Zoom's large R&D presence in China, which is likely made easier by CEO Eric Yuan's Chinese background, is turning out to be a major cost saver for the video-conference software maker.
Unlike most tech companies preparing to go public, video-conferencing startup Zoom is profitable. One key driver of Zoom's profitability: a large engineering team in China, where average tech salary is relatively lower than in the U.S.
"Our product development team is largely based in China, where personnel costs are less expensive than in many other jurisdictions," Zoom wrote in its filing."If we had to relocate our product development team from China to another jurisdiction, we could experience, among other things, higher operating expenses, which would adversely impact our operating margins and harm our business.
"One key driver of profitability is labor-market arbitrage," Tunguz wrote in a blog post about Zoom's financials.Tunguz told CNBC in an email that labor arbitrage, or moving jobs to inexpensive regions, is a growing trend among tech companies. Many of his portfolio companies are now looking for talent everywhere and are more willing to hire remote engineers outside of Silicon Valley because of the cost advantage.
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