Having successfully operated from a small town like Tenkasi in Tamil Nadu, software provider Zoho Corporation plans to replicate this model in the U.S. The aim is to locate offices in smaller towns Sridhar Vembu, co-founder and CEO, said in a telephonic interview. Excerpts:
Recently, Zoho announced its investment plan in a Bengaluru-based MRI tech start-up Voxelgrids. Why make an investment when you can acquire it?
It is a completely different vertical and I do not have any special knowledge on how to run it. If I acquire it, I have to run it since it will be under my leadership. But it already has a leadership team. Arjun is really good. He is a scientist inventor and he has brought the product this far.
So, it’s best that it is run independently and they continue to run it.
Secondly, this is still work in progress in terms of some R&D. It’s crucial that we allow the team to continue as it is, rather than imposing any revenue requirement. These are reasons why it’s best not to set a target. But who knows in 10-15 years, things may be different. Right now, the company is in a stage where it requires R&D funding. It’s like funding a research lab, that’s what we are doing.
Once the products come out, we will be in a position to decide the course of the company later. My preference, in general, is to try not to run everything because it’s the discipline that has kept us vibrant.
How do you describe this investment?
I would call it more like a strategic know-how investment. It is not really that way. Actually, here the company creates infrastructure and we are investing in them to help. We don’t want to control or run it. That’s all.
Will it be an independent company or under the banner of Zoho?
Yeah, it’s an independent company. Zoho will have a stake. It will be in our advisory capacity, but we won’t be dictating terms to them that’s all.
Will you be a long-term investor in this company?
We are planning to stick to this long haul. In fact, that is my request to the founders. That’s the basis on which we are coming in, because we want to fund the long term committed players in this.
When do you expect the first product?
It should be out in the next 12 months at least, could be next six months. But one reason I don’t specifically pin down timelines is, as I often talk about this on Twitter, when something very complex such as R&D is involved, you cannot really predict timelines. So, best to just be vague about it. But the key is are we making progress in it.
What is the average ticket size of your investment in companies such as this?
It’s not like we have too many investments. There are like four or five, but the total aggregate was about ₹250 crore investment in the last eight or 10 years. So I actually think it’s about ₹25-40 crore, in that range.
Do you plan for more investments, or only as and when opportunity arises?
As the opportunity arises... We are not actually actively scouting for investments like venture capitalists do. But if something that is suitable, that fits with our vision shows up, we will take a look.
Going forward, how would you describe Zoho? What percentage of revenue will come from new businesses?
Zoho itself remains a software company at its core. vTitan, Voxelgrids are all separate companies, which are doing their thing in their markets. The Zoho Corp mission itself remains very strongly focused on our software offerings. Right now it won’t be very significant. In the near future, say over 5-10 years, that will change.
During the pandemic, Zoho opened small regional offices. What’s their status?
We have about 20 in operation right now. All are open. In about three to four years, I would like at least 30-40% of our staff to work from rural areas, that’s the goal. And eventually longer term, at least 50% rural and 50% urban would be a good mix. I expect that at least about 1,000 to 2,000 current employees [would] eventually choose to work from the smaller centres.
What about your geographical expansion?
Middle East has been doing very well. We are also expanding aggressively in the EU, we are opening offices in Germany and soon in France. Even in the U.S., we are moving away from major metros and setting up offices in smaller townsWe also have offices in even in Southeast Asia. All these are also for focus on expansion.
How is Arattai app doing?
Arattai is still in beta mode. In the next couple of months you will see a formal release with the new features on. We have not even formally launched it yet. Actually you know, it got leaked.
