Sam Parr interviews Max Lytvyn, co-founder of Grammarly, about building a $13 billion company from a bootstrapped start. They cover Max’s earlier exit (a plagiarism detection company sold to Blackboard), the decision to hire an external CEO early, how Grammarly grew via paid and organic channels, and the evolving vision of making human communication measurably more effective.
Speakers: Sam Parr (host, co-founder of The Hustle), Max Lytvyn (guest, co-founder of Grammarly)
Introduction and Hustle Con Memory [00:00:00]
Sam: Basically — we’re Facebook friends now, so we talk a little bit — but I first met you at Hustle Con, I think. It was an event I hosted in 2019, and you’re one of the best people we’ve ever had. We’ve had hundreds of people, and I’ll tell you why — two things. The first: I think you spoke right when you guys had just raised maybe $100 million at a billion-dollar valuation or something like that. Is that right?
Max: Yeah, that was $120 million. We didn’t disclose the valuation at the time.
Sam: Yeah, but if I had to guess — yeah, you didn’t — but I heard rumors and I’m guessing it was in that range. It didn’t matter. But basically, I made a comment to you, like, “That’s pretty cool,” and you kind of replied back. You weren’t cocky, but you were very confident and still humble. You had a grin, and I forget exactly what you said, but it was something like, “Yeah, it’s gonna get much bigger too.” And I loved that — that subtle confidence.
Then at the event, what you talked about — I don’t even remember the title — but the idea was basically: you’re an engineer, but you’ve done a really good job of evolving past just engineering. Everything you looked at was from an engineering lens — about reverse-engineering different stuff — and I thought that was incredibly fascinating. Do you remember what I’m talking about?
Max: Oh yeah, I do. I actually use it as a mantra a lot inside the company as well, when we look at different markets and where to go next. It’s a universally good framework that works for many things — just looking at things narrowly, identifying the sweet spot, and then going broader from there.
Max’s Background: Before Grammarly [00:01:45]
Sam: This is Max Lytvyn. He started a company called Grammarly. Before Grammarly, you had another company — Blackboard, I think, right?
Max: That was not my company. That was a company that bought my company. My company was MyDropBox — not to be confused with Dropbox. It was a plagiarism detection company, and it was bought by Blackboard in 2007. I spent two years with Blackboard — part burnout, part just having been there. And compared to Grammarly, it was a mild success. It was financially good, but it wasn’t like a huge multi-billion dollar company.
Sam: Oh yeah, that was just a start.
Max: It could have grown big, but education was at that point a relatively difficult market to be in, and it wasn’t as big of a market. Plus our product was fairly narrow — it was just doing one thing for one group of people. We could see it growing to a certain point, but further than that it was going to be very slow and very difficult. That’s why we decided to sell. Plus we had bigger ideas.
The $13 Billion Valuation [00:03:10]
Sam: And you started Grammarly. At this point, can you reveal how big it is?
Max: Yeah. We raised at a $13 billion valuation, and we disclosed that valuation. I still think it’s a conservative one.
Sam: Why?
Max: Because Grammarly is a very non-standard company with a very non-standard product. It’s easy to underestimate it. That’s often reflected in perceptions — sometimes investors, sometimes even potential team members. We have to explain why it’s big. But that also helps with the competition.
Sam: And by the way, you guys bootstrapped it for a long time, so you and your co-founder probably own a very substantial portion of the company. You’re probably a multi-billionaire on paper at this point.
Max: It depends on whom you believe. There’s some information out there that’s not fully accurate. But yeah, we managed to keep a significant portion of the company with the founders and employees — employees actually did quite well too.
Why Grammarly Gets Underestimated [00:04:30]
Sam: When I heard about Grammarly, the reason I wanted you to come on the podcast — and at Hustle Con — is because I think my reaction was the same reaction most people in business had, which is: “A, this is just a Chrome plug-in. B, this is just spell check. There’s no way either of those things are interesting.” And then I learned more about it and I was like, “Oh, this is way bigger than it looks.” Were most people dismissive of it just being a Chrome plug-in?
Max: Some people are dismissive — quite a lot. I wouldn’t say completely dismissive, like “there’s nothing here,” but they underestimate the impact and importance of it. That’s always a very similar conversation, because they kind of think, “Oh, this is a cool product, but not for me — I know what I’m doing.” And then they try it and it helps in material ways. Especially when you measure results, because when you don’t measure things, you’re just typing away. It saves you from an embarrassment or helps you phrase something more clearly. That’s cool, but what’s the impact? Show me the money.
But when it’s done on a business scale, measured and assessed, you can see percentage improvements in productivity, satisfaction, and so on.
Sam: We bought it at The Hustle, so I had it for the whole company. I don’t remember what it cost, but I remember seeing the bill every month — hundreds of dollars a month. And everyone loved it. I still use it. Once I started using it I was like, “Oh my god, I get it.”
Chrome Plug-In to OS-Level Integration [00:06:00]
Sam: One thing I’ve always been fascinated with is plugins as a business. Particularly two types: WordPress plugins — there are a bunch of guys with substantial businesses selling WordPress plugins, like $25-50 million a year — and Chrome plugins. Do you describe yourself as a Chrome plug-in business? I don’t know if you do, but it’s definitely one of the main ways most people interact with you, right?
Max: For now, yes. We just recently switched over to our flagship product being an operating system-level integration, so it works similarly to the Chrome plug-in except it integrates with all apps — not just web apps. That was a big switchover that happened in December, just a few months ago. That expands the surface area for Grammarly — now it’s in Microsoft PowerPoint, Oracle applications, wherever you want.
Hiring a CEO Early [00:07:00]
Sam: Why did you hire a CEO, and when did you do that?
Max: We brought in a CEO in 2011, I think. One big reason was that both Alex, my co-founder, and I have a philosophy that everybody should be doing what they’re in their zone of genius — what they like and what they’re good at. Neither of us was really experienced or even that passionate about scaling organizations, and that’s what we were looking for most from a CEO: teaching us how to do that and actually doing it. We realized that to do what we needed to do, we’d need a lot of people, a big company. That size isn’t a desired outcome in itself — it’s a necessity because the goals are so big that you can’t do it with 20 or 30 people.
Sam: How many employees did you have when you hired Brad?
Max: I think around 20-something.
Sam: Wow. Nothing. Small.
Max: Yeah, we were fairly small. We were making good revenue and being profitable at the time already, but the company was still very small. The realization that the opportunity was big and we needed to scale — that pushed us to look for external expertise.
Not Micromanaging Brad [00:08:30]
Sam: How did you not micromanage Brad? Because you’d bootstrapped it — it was your business, your money — and not micromanaging is tough. If he makes a mistake, you’re going to lose money. That’s my money. It’s really stressful to let someone fail and learn. Were you micromanaging, or were you pretty emotionally healthy about it?
Max: I’d like to think we were emotionally healthy. Maybe Brad would disagree — I actually will ask him. But I think part of it was out of necessity. There was just so much to do that if you micromanaged, you’d get stuck and not make progress. There was no time or energy to micromanage anybody. We had to divide and conquer to actually keep making progress, so everybody had to do their own thing. That happened naturally.
And part of it is a philosophy that Alex and I share: if you bring smart people on board and don’t listen to them or don’t let them think independently, that’s a waste. There’s no point in bringing smart people on board. That made it easy to give freedom and space to Brad and the other leadership team members.
Early Goals and the Multi-Billion Dollar Vision [00:10:00]
Sam: What were your goals early on? Like when you started the business, were you thinking, “I think this can make $10 million a year and provide a good lifestyle”? Or was it, “I think this could be a multi-billion dollar thing”?
Max: I think we decided it could be a multi-billion dollar business during our conversations with Brad — partially. Alex and I hoped it could be, but once we started talking with Brad about valuation plans and the opportunity when he was thinking about joining, it became pretty clear that yes, there is a multi-billion dollar market out there. Whether we’re going to capture it was to be determined, but there was definitely an opportunity. The size of the opportunity became clear fairly early — but past there, that took years.
Sam: What was the vision that made you feel it could be a multi-billion dollar opportunity? Was there any number you saw early on that made you think, “Oh my gosh, there’s something here”?
Max: Yeah. The breakthrough moment was when we saw that it’s possible to help not just professional writers — people who write for a living every day — but also casual writers, or people who write as part of their job or life but not as a key part. Writing is not their main product — they’re not novelists or published researchers.
When we saw that it’s possible to make a product that’s useful for everybody else, it clicked. A very simple formula: if you look at the amount of time we spend communicating and creating knowledge — as a humanity, all people in the world — that’s a huge percentage of our time, and it’s increasing. Because we spend less time doing things with our hands; manufacturing is being automated. So if you take this time we spend communicating and creating knowledge and make it even one percent more effective, the impact is in the trillions, not even billions.
So: can we do something that makes communication one percent more effective on average for everybody? That doesn’t sound impossible. That sounds doable. So we aimed at that.
Sam’s Parallel Insight (The Terrible Version) [00:12:30]
Sam: I had that same insight, except I did it in the worst possible way. I learned how to be a copywriter — I read books on copywriting and persuasive writing. My theory was, “Oh my gosh, with texting and online dating” — I was single at the time, 21 — “if I learn how to write better in my messages to girls I match with, my life is going to be better.” And then I was like, “Wait — if I learn how to write better, I could sell more stuff. I can make people feel emotions about causes I want them to care about.” Just writing better makes life more practical, and it also makes you think better. If you have an idea and you’re forced to write it out, you’ll see all the holes in it.
So I was like, “I’ll teach people how to write better,” and I created a course on how to write better. Creating a software product was clearly the better move — it was out of my league — but the same insight was there: everything we do is via text, whether it’s a text message, an email, or a website. And even if it’s via the spoken word, I have to write that anyway. So writing is the most important thing you can master. I just wish I’d approached it in a software way, rather than just selling a $300 course.
Max: Software is more scalable, that’s true. And actually, what you said about writing — it also applies to speech. When we do user research, we notice that people who use Grammarly repeatedly adopt more effective patterns of communication that translate to non-written communication as well. For example, if Grammarly keeps suggesting that you don’t use wordy or weak sentence structures, you reduce use of them in speech as well. Good habits rub off and translate to other modes of communication.
Copywork and How People Learn to Write [00:14:30]
Sam: Have you ever heard of copywork? In the 1700s and 1800s, up until about 1910, one of the ways we taught children how to write well was the same way we teach them to play an instrument. If I want to teach you piano, I’m not going to say, “Go write a piano song.” I’ll say, “Let’s play Jingle Bells, let’s learn Happy Birthday,” and then after that we move to pop songs you really like. You do that for two years, you see patterns, you understand the rules, and eventually you’re like, “Okay, now I know the rules — I can follow them or break them, but I can make my own.”
It’s the same thing with writing, but we don’t do that. The easiest way to learn is: you find great writing that you really like and you literally copy it by hand. In doing that you see patterns. That’s called copywork. It’s not a popular way to learn anymore, but in my opinion it’s one of the most powerful. I think grammarly, in a sense, is doing that — because in real time you’re learning. But it’s far better than just saying “go write a lot.” Copying other people is far better.
Max: I haven’t heard of copywork, but I’ve seen it done in many fields. At one point I was passionate about photography, and same thing — you basically try to copy different photographs and recreate them, and that way you learn the language of that art. So yeah, that applies to many many areas.
Technical Depth and Building the First Product [00:16:30]
Sam: How technical were you and your co-founder? Were you technical enough to build the first handful of iterations?
Max: I was very technical. For example, with the previous plagiarism detection company, I wrote the core algorithm and most of the code originally — most of the back-end code, not the front end. When we were working on Grammarly, I don’t think I did any production code. I coded some experiments, landing pages, the payment checkout process — some stuff you don’t even need to code anymore today.
Sam: Yeah, yeah.
Max: But I didn’t code the real production-grade stuff, mostly because I’m not a formally trained software engineer — I’m a self-trained coder. Building real complex software is not my thing. Plus I had to manage the business full time. When we started, I was responsible for finance, marketing, pretty much a lot of things. Everybody has to wear a lot of hats in a small company, so running the business occupied pretty much my whole time.
Sam: So you just self-funded it and hired a couple people to help build the first version?
Max: We hired quite a significant number of people. We also had a technical co-founder on board — a team leader who helped build out the technical team and was responsible for the technical side initially. Because of our previous exit, we had some savings we could put into Grammarly — substantial savings. So basically we were both founders and the first investors.
Sam: How much did you spend to get to a sellable product? Like a million? Ten million? Five hundred thousand?
Max: I think it was close to a million. But it was a product that worked only for a very small audience and a very small use case, and it was not real time. What happened was: you’d write a chapter of a book — because it couldn’t check the whole book at once — or a research paper, you’d submit it to the old Grammarly, and then you’d go make a cup of coffee, drink the cup of coffee, wait a little bit more, and then it spits out the result. And probably half the result was real issues and half was false positives.
But at the time, the target market was fine with that. If you’ve spent two months writing a book, what’s an extra half hour to review all the potential issues, even if some aren’t real? But that wouldn’t fly with business writers. If you’re writing a business email you need to send in 20 seconds, you’re not going to deal with false positives.
Sam: Did that version get you to profitability?
Max: Yeah.
Sam: What did you charge?
Max: I think $90 a year. Or $9.95 a year — something like that. Hundreds, so yeah.
Early Growth: Consumer vs. B2B [00:20:00]
Sam: How did people hear about it? The first users?
Max: That was interesting because we launched two parallel streams — one to consumers and one to businesses: educational institutions, publishers, consulting companies. The consumer channel took off and grew exponentially from basically week one. Enterprise or B2B took longer to build.
So once we pushed both in parallel for about half a year, we saw that the consumer side made sense to focus on because it was growing like wildfire. B2B required much more pushing, more hiring — it’s more intensive because you need a sales team and all that. So we decided to slow roll it a little and focus on consumer for the first few years.
Sam: How did you get the word out on the consumer side?
Max: We tried all the channels available to us. Different channels have different benefits. Social was easier to get free promotion from back then — right now Facebook and others just want to capture all the value they create, but back then it was easier to get stuff to go viral and get free promotion. SEO was easier too. A lot of channels were just easier to work with.
But we relied on paid marketing quite a bit early on, because it’s a very quick feedback loop. You design an ad, put it in the system, and you get results within hours. It tells you if the message resonates, if there’s a market, if you’re finding that market correctly. In the more traditional world, that takes weeks and hundreds of thousands of dollars. So that’s why we were so bullish on paid from early on, even though it costs a lot of money.
What Grammarly Would Acquire [00:22:30]
Sam: What companies are you guys trying to buy?
Max: Not specifically. We’re open to it, but we’re not hunting to buy companies.
Sam: Is there a problem that needs to be solved that you saw another company solving, and you’d buy them? Like — the founder of Jet.com sold to Walmart for billions of dollars. He said, “If we could figure out how to reduce returns by helping people pick the right sizes, we’d buy that company for a lot of money.” Is there anything inside Grammarly where you’re thinking, “We haven’t figured out X yet, but if someone did, that’s a company we’d buy”?
Max: Yeah, there are many things. Things around doing more on-device processing — I think that would be very interesting to us. It enables better user experience, lower lag, potentially higher performance. It also helps alleviate some potential privacy concerns. It’s cheaper for us. So it’s kind of a no-brainer to do more stuff on device.
Sam: Sorry — what does that mean? Instead of you paying for all this cloud space for everything —
Max: Yes. Calculating the suggestions on device. So whenever we say, “This needs to be shorter,” or we rephrase something — making that determination on your phone or laptop rather than sending it to the cloud and having our servers crunch numbers. That has a number of benefits for us.
Cloud Costs and Infrastructure [00:24:00]
Sam: I don’t know what those costs are — how much does it cost to host? What percentage of your revenue goes to hosting, or how does payroll compare to hosting costs?
Max: I would say they’re comparable. Hosting costs are quite expensive even though we don’t host much data — we’re not like Dropbox where we store files — but the processing is quite expensive, especially when you consider that we have tens of millions of free users who are not paying us anything. We don’t monetize them in any way — we don’t sell user data, we don’t show ads. So all the free users are not monetized until they subscribe. That makes us conscious of cutting costs, especially for regions where not many people can upgrade to premium, like developing countries.
Sam: How many employees do you have?
Max: I don’t recall exactly, but somewhere around — damn, that’s a lot for hosting.
Max: Yeah, it is a significant amount. Supporting that many users and providing a reliable service — it does add up.
Sam: What do you pay? Is it Amazon?
Max: Mostly Amazon.
Sam: Crazy. It just runs the internet. It’s crazy.
Max: We evaluate from time to time bringing some things in-house, and actually some things we do have in-house — not necessarily the hosting infrastructure, but things like some model training we do in-house. So it’s not like we just use Amazon and forget it. But it is an effective way to scale a business.
Sam: Doesn’t it affect your margins though? Yeah, it’s crazy. It always freaks me out a little bit. We used Cloudflare and I remember one time Cloudflare went out and our website was dead — and so was like a quarter of the internet.
Max: Yeah. This concentration is kind of scary. A lot of places have a single point of failure for significant portions of the infrastructure. It has its benefits, but it’s concerning.
Competition and Complacency [00:26:30]
Sam: Are you wrapping up here in a second — I asked you about Hemingway earlier. Do you view them as competitors at all?
Max: Not really, no. They do something similar, and it’s basically part of what we do. A number of people use both products simultaneously. So we don’t view them as a competitor because they don’t take business from us.
Sam: Who do you view as a competitor?
Max: The biggest one is complacency — just people not realizing they can benefit from this. That’s the biggest competitor, by far bigger than any other. But other than that, once you get to a certain size, everybody becomes a potential competitor because big tech companies all compete in some ways and do some things that are similar.
Sam: Are there any upstarts or small companies trying to compete with you guys?
Max: There are some. But most are focusing on a niche — a Grammarly for a specific market. That’s a good way to start. We’re watching them, seeing what they’re doing right and wrong. Microsoft has a similar product, but it only does part of what we do, so it doesn’t take away much business. So yes, there are similar products, but I wouldn’t say there are any direct competitors at this point. And I’m not too worried about competition, frankly, because it’s just such a new field that most of the market is untouched by anybody.
Closing [00:28:00]
Sam: Well, thanks for coming on. We’re gonna wrap up now. I’ll let you know when this is live — should be in about a week. I appreciate you coming on. It means a lot.
Max: Great. Thank you so much for having me.