When Zoom CEO Eric Yuan hired Kelly Steckelberg to be his company's first CFO in 2017, he had his sights set on going public and needed an experienced hand to help him prepare for and manage the IPO. He got that. But he also got a former CEO whose experience on the strategic side of running a company made her the ideal partner to manage Zoom's explosive pandemic-led growth.
"We didn't hire Kelly because we are going to go public," Yuan told the Silicon Valley Business Journal at the time. "It's more to help us grow our business."
Yuan and Steckelberg worked together at WebEx, the video conferencing platform Cisco bought in 2007. For all of WebEx's promise, Yuan said, it was too hard for people to use. That led him and other engineers to leave and build from scratch what they hoped would be a reliable, user-friendly platform: Zoom.
Steckelberg, who was finance chief and then CEO of dating app Zoosk after she left WebEx, was the natural choice to join her former colleagues.
"Having the opportunity to be CFO at Zoom was something I just couldn't pass up," she said.
For her role managing a company that, because of the pandemic, grew 355% over two quarters and became a household name, Steckelberg is CFO Dive's CFO of the Year.
"Kelly and her team have done a tremendous job," says Ryan Koontz, who follows Zoom as managing director of Rosenblatt Securities. "She's an integral part of the machine there."
Steckelberg brings two guiding principles to her role as CFO: Employees should think of the company's finances as their own, and they should understand how their role contributes to the company's success.
"If you give employees the opportunity to understand how they fit in, most will rise to the occasion and do everything they can to help," she said. "Everybody wants to participate in the company's financial success."
Steckelberg credits her three years as CEO of Zoosk with giving her organization-wide insight.
"It gave me a much greater understanding of how marketing, engineering, and product development come together," she said. "If we're launching a product, what does that mean for needs that ripple across the whole organization? I'm more able to prompt people to think, if we're adding all this headcount over here, don't we need something on this side as well?"
Zoosk was a popular dating app when Steckelberg joined it as finance chief in 2011, but it ran into trouble while preparing for an IPO in 2014. Its losses were mounting despite having 27 million users and $200 million in revenue.
With critics saying the company was focusing too much on growth at the expense of profitability, the company canceled its IPO and Steckelberg was promoted to CEO. The job forced her to make tough calls, including laying off 15% of the staff and reducing marketing spend.
"Reductions in force are the hardest decisions you have to make," she said.
A key to the company's turnaround was her executive team's decision to change the direction of the product and eliminate features that would decrease its revenue in the short term.
"That was a very difficult decision to make," she said. "It's absolutely counter-intuitive to everything you learn as a finance person. But two years later, our strategy really took hold."
Zoom was already a high-flying company when she left Zoosk in 2017, but the pandemic supercharged its growth in a way few businesses have experienced.
"It just happened to be they were at the right place at the right time," Koontz said. "They literally accelerated about four years' worth of growth into two quarters. And there aren't too many types of products or services you can sell in the world that can actually produce that. Zoom is a verb now."
Koontz credits Steckelberg and her team with managing the company's meteoric rise with the right mix of short- and long-term investment while executing an aggressive organization-wide hiring plan. The company has grown from about 700 employees to 4,000 in the last three years, and needs more, but the pandemic has slowed hiring.
"I know they paid out bonuses to a lot of employees over the third quarter, during the pandemic, just for the workload these people had to incur because they literally couldn't hire fast enough," Koontz said.
He praised the company's decision to open its two newest R&D centers in Arizona and Pennsylvania rather than in Silicon Valley or other technology hubs. "These are places where you can hire engineers," he said.
The company's decision to add server capacity by partnering with Oracle, rather than building additional in-house data centers, is another smart move, because it provides the kind of flexibility that it can turn on and off as needed in the short-term.
"Their margins took a little bit of a hit because they had to use public cloud instead of building their own infrastructure out in some places," he said. "You can basically order up the level of service you need on an hour-to-hour basis to handle your peak loads, so they're basically using public cloud to handle the peaks and to handle the surges in demand where they just aren't ready with their own infrastructure."
"It gives us the ability to flex up and down as we need to going forward," Steckelberg said. "We're being thoughtful about not getting over-committed from a resource perspective and looking where we can use third-party resources to flex. We're going to have this hybrid approach."
The mix worked well when usage dropped over the summer when online classes concluded and then picked up again in the fall.
To know whether more server capacity is needed, Steckelberg said, she looks at a metric she didn't pay much attention to before the pandemic: concurrent daily meeting attendees. Previously, she looked at daily meeting attendees as a gauge of company performance. But now, she needs to know how many people are video conferencing at the same time.
"It's become more important over the last six months," she said. "It tells us where we're going and what we need to add."
The company's biggest challenge lies ahead: staying on a growth trajectory once the pandemic eases and the demand for video conferencing subsides.
After Pfizer in early November announced a 90% success rate with its vaccine in tests, Zoom's stock valuation dropped 17%, a preview of what's to come if it can't show a renewed growth path.
But the company's strategy so far has been reassuring, Koontz said. In one of its biggest moves, it launched Zoom Phone, a kind of PBX system in which calls, whether for work, home or mobile, are routed through a single system and can be converted to a video call. RingCentral is a dominant player in the space, but it might not be for long.
"Maybe Zoom wants to be the king of unified communications and buy RingCentral," he said.
The company has already snapped up RingCentral's former chief sales executive, Ryan Azus, another WebEx alum, suggesting it is keeping a close eye on the company.
Zoom has also been making its core video conferencing business more attractive for a post-pandemic world. Companies have seen how cost- and time-efficient video conferencing can be compared to on-site events, which makes them likely to make virtual events a bigger part of how they operate even while resuming travel.
Zoom's improvements include a partnership with DocuSign to enable contract signings during virtual meetings and the launch of a program called OnZoom, which is intended to increase the attraction of virtual meetings for small businesses. Other initiatives include voiceless check-ins and what Zoom calls its Smart Gallery, a way for employees attending an in-person meeting virtually to feel more a part of the event.
"We're always listening to our customers and learning from them what is the most beneficial to them," Steckelberg said. "As long as we keep focused on that, competition makes us all be better. It's good for the end user."
"I think they're doing the best they can given the circumstances," Koontz said. "Their op ex in the July quarter was up 104% YOY, so they doubled in size in a single year, and they're still behind. It's pretty incredible what they're trying to pull off."