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Zoho Success Story – How the Startup Scaled Sustainably with No Investors?

From a Network Management firm named AdventNet Inc. in 1996 to presenting ‘Zoho Remotely’ to support ‘work from home’ in 2020, the company ‘Zoho Corporation Private Limited’ has touched practically every part of software development and web-based business applications. Zoho is an Indian software development firm and IT business corporation, which began its activities in 1996.

Sridhar Vembu and Tony Thomas started Zoho. Recently, on the occasion of India’s 72nd Republic Day (2021), Sridhar Vembu became the recipient of the coveted Padma Shri.
About Zoho

Zoho Corporation Private Limited is an Indian firm, founded by Sridhar Vembu and Tony Thomas in 1996. The firm started its activities from a modest apartment in the outskirts of Chennai. Zoho was previously titled ‘AdventNet’, and the only service offered was Network Management.

AdventNet was performing well, and the firm recruited clients from the Bay region and Silicon Valley. Cisco was one of their earliest clients. AdventNet extended its business in Japan by June 2001. However, the 2001 dot com bubble bust, came as a major setback to the corporation. In 2002, the number of consumers was dropped from 150 to just 3.

This is the point when Sridhar recognized that to survive, the firm had to diversify its offerings. AdventNet thus started to provide numerous more services other than network administration. Today Zoho provides approximately 45 software solutions. AdventNet was renamed Zoho Corporation in 2009.

Zoho CRM – Released in 2005. Zoho CRM (customer relationship management software) is being utilized by over 250000 organizations across 180 countries. Zoho CRM India enables organizations manage their sales, marketing, and customer support activities all from a single platform.

Zoho Writer – This is a cloud-based word processor. Zoho writer allows one to generate documents and collaborate with the team members in real-time.

Zoho Sheet, Zoho Creator, Zoho Show, Zoho Meeting, and Zoho Docs are some more prominent products of Zoho. Zoho reached one million users by the year 2008. With over 13 million users in 2014, Zoho became one of the largest subscription businesses.

Zoho eventually propelled in practically every field of sales, finance, communication, and marketing. The corporation brought in a wider digital transformation with more than 50 million customers in 2019, and released ‘Zoho Remotely’, a toolbox to expedite work-from-home.

Zoho – Founders

Zoho was created by Sridhar Vembu and Tony Thomas in 1996. However, the firm was not famous as Zoho but as AdventNet (1996-2009) back then.

Sridhar Vembu

Zoho creator Sridhar Vembu comes from a modest background. Sridhar was born in 1968 to a farmer in a little town near Thanjavur but his goals were enormous! He dreamt of studying in an IIT and then moving to the US and he successfully captured his ambitions.

Sridhar attended in a Tamil Medium Government School through the 10th standard and obtained his degree from IIT Madras in 1989. Sridhar finally earned a scholarship to pursue his Masters and Ph.D. in Electrical engineering from Princeton University in New Jersey. The inventor of Zoho received his PhD degree and chose for a professorship in Australia. He moved to Australia but after 2 weeks he returned back, resigned from the job.

He started his career with Qualcomm in 1994. Two years later in 1996, he kickstarted his own firm, AdventNet with Tony Thomas, who is also an IIT Madras alumnus and was an old acquaintance of Sridhar. It was Tony, who built a preliminary copy of networking software and required help to market it when Sridhar joined him as the Chief Evangelist to form AdventNet, which eventually came to be known as Zoho since 2009.

Sridhar Vembu was given the Padma Shri, on the occasion of India’s 72nd Republic Day (2021). Sridhar is the 59th richest man in India, according to Forbes 2020. However, the original millionaire is known for his humble approach and often prefers to go barefoot. Sridhar previously remarked in an interview, “I live very modestly, I loathe wearing shoes. If I can prevent it, I do.”

Tony Thomas

Zoho cofounder Tony Thomas worked at Bell Labs, before creating AdventNet. Sridhar and Tony both had similar interests in business and technology which lead them to develop their big venture.

Now, Zoho runs with 12,000+ workers.

Zoho – Startup Story

The two founders of Zoho first opted to target the Japanese electronics manufacturers to move on with their company and in the interim, Sridhar started to construct the vision of AdventNet, which will power it for generations.

A VC approached them in 2000, which needed them to quit and liquidate at the end of 7 years but it was halted quickly since Sridhar and Tony were in no way watching everything come down after toiling that hard.

It was 2001-2002 when the markets fell! The AdventNet clients were dropped from 150 to 3 but thankfully, they had enough money to survive and pivot.

ManageEngine, a premium IT ops suite for middle market and corporate customers, was created in 2003, which immediately started to work with a list of firms, over 60% of which had its name in the Fortune 500 list then. Thus, it became a leader in its target sector.

They had developed a winning recipe by then, which included:

Lower Cost

Largest Product Suite

Massive Indian Engineering Base

Sridhar immediately realized the potential of Cloud and SaaS and moved to constructing an office suite to break into the consumer market. Google Docs was ultimately released in 2005, and he switched again.

“It was easier to compete with Salesforce than Google, so we built a CRM,” said Sridhar.

Zoho team targeted small offices and home offices and hence, they originally planned to take the domain name, “SOHO” to construct, however realizing that the name was not available, the firm went for, which however was near enough, but pricey. The name was eventually picked as “Zoho”, which began to be the nursery of Zoho Docs and CRM.

The USP of Zoho Docs and CRM was to leverage on the extensive services that they bragged of at low pricing and this requires a massive staff of programmers but Zoho didn’t back out.

The firm really had 600 engineers with them in 2007, whereas Salesforce, the industry leader, had just 100 engineers. Zoho currently employs and trains hundreds of engineers straight from their HS and takes them through the schools that the firm has established for them. The Zoho Schools of Learning instruct their students in the skills that are vital for software development, and in exchange, pay them to attend their schools. The kids ultimately mature into excellent engineers, who are kept by a combination of location, and a big R&D budget.

The Zoho Schools are headquartered out of Tamil Nadu, India, and allow its students to remain near their family, which are generally situated out of the rural districts of Tamil Nadu.

Zoho – Business Model and Revenue Model

‘Marketing via Engineering’ is Zoho’s ultimate business model. It lets customers to use their applications with no upfront fee and it neither profits from adverts. Zoho has around 10,000 workers and a revenue of $590 million as of 2020.

It’s just the products’ quality that is behind the successful company plan. Zoho, with its ‘freemium model’, allows for a free sign-up initially, followed by specified payments for its premium upgrades.

“A lot of the cloud companies are moving away from the freemium model. We still believe in it firmly because, for us, the economics is, we want to gain as many customers as possible initially. Get them to use our product vigorously — we really measure usage very closely — and then since we have a portfolio, they will find more and more of the Zoho suite, and then they end up buying something”, says Sridhar Vembu, founder, and Zoho Corporation CEO.

Zoho believes in spending or reinvesting roughly 50% of its income in new projects. The overall expenditure of Zoho is inherently smaller because the firm always lets the products speak for itself and refrains from spending too much on marketing. It is reported that it spends roughly 5% of what its competitors do for marketing purposes.

The branding of Zoho has always been odd, to say the least. The corporation, in fact, resorted to taunting Salesforce in 2013 by disrupting their worldwide user convention. That branding adds to the pace momentum of the firm, which is presently growing at ~30% per year.