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Tech: Zuora soars in its IPO and the founder’s stake is worth nearly $200 million — 5 years after the company hit rocky times (ZUO)
PublishedBy: in Business Insider/TechApril 12, 2018


Well-known Valley founder CEO Tien Tzuo celebrates an IPO, says the one word to describe his company is "grittiness."

  • Cloud accounting software company Zuora popped about 50% on its opening day as a public company.
  • The company was founded by well-known Silicon Valley player, Tien Tzuo, who was employee number 11 at Salesforce.
  • There were some dicey times for Tzuo about five years ago, when things weren't going well and employees were bailing.
  • Those employees have since come back and today is a sweet moment of validation, he tells Business Insider.

2018 is shaping up to be the year of the enterprise tech IPO, and cloud accounting software company Zuora just entered the public market with a bang.

On Thursday, its first day of trading, Zuora's stock popped 50%. It is currently trading at over $20 compared to its initial price of $14.

Prior to that, Zuora had other hallmarks of a successful IPO. As CEO Tien Tzuo wrapped up an exhausting two-week road show, investor interest was so high that Zuora bumped up the price of its initial shares not once, but twice.

At its chosen price of $14, Zuora raised $154 million for the company and entered the market at a $1.4 billion valuation, an increase from its roughly $1 billion valuation as a private company.

The company earned $168 million in revenue in its last fiscal year, up from $113 million in fiscal 2017. It lost $47 million in FY18 versus $39 million in FY17.

Zuora was an investor favorite because its accounting software is geared toward something Tzuo calls the "subscription economy." Zuora makes it easier for companies to collect subscriptions and have renewable billing, including all the odd-ball tracking and accounting practices that comes with that. Companies across all industries are chasing subscription revenue, from tech companies selling software to Fender Guitar selling online guitar lessons.

Tzuo is a well-known founder in Silicon Valley. He was employee No. 11 at at Salesforce and worked his way up to chief strategy officer. He and Salesforce founder Marc Benioff had worked together at Oracle. Tzuo left Salesforce in 2008 to found his startup, with Salesforce founder CEO Marc Benioff's blessing — and some of his money.

Today, that choice paid off for him personally. At $20 a share, Tzuo's 10% stake in Zuora is worth about $193 million.

A dicey time five years ago

There were difficult times over the decade Tzuo spent building Zuora. About five years ago, the company hit a growth spurt, but its cloud service couldn't keep up with demand and engineers couldn't build out promised features fast enough. Customers grew unhappy, early employees bailed, and Tzuo's investors got nervous, he remembers.

"It was the first time doubt started seeping into the company," Zuora recalls.

Uncertainty can mean danger for founders who are CEOs. Founders can occasionally find themselves ousted by nervous investors on their board, who may want to replace them with someone more seasoned.

But not Tzuo.

Instead of cracking the whip and demanding longer work hours — which can burn out employees — Tzuo said he wanted "to make people feel empowered."

He pushed all teams to work more closely together, including the sales and support teams "who were the eyes and ears" and the engineering team that wrote the code.

The high-pressure situation was a learning moment for him as CEO.

"People talk a lot about creating a culture," Tzuo says. "But if you have the foundations of shared trust, a shared journey and a shared sense of mission, the culture takes care of itself."

Since then, several of those early Zuora employees who left have boomeranged back. When the company held an offsite manager meeting to prepare for being public, a long-term investor turned to him and said, "If I used one word to characterize this company, it is 'grittiness,'" Tzuo recalled. "So we downloaded True Grit to watch the movie (you know there are two versions)."

Tzuo is also known in the Valley for being outspoken. For instance, after the 2016 Brexit vote and US elections, he told Business Insider that technology was destroying a lot of traditional jobs and worker displacement needed to be addressed.

We asked Tzuo if being a public company CEO meant he was going to start buttoning his lips.

"I'm off-script right now," he laughed. We'll take that as a no.

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