Message Received: RingCentral CEO Likes Cloud Computing Phone Systems

VC-backed RingCentral was started on a shoestring, with institutional investors arriving relatively late in the game, according to founder and CEO Vlad Shmunis.

The Russian-born Shmunis previously founded RingZero Systems in 1992 to sell desktop telecommunications software. RingZero then shipped 25 million units worldwide before it was acquired by Motorola in 1998.

A year later, Shmunis spun out part of the business to form RingCentral and has since raised about $24 million in VC funding from Sequoia Capital, DAG Ventures and Khosla Ventures.

The Russian born Shmunis, who came to the United State from Ukraine when he was 14, knows a thing or two about starting with very little. He launched RingZero with $5,000, “which pretty much accounted for all my liquid assets at the time,” he says.

Last month, RingCentral, the cloud-based business phone system provider, announced results of a survey of customers on the changing nature of how and where we work.

Not surprising, the survey found that only 15% percent of small and mid-sized businesses currently have an office set up where all employees work from the same location. On the flip side, about 40% of the businesses polled have virtual office setups.

Shmunis says that the survey reveals a definite shift from the traditional onsite centralized work force to a virtual distributed office model.

Indeed, it’s a wonderful, distributed world.  Of the 67% of business owners who stated that they are expanding their business in the next year, 57% of those surveyed said they would adopt a virtual, distributed office model in 2010.

I talked to Shmunis recently about his company and the importance of the recent survey.

Q: Do you plan to raise more capital?

A: We are fortunate to be in a business that has great demand for our services and we continue to grow rapidly. We have deployed the capital effectively and do not have any immediate necessity to raise more capital.

Q: What advice do you have for other startup CEOs raising capital right now?

A: Capital is more expensive now than a few years back, so the ability to generate revenue and eventually profit has gotten even more important than before. There are always going to be examples of companies that succeeded without initially having a good idea on how to generate a profit, but there are substantially more failures of startups that followed that path. So my basic advice is to prove your business case first, and get the capital that you need once you’re ready to scale the business.

Q: What lessons have you learned that have helped during the current economic crisis?

A: In my book, the key to success is not how much money you have in the bank, or any other such external factor. The main idea is to know where you’re going, believe in yourself and your team, stick to your guns, and always make sure that your products are solving a real need in a way that’s appreciated by the end customer.

Good football teams win in snow and rain, and bad ones tend to lose in any weather. So I’m just trying to build a company that’s good at what it does in any economic weather.

Q: In regards to your survey, what types of changes or trends to business communications are you seeing?

A: The most important trend we see is that no matter the size of the business, the decline of a traditional centralized single office is accelerating. Our survey data showed that nearly half the employees spent more than three quarters of their time working outside of a physical, centralized office environment.

At the same time, nearly 80% of businesses want to give the impression that their employees are in the office when receiving or making business phone calls outside of the office. This underscores the fact that professional communications are critical to business owners, but traditional on-premise phone systems are not designed to meet the needs of a distributed work force.

Q: What’s the driving trend of the virtual office?

A: Mobile phones and broadband Internet are what’s driving rapid adoption of virtual office environments. But the economic downturn has also been a factor as businesses want to lower their real estate and fixed overhead costs without losing the productivity of their employees.

Q: How are you different than Google Voice?

A: Google Voice is designed for individual consumers and gives them the ability to have one phone number that can be forwarded to their existing mobile or home phone. Google Voice does not replace your underlying phone service.

At RingCentral, we deliver a cloud-based business phone system for the modern mobile and distributed business world. As use of fixed line phones decrease rapidly, cloud-based business phone systems is rapidly becoming the norm.

Businesses need all their employees to connect with multiple extensions and multiple voice mail boxes to be associated with various departments, like sales, billing or support. RingCentral can work with all types of existing fixed-line and mobile phones, as well as be used as a core “first-line” service by our business customers.