Would you believe that a man who wears a lungi and lives in a simple village in India runs the most profitable startup in the country? But that is exactly the truth. India has 114 unicorns, of which 77 are currently operating at a loss. At such a time, this ordinary man runs a business from his village and earns enormous profits. He has business operations in over 180 countries and more than 60 million customers. He employs over 11,000 people. Companies like Apple, Netflix, Amazon, and Mahindra are all his clients. His revenue is 7,000 crore rupees, with a profit of 2,700 crore rupees. The company's valuation is 40,000 crore rupees. What makes this startup's story unbelievable is that all this was built without any loans or investors.
The company is called Zoho, and the founder of this company is Sridhar Vembu, the ordinary man from the village. At a time when startups were receiving government notices, he was honored with the Government of India's Padma Shri award. Sridhar was born in a small village in Tamil Nadu. His family were farmers. But after some time, his father got a job at the Chennai High Court, and the family moved to Chennai.
It was during this period that Sridhar took the JEE exam and secured an All India rank of 27. He joined IIT Madras to study Electrical Engineering and became the first graduate in his family.
However, Sridhar was not satisfied with his studies at IIT Madras. So, he went on to pursue higher education at Princeton University, where he earned a PhD. Still, he was not content. Despite being highly intelligent, he did not find joy in reading books or gaining new knowledge from them. This led him to decide to learn independently without relying entirely on books.
After completing his studies, he got a well-paying job at a reputed company. Yet, he did not find satisfaction in life. His desire to do something on his own kept growing.
In 1994, his brother shared the idea of starting a company with him. They decided to return to India and start a company there to create employment and elevate the country's name. So, they came back to India and began their first venture, Advent Net, in a room in their village.
Their idea was to create a machine and sell it. However, the money they had was quickly spent on manufacturing the machine, which ultimately failed. At that time, startups rarely received funding in India; it was almost unheard of. This is how the brothers shifted from hardware to software. From a small room in the village, the two brothers started the venture using just two computers. They had a good understanding of technology and the IT field but little knowledge about running a business. Once, a client told them that they were selling their services at a very low price. That led Sridhar to hire someone for sales. He spent two years learning everything about sales. Similarly, he hired people to manage finance and operations. Gradually, they appointed dedicated people for each department.
Their venture, Soho, got its first breakthrough through an exhibition. Their software was highly appreciated by Japanese clients. Companies like HP asked Sreedhar if they could provide high-priced software, usually sold by giants, at a lower cost. He replied, "Look, you are our customers; we will develop the software exactly as you want." It was then that Sreedhar realized who his competitors were. He understood that while big companies developed software for large clients, if they created software at a lower cost for small and medium-sized clients, the business would grow well—that was his niche.
In 1998, they received a major order, and the company's revenue reached one million dollars. For a company started in 1996, achieving such growth in just two years was a significant accomplishment. Gradually, the company's revenue grew to two million dollars. At that point, several parties were willing to buy the company for 25 million dollars. Their team of five members discussed the matter in great detail. When asked whether to sell the company or not, everyone unanimously said no. They then decided never to accept any investment from anyone. Their ongoing strategy has been to reinvest their profits back into the company to increase their share of earnings.
By the year 2000, Doha’s team had grown to 115 people, and their turnover reached 10 million dollars.
That same year, the dot-com bubble burst in the stock market. Large companies like Cisco, Intel, and Oracle suffered huge losses. For them, it was a minor setback, partly because they were not listed on the stock market. However, 80% of their clients were affected by this crash, leading to significant losses for them as well. All of these clients canceled their orders. This was when we truly saw the exceptional talent of Sreedhar. Despite the sharp decline in revenue, Sreedhar stated that they had enough funds to keep the company running for 12 months. Because they never invested profits elsewhere or took loans, he had a substantial amount of money on hand. As a result, even during this difficult period, they did not have to lay off a single employee from their 115-strong engineering team. With no new work orders coming in, Sreedhar devoted this year entirely to research and development, utilizing all his employees for this purpose. They studied in depth the market changes underway and identified what new products were needed. They upgraded their existing ERP software and released an improved version called Manage Engine. This remains their most profitable product to date. It was also during this period that they decided to enter cloud services—that was the birth of Soho.
The company has developed a software called Zoho, which includes all business-related activities. It will have all the necessary applications and apps for all the activities like HR management, Hiring Finance, etc. While the main server is in the company's hands, anyone can download and use the services from the cloud. This time also Sridhar followed the same old philosophy. Sridhar used to make software for women companies for Rs 1 lakh. As a result, the number of their customers has increased. The name of the company was still Advant Net. It was just the name of a product.
One principle that Sridhar has always believed in is that no business should have debt. Don't owe anything to anyone. The balance sheet should be strong. The business had to grow slowly.
The company was registered in the United States. The company was registered in India in 2009 as Sridhar Soho Corporation out of the desire to have a company registered in India.
It's their ideas that have made them so successful. The first is the low price. The simplest strategy implemented is to manufacture a product at the lowest cost and sell it in the most expensive market. That is, the cost of technology is the highest in the American market and the cost of technology labor is the lowest in India. Their strategy was to make products in India at a cheaper price and sell them to the expensive American market. That's why they are cheaper than others.
Another consideration was the quality of the product. Having a great team, they launched three to four new products every year. Like Apple, which created a technological ecosystem, they also started to release other software that supported their software. So slowly and gradually there are 45 applications of Zoho in the market today.
Another idea that contributed to their success was the freemium business model. This means that if you want to use their software for free for a month or two, you only need to subscribe. If a company gets used to using a software for two months, then it will not change. That's why they got a lot of customers without spending a lot on marketing.
The other is the referral model. Zoho doesn't spend anything on marketing. The principle of Zoho is that our product is very good and all our customers say good about our products, so we do not need marketing. Zoho's model is where a company that likes using Zoho's software will pay them a commission if they refer it to another company. Even today, Zoho's business continues to operate on this referral model.
The last and most important success strategy is to find the gap in the market. Big IT companies build complex software for large companies and corporations and generate revenue from it. But there was no one in the market to make software for small companies. Seeing this potential, Zoho has come forward to produce low-cost software for small businesses. This is the secret of their success.
SoHo currently has 11,000 employees. But they do not select any campus from the top colleges of the country. Soho selects employees in a very different way. He started Soho University like the earlier gurukul system for the children who had passed 10th and 12th grade and who had studied in small colleges with small marks. In six months, you will be taught everything about software and technology, and you will also learn English well. A certificate will be issued after six months. SoHo will directly hire those who perform well during this six-month study period. The school currently has between 200 and 250 students. So are the 1,500 employees at SoHo, which has 11,000 employees. About 15 per cent of the employees in Soho do not have a degree certificate. They learned coding and proved that they were good at it and went to work in Soho. Zoho is a company that takes very good care of its employees. No one was laid off during the pandemic. There are many facilities for employees, such as free meals, medical treatment, health insurance and transportation.
Zoho's goal is to increase its market share in India. Currently, most of its customers are in the United States. They want to change India. The second is to address rising unemployment in India. Realizing that the youth of the villages are mostly unemployed, Soho has not gone to the big cities and has set up its offices in the villages itself.
