from your own data that you already have and there is automation of some manual tasks on that. I myself am not an AI pessimist, where it is going to replace all human beings or any of these, because I have more faith in the creativity of the human being to come up with more and more ways to employ ourselves. Basically, we have always figured out that, so I am not a pessimist that way and ultimately let’s say that AI replaces every job, that means that every good has to be cheap or free because AI produces them, robots produce the goods. So it is only a question of the distribution and there are many creative ways to solve those problems. I don’t believe that these are an insurmountable problem, that’s an economic, political policy questions and not a technical question. I mean, already, as it is, compared to say 200 years ago, a lot of us don’t do the back breaking kind of work anymore. So we will invent new forms of such work and that will keep us engaged. But there is a different issue. That is, a lot of modernity now, postmodernity, as I say, is creating a lot of, I mean, there is growing depression, these are problems that are sometimes linked to technological progress. But I don’t believe that, I believe that it has to with our social institutions or the other failure of those institutions rather, I would say. So those are the challenges. You know, we can have all the goods, we can have all the goodies in life, but are we happy? That’s a different question and that is, I am more concerned about that. I am not worried that AI will destroy all our jobs and enslave us, that’s not my concern. But are we killing ourselves? In other words, there is the George Orwell world and the brave new world. I am more worried about the brave new world because we are heading to a brave new world. I am worried about the brave new world but we are drugged into some kind of a stupa.
Could you tell us about Zoho?
How did you organised such a broad range of applications?
What is special in the software?
Why did you start Zoho?
Are you accomplishing your goals?
What is the purpose of your business?
Why did you never think of selling your business?
Would you call yourself a billionaire?
Are you mediator?
How do you understand the customer needs to enhance their experience?
Do you have formal mechanisms to engage with the customers?
To what extent are you involved with your customers in terms of providing them with your service?
What is the secret sauce of building your process?
How did you break through the culture of your first customer?
Your support system is not even for all products. How do you maintain the consistency?
Tell me something about Zoho and how it got started?
Why did you refuse to sell your company during its initial stage?
What do you think about the Japanese vision of '100 years old corporation'?
Why don't you promote mergers and acquisitions to grow your company?
What is the bonus program that you are planning to provide your employees?
How do plan to use your employee's energy in a less exhausting way?
What are your views on the process of contemplation?
What is your vision behind Zoho University?
Tell me something about Zoho?
What is the mission and vision of Zoho?
How do you evaluate your own efforts to achieve the goal of being a great company?
What is your purpose behind starting Zoho?
Why don't follow the standard way of silicon valley to grow your business?
How do you gather access to customer's needs to enhance the customer experience?
Do you have any formal mechanism to gather customer experience?
To what extent are you involved with your customers as they go through the transformation journey of technology?
How did you build such a big and successful organization?
How did you break through the culture of your first customer when you were just a beginning startup?
How do you maintain consistency in developing your products?
How do you balance flexibility with the quality of the products?
To what extent does the culture help people in the organization who are owning these products to self-correct their decisions?
How do you prevent complacency and arrogance from infecting the company?
What do you mean by customer empathy?
What advice do you have for the entrepreneurs?
Can you elaborate on how an entrepreneur can approach the question of the honest purpose of his business existence?
Do you consider Zoho as a silicon valley product or a dedicated Indian product?
You mentioned earlier 'The only durable capital we have is our culture.' What does that mean?
What is your philosophy of not growing your company rapidly?
What is the most misunderstood thing about Zoho?
Do you still look at Facebook and Amazon as your role model companies?
What do you think the companies expect from Zoho?
How would you describe shapeshifting from a cultural perspective?
What do you think about the future?
What kind of changes will SaaS companies witness due to the covid crisis?
The worldwide SaaS industry was already overcrowded and ripe for consolidation. That was also true in India. The pandemic may force that consolidation wave. Secondly, venture capital (VC) funding becomes tighter, as VCs become much more cautious. These trends mean that SaaS companies should be very prudent, watch their costs carefully and manage their business so as to not need external funding. That is a big change for most companies used to easy financing terms.
What are the measures taken by Zoho keep costs in control?
In the short term, we have put a freeze on hiring and are cutting marketing budget to brace for tough times. Being bootstrapped gives us the freedom to adapt to these changing times quickly. Having survived two major economic crises (the dot-com bust and the 2008 global financial crisis), we have been financially prudent. Being away from urban centers has allowed us to not worry about real estate prices. Going forward, we intend to create jobs in smaller clusters in rural areas, with a hub in a bigger town. Even as a hunker down, we are investing in R&D and growing our product capabilities. Our objective now is to survive and serve. Our top priority is to ensure that we can save jobs of our employees. We review the situation every month, and so far, thanks to our wide product portfolio and ability to restructure and adapt, we have managed to avoid pay cuts. Next, we are focusing on serving our community, country and the world. We have launched several programmes under "Swadeshi Sankalp: Made in India. Made for India initiative."
How challenging will the next one year be for business?
I expect very challenging times to continue, even after the lockdown restrictions are lifted and I will be glad to be proved wrong here. First of all, there is the issue of fragility and severe imbalances in the global economy hooked on debt. That has never been addressed and I am not sure that policymakers can kick the can down the road once again. Secondly, the virus itself is far from defeated, and that makes for a very cautious environment all around. That is not good for consumer spending which drives businesses up through the chain. The Indian market reflects these global realities, with added problems of our own due to issues such as non-performing assets in the banking system that predated the pandemic.
Given the uncertainty going forward, what will be Zoho’s strategy?
In such an environment, providing deep value in product offerings, and very quick payback of money invested in products is vital. We have always focused on making our products very affordable, and that focus will continue. We continue to invest in R&D, even as we remain cautious in terms of marketing spending. We are also speeding up our move towards smaller towns and rural areas.
How much will fund-raising be impacted?
For too long, the SaaS industry has relied on VC funding and IPOs, even at the cost of profitability. That model is not sustainable and certainly, as the funds are drying up, the underlying lack of resilience is exposed. While being bootstrapped and financial prudence has allowed us to not be directly impacted by the drying up of VC funding, our customers are affected by it.
When you started the company 22 years back, what did you intend to build?
What product did you launch initially, before Zoho?
Tell us about your investment startegies when you started.
You started Zoho with something called Zoho Writer, how did you grow your suite?
When started acquiring companies to build it’s Google Suite was it a point of concern for you then?
You currently have 44 products and a dominant competing market leader for each. How do you manage to get your product right always?
What is latest product launch and why did you build a product as such?
You are known as the “Bootstrap King”, but were you sure you will not raise money when you started?