Zuora soars in its IPO, and the founder’s stake is worth nearly $200 million — 5 years after the company hit rocky times

  • The cloud accounting software company Zuora popped about 50% on its first day as a public company.
  • The company was founded by Tien Tzuo, a well-known Silicon Valley player who was employee No. 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 told Business Insider.

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

On Thursday, its first day of trading, Zuora’s stock popped about 50%. It’s now trading at over $US20, compared with its initial price of $US14.

Before that, Zuora had other hallmarks of a successful initial public offering. As CEO Tien Tzuo wrapped up an exhausting two-week roadshow, investor interest was so high that Zuora bumped up the price of its initial shares twice.

With shares at $US14, Zuora raised $US154 million and entered the market at a $US1.4 billion valuation, an increase over roughly $US1 billion as a private company.

The company earned $US168 million in revenue in its last fiscal year, up from $US113 million in fiscal 2017. It lost $US47 million in fiscal 2018 versus $US39 million in fiscal 2017.

Zuora was an investor favourite because its accounting software is geared toward something Tzuo calls the “subscription economy.” As companies across numerous industries chase subscription revenue, Zuora wants to make it easier for them to collect subscriptions and have renewable billing, including all the oddball tracking and accounting practices that come with that.

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

On Thursday, that choice paid off for him – Tzuo’s 10% stake in Zuora, at $US20 a share, is worth about $US193 million.

Dicey times 5 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 became unhappy, early employees bailed, and Tzuo’s investors got nervous.

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

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

Tien Tzuo CEO
Tien Tzuo, Zuora’s founder and CEO. Zuora

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 – “the eyes and ears,” he says – 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. Tzuo recalls that when the company held an offsite manager meeting to prepare for going public, a long-term investor turned him and said, “If I used one word to characterise this company, it is ‘grittiness.'”

“So we downloaded ‘True Grit’ to watch the movie,” Tzuo said.

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

We asked Tzuo whether being the CEO of a public company meant he would start buttoning his lips.

“I’m off-script right now,” he said with a laugh. We’ll take that as a no.