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An IPO is always a manic time for a company, but even by those standards, ZoomInfo's has been particularly intense. The business contact database, used by salespeople to find new leads, has not only had to conduct much of the process remotely, it's also launching into the most uncertain economic environment in living memory. Not that that's proved to be much of a problem: The company priced well above its initial target, with shares jumping 90% upon its trading debut.
"It's been a little crazy," CFO Cameron Hyzer said ahead of the company's listing this morning. Hyzer, who is currently in Maine, said the process has brought all sorts of unexpected challenges. "Our neighbors apparently have emus," he said, "so I've had to stop calls to go and shoo the emus away." Despite those animal-related incursions, the process has been a good one, Hyzer said — and it's turned out about as well as he could have hoped for. As long as you don't confuse his stock with Zoom Video's, that is.
The following interview has been lightly edited for clarity and length.
What has this week been like?
It's been a little crazy. I think every roadshow and IPO has its own idiosyncrasies — obviously ours is a little different because we're doing this from home. It's all done on videoconferences and phone calls. But it's been exciting. I think we've got a great reception from different investors, and it's been great to find investors that are really focused on the long-term story.
You confidentially filed for an IPO back in December, which was obviously a very different world. What was the thinking like when the pandemic hit?
First and foremost, we wanted to make sure that all of our employees were safe and that our business would continue to run. We very quickly shifted toward making sure that work-from-home worked for everyone, that everyone had what they needed. And then we kind of just watched the markets, and through that time period we had obviously met with investors. Investors kept coming to us and saying, "Look, we understand that this is a weird time, but we're still very interested, and we think that this is a potential company that really could go public right now." As the market has kind of settled down a little and, there's a bit of normalcy, at least in terms of the markets, we kept reassessing and decided that this was actually a good time for us to get through the process, so we can get back to building the business and really focusing on the future.
What were you looking for in terms of the market settling?
One of the things that the bankers very much focus on is volatility. IPO is a process that — for us it took a week — usually takes two weeks. So you want to have some confidence that there's not going to be major shocks or drops or other issues around how investors are thinking about valuation and how they assess businesses.
In March, as an example, volatility was at record levels and, every day things changed. That wasn't a good time to kind of start a two-week process to court investors and create new long-term relationships. But as the volatility came back to more normal levels — there's a lot of ways that people look at it, but if you look at the VIX index, we're back into the 20s, which is a more normal time. And obviously with a shortened roadshow, because we're doing it all virtually, there's less travel — you don't have to spend quite as much time on planes and hotels and so forth. I think everyone got comfortable that this was as good a time as any.
Did any of the unrest in the last few days with the Black Lives Matter protests affect your thinking at all?
It's a tough backdrop, but we had actually started the process before a lot of that came into being. And so we obviously have a lot of feelings about the unrest and injustice in the world, but getting through the process was something that we just needed to kind of keep powering through.
It's been reported that your IPO was massively oversubscribed. What did investors seem to be so keen on?
We think we have a really special business because we drive operating profitability and high growth together, and we do it in a market where we serve basically any business that sells to another business. I think that the really big opportunity over the long term, the fact that we continue to grow, and continue to grow profitably, are all aspects that people get really excited about.
Did you get a sense from investors that they liked or didn't like doing this remotely?
We had the advantage that we'd already started the process and talked to a lot of people. So we've met a lot of people in person already. For those people that we're meeting for the first time, I think they've gotten a little more used to doing things from home. The great thing about people in general is they're generally resilient. So they've gotten used to doing things through videoconference or whatever else. I don't know that it's 100% the same, but it's certainly worked well for us, and I think people got really comfortable and excited about the story.
Do you get to do a virtual bell-ringing?
We are going to do a virtual bell-ringing. In the theory of there are good things and bad things, certainly it would have been more exciting to be in New York, we're listing on the NASDAQ so it would have been in Times Square with lots of big lights and great things. But realistically, this is just one small part of our journey. Henry [Schuck] founded this company 13 years ago, and we're excited about what the next 13 years or longer have to offer.
Have you seen any benefit from the whole pivot to remote work, now that people can't go to conferences to find customers?
Part of the value we think we deliver to customers is helping them sell more effectively and efficiently, and we do that with data and insights and technology. One of the things that we've always felt is an inefficient way to go to market is taking people out to dinners and ballgames and flying across the country. Our platform just natively helps people find their customers without having to spend as much time and money on those inefficient methodologies. That was a trend that we saw before COVID, but certainly the fact that you can't be taking people out to dinner and there aren't ball games to go to — I think it's put into starker relief that there is a more efficient way to do things, and we help companies do that.
What are your plans for the next six to 12 months?
With the proceeds from the offering we are going to pay down some of our debt and continue to focus on just growing the business. Our real goal is a much longer-term time horizon. We think of the world as really delivering tactical go-to-market, helping every salesperson or marketing person on an individual level just be more effective and more efficient, so they can hit their number and continue to be successful.
Do you think people will confuse your stock with Zoom Video's, as they did with Zoom Technologies'?
We hope not. Zoom [Video] is actually a good customer of ours. We help them continue to drive growth within their business as well. One of the confusions is that the other Zoom [Zoom Technologies] actually had a ticker that was ZOOM [it's since been changed to ZTNO]. Our ticker is ZI. I think our investors are very focused on ZI is ZoomInfo, and we're hoping that doesn't get confused with Zoom Video. And ultimately, I think we're focused on really engaging with our investors and continuing to grow. So hopefully there's very little confusion going forward.
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Shakeel Hashim ( @shakeelhashim) is a growth manager at Protocol, based in London. He was previously an analyst at Finimize covering business and economics, and a digital journalist at News UK. His writing has appeared in The Economist and its book, Uncommon Knowledge.
Microsoft wants to replace artists with AI
Better Zoom calls, simpler email attachments, smart iPhone cases and other patents from Big Tech.
Turning your stories into images.
Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.
Hello and welcome to 2021! The Big Tech patent roundup is back, after a short vacation and … all the things … that happened between the start of the year and now. It seems the tradition of tech companies filing weird and wonderful patents has carried into the new year; there are some real gems from the last few weeks. Microsoft is trying to outsource all creative endeavors to AI; Apple wants to make seat belts less annoying; and Amazon wants to cut down on some of the recyclable waste that its own success has inevitably created.
And remember: The big tech companies file all kinds of crazy patents for things, and though most never amount to anything, some end up defining the future.
Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.
Everything you need to know about the Roblox direct listing
The company is expected to go public via direct listing on the New York Stock Exchange in February.
Roblox CEO David Baszucki is taking the company public.
Roblox is a video game platform, though it describes itself alternatively as a "metaverse," "human co-experience platform" and "new category of human interaction." It's expected to go public via direct listing on the New York Stock Exchange in February.
In simpler terms, Roblox enables developers to build games within the Roblox virtual world, which looks like a crossover between Minecraft and Lego. Developers publish and distribute their games through Roblox to an audience of some 31.1 million daily active users.
What Does Roblox Do?
<p>Many of the core Roblox experiences are free, but the virtual currency, Robux, can be used to customize player avatars, unlock premium games and purchase in-game perks. Roblox makes money by charging users for Robux and through its <a href="https://www.roblox.com/premium/membership" target="_blank" rel="noopener noreferrer">subscription service</a>, Roblox Premium, which offers discounts and access to exclusive content. Developers keep <a href="https://developer.roblox.com/en-us/articles/developer-economics#:~:text=When%20you%20start%20developing%20on,via%20our%20virtual%20currency%20Robux" target="_blank">a portion</a> of the Robux generated through their games, and can cash out through the <a href="https://en.help.roblox.com/hc/en-us/articles/203314100-Developer-Exchange-DevEx-FAQs" target="_blank" rel="noopener noreferrer">Developer Exchange Program</a>. </p><p>An active Roblox developer community means content is always changing. On my homepage, for instance, Roblox gives me the option to play a <a href="https://www.roblox.com/games/4996049426/UPDATE-All-Star-Tower-Defense?refPageId=7098b58b-fcbf-42bd-86a0-fcd00216ed05" target="_blank" rel="noopener noreferrer">tower defense game</a>, <a href="https://www.roblox.com/games/166986752/Plane-Crazy?refPageId=7098b58b-fcbf-42bd-86a0-fcd00216ed05" target="_blank" rel="noopener noreferrer">flight simulator</a>, <a href="https://www.roblox.com/games/364802243/Freeze-Tag-NEW-MAP?refPageId=7098b58b-fcbf-42bd-86a0-fcd00216ed05" target="_blank" rel="noopener noreferrer">freeze tag simulator</a>, a <a href="https://www.roblox.com/games/920587237/Adopt-Me?refPageId=7098b58b-fcbf-42bd-86a0-fcd00216ed05" target="_blank" rel="noopener noreferrer">pet game</a> reminiscent of Nintendogs and a <a href="https://www.roblox.com/games/5596703547/Weight-Lifting-Simulator-5?refPageId=7098b58b-fcbf-42bd-86a0-fcd00216ed05" target="_blank" rel="noopener noreferrer">weight-lifting simulator</a>. Developers have created more than 18 million games/experiences for the Roblox platform, though users <a href="https://venturebeat.com/2019/12/09/robloxs-10-biggest-games-of-all-time-each-with-more-than-a-billion-plays/" target="_blank" rel="noopener noreferrer">tend to gravitate</a> to a much smaller subset of the available content. Flexibility in gameplay is critical to Roblox's long-term value proposition, since it hopes to avoid the boom-and-bust cycle of a typical standalone game. </p><p>If you feel old reading any of the above, it's probably because over half of Roblox users were born after 2006. But what the community lacks in life experience, it makes up for with enthusiasm: Roblox <a href="https://www.sec.gov/Archives/edgar/data/1315098/000119312520298230/d87104ds1.htm#INDEX" target="_blank">users spent a total</a> of 22.2 billion hours on the platform for the nine months ended Sept. 30, 2020, which comes out to 2.6 hours per day for each active user. With children locked out of other social activities during the pandemic, Roblox experienced a massive uptick in usage; total time spent on the platform <a href="https://www.nytimes.com/2020/08/16/technology/roblox-tweens-videogame-coronavirus.html" target="_blank">doubled between February and July 2020</a>.</p>Roblox's Financials
<p>Roblox isn't yet profitable, but it has managed to grow revenue at an impressive clip. According to the company's S-1, Roblox generated $588.7 million in revenue for the nine months ended Sept. 30, 2020, representing a 68% jump from the same period in 2019. Costs grew even faster than revenue, however, so Roblox posted a $205.9 million consolidated net loss in the 2020 period, down from the $46.3 million consolidated net loss in the first nine months of 2019.</p><p>Roblox's highest expense is developer exchange fees, which accounted for roughly 26% of total expenses in the first nine months of 2020. Other significant costs include server fees, consumer safety (Roblox contracts out some 1,700 agents to monitor its platform to uphold community standards), research and development investment and the 30% fee owed to Apple and Google for mobile OS purchases. </p>What Could Go Wrong?
<p>Three themes stand out from Roblox's S-1: loss of user interest, access to distribution channels and user safety.</p> <p><strong>Children's attention is notoriously fickle, </strong>and Roblox is asking investors to bet billions on its ability to remain relevant for years to come. For every Lego or Nintendo that has defined multiple generations of childhoods, there's a Club Penguin, Neopets or Webkinz that quickly went from all the rage to irrelevant.</p><ul><li>"The multitude of other entertainment options, online gaming, and other interactive experiences is high, making it difficult to retain users who are dissatisfied with our platform and seek other entertainment options," Roblox writes. "Moreover, the majority of our users are under the age of 13. This demographic may be less brand loyal and more likely to follow trends, including viral trends, than other demographics."</li><li>Another concern is that Roblox won't be able to sustain its boost in user activity after the pandemic subsides. The company writes: "The COVID-19 pandemic and resulting social distancing, shelter-in-place and similar restrictions led to increased developer and creator and user engagement on our platform relative to our quarterly forecast and historic trends. These increases in user activity are almost certainly not indicative of our financial and operating results in future periods."</li></ul> <p><strong>Roblox's access to distribution channels is contingent </strong>upon external partnerships.</p><ul><li>In December 2020, Roblox <a href="https://www.scmp.com/tech/apps-social/article/3112379/us-gaming-platform-roblox-licensed-release-china-company-plans-go" target="_blank" rel="noopener noreferrer">gained approval</a> to operate in China through a joint venture with Tencent. This could be an enormous revenue opportunity, but it comes with uncertainty given the <a href="https://www.theverge.com/2020/10/23/21531154/judge-denies-trump-administration-ban-wechat-tencent-china" target="_blank" rel="noopener noreferrer">tense relations</a> between the U.S. and China.</li><li>Apple and Google also have significant leverage over Roblox. "For the nine months ended September 30, 2020, 34% of our revenue was attributable to Robux sales through the Apple App Store and 18% of our revenue was attributable to Robux sales through the Google Play Store, and during the same period 68% of our engagement hours on the platform were from users who signed up through the Apple App Store and Google Play Store," the company writes. Roblox raises the possibility that Apple or Google could damage their profitability by changing fee structures or data policies. </li></ul> <p><strong>Roblox needs to uphold high safety standards</strong> since so many children are on the platform; failing to do so would damage their reputation. </p><ul><li>The company writes: "We have faced allegations that our platform has been used by criminal offenders to identify and communicate with children and to possibly entice them to interact off-platform, outside of the restrictions of our chat, content blockers, and other on-platform safety measures. While we devote considerable resources to prevent this from occurring, we are unable to prevent all such interactions from taking place." </li><li>Roblox also brings up the possibility that developers make content that the community considers "illicit, explicit, profane, or otherwise objectionable." The company bans such content, but with millions of experiences available, some could slip through the cracks. </li></ul>Who Gets Rich?
<p>Investors in Roblox saw the company's valuation grow seven times over the past year. In February 2020, Roblox raised $150 million in a series G round that valued it at $4 billion. Then in January 2021, Roblox closed a $520 million series H round that generated an astounding $29.5 billion valuation.</p><p>This valuation may seem absurd to some. Is a children's video game (OK, "platform") worth <a href="https://www.barrons.com/articles/ford-has-a-hidden-asset-just-like-gm-its-stock-could-rise-soon-too-51611159634" target="_blank" rel="noopener noreferrer">nearly as much as Ford</a>? Whether Roblox can justify its valuation in the long run, here's who stands to gain from a stellar IPO, based on shareholder disclosures from the <a href="https://www.sec.gov/Archives/edgar/data/1315098/000119312520298230/d87104ds1.htm#rom87104_3" target="_blank" rel="noopener noreferrer">S-1 filing</a> on Nov. 19, 2020:</p><ul><li>Altos Ventures <a href="https://www.cnbc.com/2020/11/19/roblox-s-1-ipo-filing-released.html#:~:text=Altos%20Ventures%20is%20Roblox's%20largest,and%20Tiger%20Global%20owns%207.3%25." target="_blank" rel="noopener noreferrer">owned</a> 21% of shares.</li><li>Meritech Capital owned 10% of shares. </li><li>Roblox founder, president and CEO David Baszucki owned 12% of outstanding shares.</li><li>Index Ventures owned 9.9% of shares. </li></ul>What People Are Saying
<p><strong>"The S-1 makes plain exactly how big Roblox's ambitions are: It's trying to build an entire new world, with a new economy, a new currency, a new everything, and not just for kids. The company wants to be thought of like a tech giant, not a game developer."</strong> —Protocol's David Pierce <a href="https://www.protocol.com/newsletters/sourcecode/the-metaverse-goes-public-roblox-s1-ipo?rebelltitem=1#rebelltitem1" target="_self">wrote in Source Code</a> after Roblox filed its S-1.</p><p><strong>"Roblox could be to Facebook what Shopify is to Amazon, the non-social media social media firm. Just as hospitals, doctors offices, headquarters, shopping malls, and campuses are being bypassed and shifting hundreds of billions in stakeholder value, Roblox could disrupt the kid attention economy. Roblox is set to go public this month, and will create meaningful shareholder value. Prediction: stock trades up 70% or more on first trade. More important, Roblox could be the first social media firm whose shareholder value isn't designed to extract value from the least powerful stakeholder, kids."</strong> —NYU Professor Scott Galloway in his <a href="https://www.profgalloway.com/roblox-and-the-dispersal-of-creativity" target="_blank">No Mercy / No Malice newsletter</a>.</p>The future of the cell phone, according to the man who invented it
Martin Cooper on 5G, AI, and why sometimes in tech it's helpful to have an enemy.
Martin Cooper with his original DynaTAC cell phone.
David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.
Martin Cooper helped invent one of the most consequential and successful products in history: the cell phone. And almost five decades after he made the first public cell phone call, on a 2-pound brick of a device called the DynaTAC, he's written a book about his career called "Cutting the Cord: The Cell Phone Has Transformed Humanity." In it he tells the story of the cell phone's invention, and looks at how it has changed the world and will continue to do so.
Cooper came on the Source Code Podcast to talk about his time at Motorola, the process of designing the first-ever cell phone, whether today's tech giants are monopolies and why he's bullish on the future of AI.
David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.
What $9 billion would do for the Technology Modernization Fund
The Alliance for Digital Innovation's Matthew T. Cornelius looks at how a new administration's big investment could alter the fund he helped set up.
The funding itself is only half the battle.
Kevin McAllister ( @k__mcallister) is an associate editor at Protocol, leading the development of Braintrust. Prior to joining the team, he was a rankings data reporter at The Wall Street Journal, where he oversaw structured data projects for the Journal's strategy team.
The Biden administration wants to give the Technology Modernization Fund a $9 billion payday. In doing so, they could change what the fund actually does.
Matthew T. Cornelius, now the Alliance for Digital Innovation's executive director, was instrumental in getting the fund off the ground back in 2018. As a senior adviser for technology and cybersecurity policy at the White House's Office of Management and Budget, he helped make some of the fund's first investments in government IT modernization. At the time, though, there was only about $100 million in the fund.
Kevin McAllister ( @k__mcallister) is an associate editor at Protocol, leading the development of Braintrust. Prior to joining the team, he was a rankings data reporter at The Wall Street Journal, where he oversaw structured data projects for the Journal's strategy team.
Amazon’s head of Alexa Trust on how Big Tech should talk about data
Anne Toth, Amazon's director of Alexa Trust, explains what it takes to get people to feel comfortable using your product — and why that is work worth doing.
Anne Toth, Amazon's director of Alexa Trust, has been working on tech privacy for decades.
David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.
Anne Toth has had a long career in the tech industry, thinking about privacy and security at companies like Yahoo, Google and Slack, working with the World Economic Forum and advising companies around Silicon Valley.
Last August she took on a new job as the director of Alexa Trust, leading a big team tackling a big question: How do you make people feel good using a product like Alexa, which is designed to be deeply ingrained in their lives? "Alexa in your home is probably the closest sort of consumer experience or manifestation of AI in your life," she said. That comes with data questions, privacy questions, ethical questions and lots more.
David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.