Thought Leaders in Cloud Computing: Sridhar Vembu, CEO of Zoho (Part 4)

Sramana Mitra: Tell me a bit about the metrics that you are willing to share.

Sridhar Vembu: We have 4,000 employees now and more than 20 million users on Zoho. We have one million new users per month. We still don’t disclose revenues. The company continues to be profitable. We have never taken any outside capital and we don’t intend to. We are bigger than most of the companies who have gone public in the last couple of years.

Sramana Mitra: Last time we spoke, you said you were just over $300 million. You also said that, by 2018, you’re going to hit $1 billion in revenue.

Sridhar Vembu: We are definitely marching towards there. We will get there in due course. We are focused on the long term. We have no exit plans. One of the things that we keep in mind is you want to keep the culture of the company. All that is important to us. Customers appreciate it. Maybe five or seven years ago, customers would probably say, “It’s only a product. Why do I care how you build it?” Increasingly, people also see that the startup is coming from a company that is interesting.

Sramana Mitra: There’s too much short-term thinking around.

Sridhar Vembu: We see that all around in the Valley. Particularly in the last two or three years thanks to the zero interest rate, way too much money has gone into the Valley. That’s often foolishly spent. I also look at the economic side. If you look at the cloud economics and companies like Box, the Bay is too much.

Sramana Mitra: Broken unit economics.

Sridhar Vembu: Exactly. I just look at that and think that all this will end. It’s not just the spending. Box only does storage. They don’t even have any other app. Are customers going to buy email from one player, storage from another, and office suite from another player?

Sramana Mitra: Then there is Google on the other side that is offering a lot of things for free that these guys are trying to build companies around. It’s not just going to work. I’ve written extensively about that phenomenon.

Sridhar Vembu: The only reason it has gone on as long as it has is because of the extremely loose, almost reckless financial environment. It always comes to an end like the subprime situation. In the last few months, VC flow has slowed down. Judging from the the number of pitches I get, it looks like the Series C, D, or E is becoming more difficult these days.

Sramana Mitra: That’s where you’ll want to see real metrics and sustainable unit economics. If you don’t see it, you shouldn’t want to fund it. If you do, that’s your problem.

Sridhar Vembu: These companies would have been good if they had been more modest in their ambitions. You take a nice $20 million company and try to bloat it out of proportion.

Sramana Mitra: Hyper growth is not a natural state.

Sridhar Vembu: Exactly.

Sramana Mitra: Artificially fuelled hyper growth is a very unhealthy, unsustainable economic scenario. The whole venture capital industry is predicated upon unhealthy and unsustainable hyper growth. It was good to catch up. Good luck.

This segment is part 4 in the series : Thought Leaders in Cloud Computing: Sridhar Vembu, CEO of Zoho
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