Zscaler, Inc.

Overview

Zscaler is a cloud-security company whose entire premise is that the corporate network firewall is obsolete. Founded in 2007 by Jay Chaudhry — an Indian-American serial entrepreneur who had already started and sold four cybersecurity companies — it delivers security from the cloud on a “zero trust” architecture: instead of guarding a perimeter, it treats every user as untrusted and connects the right user directly to the right application (The Hindu BusinessLine). In March 2018 it went public on Nasdaq under the ticker ZS at $16 a share — and closed its first day at $33, a 106% pop, the best tech-IPO debut since September 2016 (TechCrunch; Nasdaq (Renaissance Capital)).

A fifth startup, built on one observation

Chaudhry’s four previous security companies were all acquired — SecureIT by Verisign, CipherTrust by Secure Computing, AirDefense by Motorola, and CoreHarbor by AT&T — and Zscaler was the fifth (The Hindu BusinessLine). His account of the founding insight, given in an interview with The Hindu BusinessLine, is architectural: “Big disruptive changes happen every 20 to 30 years when architecture changes.” By 2007–2008 he had concluded that applications were moving to the cloud and users were becoming mobile, and that “you can’t do with a traditional network security of firewalls, VPNs” — firewalls were “like doors in front of a building,” and the building was emptying out (The Hindu BusinessLine).

The replacement was a “switchboard” model: “everyone is untrusted, there is no inside, no outside. You come to us and we ask who are you? We validate and recheck who you are allowed to talk to. We connect you to the right person and the right party… This is zero-trust security” (The Hindu BusinessLine). TechCrunch described the same idea under the industry label of software-defined perimeter (SDP) services: rather than giving employees access to the full network, workers are authenticated only for the applications they specifically need (TechCrunch).

The commercial framing followed the architecture. Zscaler priced and sold by user rather than by office or data center, the way appliance vendors did — Chaudhry’s team sized the addressable market bottom-up at $72 billion, $48 billion from protecting users and $24 billion from protecting cloud workloads (The Hindu BusinessLine). He claimed 40% of the Fortune 500 already depended on Zscaler for security — a customer claim reported in an interview context, presented here as such (The Hindu BusinessLine).

The 2018 IPO: from $10–$12 to $33

Zscaler filed confidentially for its IPO in 2017, and investor demand kept pushing the price up: the initial range of $10–$12 for 10 million shares became $13–$15 for 12 million, and then $16 a share — priced at a whopping 45% above the range’s midpoint (TechCrunch; Nasdaq (Renaissance Capital)). The 15 March 2018 pricing raised $192 million at a valuation above $1.9 billion (TechCrunch).

When trading began on 16 March under the symbol ZS, the appetite was unmistakable: the stock opened at $27.50 — a 71.9% pop at the open — peaked at $33.37, and closed at $33, up 106% (TechCrunch). Renaissance Capital called it “the best first-day pop for a tech IPO since September 2016,” noting the company was the fastest-growing player in web security with strong fundamentals — fast growth, high gross margins, improving cash flow (Nasdaq (Renaissance Capital)). It was a remarkable reception for a still-unprofitable company: Zscaler had posted $125.7 million in 2017 revenue with $35.5 million in net losses and told investors in its S-1 it expected to keep losing money (TechCrunch).

Zscaler went public into a crowded field. TechCrunch’s IPO-day rundown named the incumbents it faced — Cisco, Check Point, Fortinet, Palo Alto Networks, Symantec, and even Google — and noted the S-1 disclosed IP lawsuits involving Symantec (TechCrunch). Chaudhry’s pitch was that this crowded, appliance-era field was exactly the market being displaced: as he told The Hindu BusinessLine, competitors sold by data center or office, while Zscaler priced per user — “per-user is our bread and butter” — matching the cloud-and-mobile architecture he believed made firewalls and VPNs redundant (The Hindu BusinessLine).

What this profile does not claim

• It does not assert Zscaler’s post-IPO scale (customers, daily transactions, market cap, ARR) — those figures appeared only in sources not read in full, so the profile stops at 2018.
• It does not adjudicate whether Zscaler “pioneered” zero trust — Chaudhry’s own telling is that the company built its architecture around the principle; the industry-wide history of the term is not investigated here.
• The 40%-of-Fortune-500 customer claim is Chaudhry’s statement in an interview, reported as such, not independently verified.
• It takes no position on the IP lawsuits involving Symantec noted by TechCrunch, which were reported as context, not investigated.