Snowflake vs Zoom - a comparison

The Hype and Price Points

The two most talked about companies on here in recent weeks have been Snowflake and Zoom. There has been a lot of talk since Snowflake’s IPO about its valuation, and I think the consensus on here is that it at $240 a share it currently is ‘just plain silly’.

An investor I follow, on a separate platform and with a large following, recently said that he hopes Snowflake dips below $200 so that he can buy in as he sees it within a couple years as a $350 stock, despite having said pre-IPO that he would only buy in up to $140. I did not understand the logic behind this.

Recently a few weeks before Zoom’s Q2 earnings when the stock price was languishing around $250 I commented that everyone should stop what they’re doing, and just buy Zoom. It seemed obvious to me that their Q2 would be another blow-out, as I expect Q3 to be too. However when I suggested this to the same investor, he replied that he had sold Zoom at $150 for 100% returns and didn’t see enough upside left (> 50% returns) compared to his other names. Zoom is up +75% since this exchange.

As someone who bought my first Zoom shares around the same time he sold, and have an average cost price of about $240 to grow it to 30% of my portfolio and my largest holding - this was the polar opposite of how I viewed Zoom. That one of us sees its potential as mostly behind it, and one with its potential ahead.

Then before Snowflake IPO’d I saw a poll asking ‘what would offer better investing returns over the next 10 years - Snowflake or Zoom’? Around 70% of pollsters answered Snowflake. Now, a decade is a long way out and fortunately we aren’t locked in for that long investing or things could get tricky. But I couldn’t help but feel that Zoom is under-appreciated by many in the investing community (which might be a good thing for holders).

The hype that ensued with Snowflake’s IPO, only added to with Buffet’s involvement and culminating with the frenzy on the opening day, got me thinking - what is it all about?

Now I think we can all agree that at the current valuation Snowflake is ‘plain silly’: at one point on it’s opening day it’s EV/S ratio was 143, compared to Zoom at 43. But valuation aside, what would be the better investment today? Say if Snowflake were to pull back to the early $100’s in the coming months, where would your money be better served? Or which would earn a higher allocation in your portfolio?

Investing is not a choice of only one company, fortunately, but for the ‘hottest’ software IPO ever vs a company which has just had arguably the best earnings report ever, I think it makes an interesting comparison. And why I think the 30% might be right.

Snowflake versus Zoom

Both companies are under 10 years old, in their early innings and with huge runways ahead - but let’s break it down.


Revenue growth. Growing at +355% YoY Zoom is benefiting from a pandemic that has supercharged its growth. Snowflake growth is +121% YoY, for comparison at IPO Zoom’s growth was +118%. But then Zoom is a totally different proposition today than it was a year and a half ago.
While for now Zoom’s revenue growth is accelerating, Snowflake’s growth is decelerating, from 173% in fiscal 20 to 133% in the first six months of fiscal 21, to 121% in Q2 21.

And yet there is a valid logic that Snowflake’s high growth rate is more sustainable, while Zoom’s may be impacted through churn in the ‘post Covid’ world, and at $664m revenue in Q2 21 Zoom is growing off a higher base. Zoom more than doubled its revenue in a SINGLE quarter, a feat that Snowflake managed to do in a year (achieving $133m in Q2 21 at +121% YoY)

DBNER: at 158% for Snowflake compared to 130% for Zoom, Snowflake appears to win here. But bear in mind that Snowflake is growing off a smaller base, Zoom has maintained ‘over 130%’ every quarter since IPO, and Snowflake’s DBNER this time last year was 223%.

Customers: Zoom’s total customers grew +458% YoY (!!) in the latest quarter, and it’s Enterprise customers grew +112% YoY. Without the pandemic boost that Zoom had, Snowflake’s customer metrics are also impressive, total customers up +101% YoY for the 6 months to end of July and the % of customers with product revenue >$1m growing from 14% to 41% YoY.

Gross margin: 71% for Zoom vs 62% Snowflake. Importantly Zoom is already profitable while Snowflake isn’t, although its losses as a % of revenue are improving.

Free Cash Flow: Zoom $373m (!!!) Snowflake $(144)m

Rule of 40 (growth rate plus profit margin): Zoom - 407% (!!!) Snowflake - 93%. In terms of the ‘Rule of 40’, I doubt there is a better company on the planet right now than Zoom.

WINNER: For its higher growth, profitability and cash flow, the obvious answer today is Zoom. Thinking a couple years down the line, the winner becomes less clear cut.


Both Snowflake and Zoom have excellent management. Both have CEO’s born and raised abroad who moved to the US in pursuit of a dream. However, an important distinction is that Zoom is founder led, where Snowflake CEO Frank Slootman joined Snowflake only 16 months ago.

Yuan’s story is incredibly inspiring; how he attempted to get a visa 9 times before being accepted in the US, how he identified a gap in the market from customer feedback of WebEx while at Cisco, and how 40 of the best engineers left Cisco to join him when he left. That he raised funding from family and friends before having a product, and he is unflinching in his commitment to putting the customer first. He is a man who clearly has a vision (one that started in the mid 90’s), inspires those around him, and does not give in.

Slootman is rather a smooth, seasoned corporate CEO, with a proven track record at Data Domain and ServiceNow. There are reports from insiders that he is emotionless, driven only by winning, which has led to internal culture clashes and high employee turnover. This seems at odds to Yuan’s outwardly empathetic leadership style, intent on fostering a sense of community in his company.

Asked what CEOs he admires, Slootman replied: "I admire CEOs that have a relentless, unapologetic focus on the business. Jeff Bezos comes to mind first, I have learned lessons from Amazon just observing from afar".

I found a quote from Yuan being asked the same question, he replied:
“A leader I think, I really admire and I learn a lot from his leadership advice is the former CEO of Wal-Mart, H. Lee Scott Jr. I think his wisdom and advice truly shaped what I think about leadership, a lot of things. I could give one example, like “whatever you said the first time will be misunderstood or ignored”. You know, a lot of things like that.”

The difference in the responses is telling. The driven, relentless win-at-all-costs side of Slootman comes out in his reply. For Yuan, what he values is something that he has learned, about understanding people. This is at the heart of what Zoom is as a business. It is about understanding what customers want, understanding how to communicate with them and creating and then maintaining a superior product that wins the market off the back off that customer-first approach.

Yuan, talking about the origin story of Zoom: “Before I left Cisco, I spent a lot of time talking with WebEx customers. And every time, when I talked with a WebEx customer, after the meeting was over, I felt very, very embarrassed because I did not see a single happy customer. And I tried to understand, why is that? And I summarized all the problems all those WebEx customers they shared with me. You know, finally, I realized all those problems are brand new problems.” Zoom was designed to be the solution to those problems. As Yuan’s colleagues began to leave Cisco to join him at Zoom, so too did its customers:
“Zoom understands what the customer wants, and its technology and customer service satisfy them better than competitors’ do” (a case study of a Cisco customer who switched to Zoom).

Something jumped out at me reading an interview with Slootman, when he referred to Snowflake’s founders: “They’re immensely supportive for what’s going on. They may not be as hungry as they were before, but they are super motivated because they feel like this is Snowflake version two. And they are as motivated by that as I am. They have to build it; I have to sell it”

There is something clinical about this quote, but all I took away from it is that Snowflake’s founders might not be as motivated as they once were - presumably now that they have listed. I can understand that, from a technical point of view. These are guys who love their product, creating it and giving it light and now it is part of an altogether different, corporate beast.

But I can’t imagine the same lack of ‘hunger’ applying to Yuan. He seems as motivated as ever, to support the functioning world and to continue to develop his product to help define the future workplace. You can sense his enthusiasm when he talks about all the new use cases in the Q2 earnings call:

Eric Yuan – Founder and Chief Executive Officer
"My golly, if I talk about new usage, it probably can speak for four or five minutes. I’ll give you several. Like, you see the problem next, you can use Zoom for the virtual property tour. During the last 10 weeks, we have closed over 50% of the newly launched properties in Singapore over Zoom.
And also, the CSK, a corporate law firm in Florida, to have virtual trial by jury. And also, like Source Coast Community services, which is the, you know, largest and the mental health service provider in California also use Zoom to offer mental health. And mental health, it’s become a very big problem. A lot of new users like that.
So, every day, I feel very, very excited to see so many new use cases. It’s very cool."

Zoom is Yuan’s baby, he is the sole founder and he has demonstrated vision for the company when setting out from Cisco a decade ago. Demonstrated through various game changing tech companies of recent years with Bill Gates & Microsoft, Steve Jobs & Apple, Jeff Bezos & Amazon or Mark Zuckerberg & Facebook, the potential of great companies seems interdependent with the vision of their founders. I don’t have as much confidence in an external CEO such as Slootman to cultivate that vision for Snowflake, as I would have with Yuan and Zoom.



Glassdoor ratings. Zoom - 4.8/5 star rating (467 reviews), Snowflake 4.1/5 star rating (89 reviews).
Zoom - 96% friend recommendation rate, CEO approval rate of 98% . For comparison, Slootman has an approval rate of 87%, and Snowflake 76% friend recommendation rate.

In 2018, CEO Eric Yuan was named Glassdoor’s #1 CEO, with an unprecedented 99% employee approval rating. In 2019, Zoom ranked #2 in Forbes’ and Glassdoor’s Best Place to Work In.

Employees LOVE working for Zoom. With recruitment Yuan is careful to hire those who fit in with the Zoom culture and share the company values and vision. And yet somehow, they were able to scale their business 355% in a year while keeping this culture intact. New team members at Zoom have dedicated mentors who teach them all about culture and vision. This is an integral part of Yuan’s vision, to create a cohesion between company, culture and customer:

“The product is kind of more like the outcome of your company culture. If you do not have a great culture, occasionally you might develop a good product. However, that’s not sustainable. Very soon, you’re not enlisting new customers. You try to add some features you think are right. The customers may not like it.“ (Eric Yuan)



With a $120bn market cap, how much further does Zoom have to grow? Who out of Zoom & Snowflake is further along their ‘S curve’? Snowflake’s TAM is estimated at $35bn by 2023 and Zoom’s UCAAS around $50bn+. We have had many threads on Zoom’s total addressable market; it seems unlikely that years from now Zoom’s will be confined to video conferencing, as Amazon was not to its origin as an online bookstore. Its use cases are already evolving rapidly. Similarly digital transformation of the cloud is only growing, with Slootman suggesting that the cloud software market will be bigger than mobile.

Both companies are young, in their early innings, and with a lot of room to grow. I believe that ultimately companies can grow to the vision of their management, and I would not put a cap on their already significant and growing TAM’s at this early stage. Other than knowing the TAM is out there, and not yet anywhere near saturation.



There is something that often seems to be overlooked with Zoom, which is perhaps the most important factor of all for its long term thesis.

This is a paradigm shift. Something that Zoom has, which Snowflake doesn’t; a change in global attitudes. Sure, Snowflake is poised to benefit from the inevitable long term shift to cloud & digital transformation, but I am talking about something more far reaching. A shift in how our work places and work culture are redefined, an underlying demand for remote work finally arriving to a worldwide audience and suddenly validated by technology, how learning, law and health are adapted, how housing, social activities and fitness are developed, how fashion, events and sports evolve - in a nutshell how people live. There have been significant periods of technological change over the past 100 years or so, perhaps this is one of them. Zoom is in pole position to benefit from this shift and, importantly - to help define it.

Eric Yuan – Founder and Chief Executive Officer
"So, speaking workplace, I think for now, I think that **for the foreseeable future, you know, we all need to work from home, but we’ve got to think about the long-term planning…**And also, you can further consolidate a lot of the small offices, right? You do not need to have offices everywhere anymore… And for us, even for the workplace today, you look at a lot of the companies, it is a very big open space. I think that may not work anymore in the future.
Good news, we do have time for next 10, maybe 12 months, we can optimize what’s the future workplace look like.

Moat. I really liked this Captainccs quote on Zoom’s positioning:
"Toothpaste has no moat, why does Colgate lead in sales year after year? A clock turning to the left is as good as one turning to the right and there used to be some. Why do all clocks turn “clockwise?” The x86 was a crappy chip, why did it win the chip wars? Why did Intel not manage to beat ARM Holdings? Why did Bing fail? Zoom’s moat is Positioning."

Brand. The importance of a brand to investing shouldn’t be underestimated.
“A well-built brand is a reflection of its mission and positioning towards its stakeholders. Branding is what gives you a reputation and, ultimately, a future.” Whether it’s Cadbury, Gillette, Coke, Google or McDonald’s, certain brands are trusted more by consumers. This gives you pricing power, but it also provides this intangible network effect, where your product begins to sell itself. Zoom, not WebEx or Skype or Google Meet, has this brand effect to date.

There is no guarantee that Zoom will outperform Snowflake in the next 1-2, 5 or 10 years. In many ways it is the riskier bet, as its short term future is still uncertain. It is a Covid play in terms of the longer the pandemic lasts the more entrenched it becomes, but it’s also so much more than that. I am relatively new to this game, but I want to be invested in companies that will help shape the future as it is unfolding before us. I am hopeful for the future and for the role Zoom has to play in it.

OVERALL WINNER: At relative valuations, I would invest in both. But in terms of who would earn a higher allocation in my portfolio, for me there is only one answer. Zoom.

Some interesting articles that helped inform this comparison.

Zoom’s culture.…

Yuan key-note start up conference, discussing his origins and founding Zoom

Slootman interviews & study:………

Beth Kindig on Snowflake IPO…


Nice comparisons especially on the leadership part. Founder led is definitely superior. Also I read that Slootman had to come out of retirement to be hired. From the S1 it showed he had the highest amount of shares at the company be valued at ~3 billion. I found it strange he has more shares than anybody there being there for only a little over a year?

I have pointed this out in other threads, but Snowflake’s growth is juiced by massive expenses. Compare the two S1s:……

Going off the last fiscal year from their S1s:

Zoom, revenue 330M, total expenses 263M (80% of revenue)
SNOW, revenue 264M, total expenses 506M (191% of revenue)

Breakdown of those expenses:

R&D: 33M (10%)
S&M: 185M (56%)
G&A: 44M (13%)

R&D: 105M (39%)
S&M: 293M (110%)
G&A: 107M (40%)

Now imagine that Zoom had the same ratio of expenses at Snowflake. This would mean Zoom would spend 4x as much on Research and Development, 2x as much as Sales and Marketing, and 3x as much on General and Administrative. Zoom’s revenue growth had they done this would have been even more massive. This is why I am saying that Snowflakes numbers are pumped.


Slootman is rather a smooth, seasoned corporate CEO, with a proven track record at Data Domain and ServiceNow. There are reports from insiders that he is emotionless, driven only by winning, which has led to internal culture clashes and high employee turnover.

I worked under Slootman for a short time. Many of the outstanding contributors in the company eventually followed him to his new ventures. I almost went, too, but did an industry change to something that was just more fun for me personally.

There will always be people that complain about the people at the top. My personal experience tells me that really good people liked working for Frank Slootman. I know of one VP level individual who retired, and then came out of retirement to join Slootman, specifically because of the team Slootman was able to put together.