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Zoom Deal Charts New Course in Post-COVID Era

J.P. Morgan’s investment banking team discusses record $2 billion software follow-on for Zoom and outlook for Silicon Valley

How would you define Zoom’s success?

Sanjay Rao
Technology Investment Banking Client Executive

Since its market debut in 2019, Zoom has become an icon of the COVID era and one of the best-performing tech companies, climbing ~10 times from its IPO price. Its founder and CEO has made what he describes as ‘delivering happiness’ to customers, employees and the broader community central to his business ethos and it is reflected in the company’s culture and growth in popularity. This was important to communicate to investors during this equity raise, which connected them to a broader swathe of funds.

Greg Chamberlain
Head of US TMT Equity Capital Markets

As the world is changing, Zoom is a driving force, enabling connection and collaboration worldwide with its high quality, frictionless and secure communications platform. The company had bet on digital transformation and the basic nature of how customers interact as fundamentally changing – COVID accelerated that dramatically as well as the permanence of this change. They had to scale immediately overnight to support the entire world which was an incredible strain. Given the uniqueness of their cultural fabric, they were able to do it successfully.

What does this transaction mean for their business?


Zoom has had exceptional momentum – if you look at their growth metrics, the company has been consistently delivering results within the software ecosystem. With the additional resources provided from the equity raise we believe Zoom will be in an even stronger position to fully realize their long–term potential whether it be continuing to invest in the business or making strategic acquisitions to shift to being a broader platform.


The company is focused on maximizing their strategic opportunity they have set and raised this capital opportunistically to strengthen the balance sheet, making it more reflective of the size of the business and the size of the market opportunity. Another objective was to bring new and existing shareholders into the stock who are excited about the long–term value the business is delivering.

How do you see Zoom’s model progress throughout this year and what is the general outlook for collaboration?


Understanding the “new norm” of what life will look like in a post-pandemic world will be critical – both for enterprises and consumers alike. For Zoom, they envision the future of work to be a hybrid workplace combining the best experience for both in-person and virtual connections – to their credit they had called the evolution of collaboration – I don’t think anyone could have guessed it would come so quickly.

They have developed new and exciting product enhancements and offerings to provide a safe, secure and inclusive experience. The rise of the hybrid work environment will create new opportunities within software and will be exciting to watch unfold. Zoom has also been focusing on the dramatic increase in usage from consumers with recent announcements like OnZoom, which allows paid users to host live events like yoga classes or cooking shows. Innovations like this will enable Zoom to continue to be successful across multiple constituents going forward as the world shifts to a “new norm.”


The communications and collaboration space has a very large total addressable market – so there is room for multiple players. Zoom has had intense competition from various players since they started, but they have always been able to capture significant market share because of their key differentiators in terms of quality, reliability, usability, and their security will also set them apart.

More broadly, what kind of tech companies do you expect to be raising large amounts of capital this year?


Given the disruption in software and internet especially, I would expect companies to continue the path of raising capital to accelerate adoption of the opportunity ahead of them. COVID validated that technology has advanced well beyond expectations and the next-generation disruptors will continue raising capital to accelerate the trajectory they have and will continue to see. In some cases, you have seen multiple years of digital transformation being pulled forward into the present, creating a massive opportunity for players within the software ecosystem.


The “stay private for longer” approach has changed. Activity levels among private tech companies looking to go public is high. The market backdrop and investor appetite for high growth companies is strong and this is driving IPO issuance. Deal activity has been high already in the first months of the year and this is likely to continue through the first half of the year.

How does M&A fit into the landscape?


M&A continues to provide a critical part of capital allocation within software – disruption within software and internet will continue to be a driving force of consolidation. Given valuations within the software sector, notably with potential buyers, I would expect the pace of M&A to accelerate as companies can use their strong balance sheets and acquisition currency to consolidate businesses to assist in capturing larger addressable opportunities.

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