Episode of My First Million with Sam Parr and Shaan Puri.
Transcript
Note: This transcript was auto-generated from YouTube captions. It may contain errors and lacks speaker identification. A full Gemini audio transcript will replace this.
Kind: captions Language: en [Music] so basically i i’m we were facebook friends now so we talk a little bit there but i first met you at hustle con i think this event that 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 i’ll tell you why two things the first i think you spoke right when so this is max he started grammarly we’ll do an intro in a second but i think you spoke when you guys had just raised maybe a hundred million dollars at a billion dollar valuation or something like that is that right yeah that was uh yeah that was uh 120 uh and i we didn’t disclose validation at the time yeah but if i had to get yeah you didn’t uh but i think i heard rumors and like i just i’m guessing it was like in that range and it didn’t matter but yeah but basically um i made a comment to you i’m like that’s pretty cool right and you you kind of replied back you weren’t cocky but you were very confident and still humble but you kind of 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 i loved that like subtle confidence and then at the event what you talked about i don’t even remember the title but the idea was basically like you’re an engineer but you’ve done a really good job of like evolving past just engineering and you like said this is how like i engineer like good products and this is like everything you looked at was from an engineer like uh about reverse engineering different stuff and i thought that was incredibly fascinating do you remember what i’m talking about oh yeah i do i remember that i actually use it mantra a lot in inside the company as well when we look at different markets and where to go next and it’s just a universally good framework that uh uh works for many things yeah just kind of looking at things narrowly identifying the sweet spot and then just going broader from there this is max litvin lit vin he started this company called grammarly before grammarly you had another company called like blackboard i think right that was not my company that was a company that bought my company so my company was my dropbox not to be confused with dropbox it was a plagiarism detection company and it was bought by blackboard in 2007 um and then they spent two years with blackboard uh kind of a part burnout part just being been there and that was like a a a compared to grammarly a mild success right like it was it was financially good but it wasn’t like this huge huge multi-billion dollar company oh yeah that was uh that was uh just a start it could have grown big but education is was at the point a relatively difficult market to to be in and wasn’t as big of a market uh plus our product was fairly narrow it was just doing one thing for one group of people so we kind of saw that it can grow to this point but further it’s going to be very slow and very difficult so that’s why we decided to sell plus we had bigger ideas and you started grammarly and at this point can you reveal can you reveal how big it is because i i like it’s shockingly large yeah so we raised that 13 billion valuation and we disclose that valuation i still think it’s a conservative it’s conservative one why because grammarly is a very non-standard company and very non-standard product it’s easy to see it for less when it is um and and that that’s kind of reflected often in in in perceptions of of everyone if investors of uh sometimes even potential team members we have to explain why it’s big and you know but uh that also helps with the last competition well and like and by the way you guys bootstrapped it for a long time so like you and your co-founder like it’s not like you own like four percent of this company you guys probably you own like a very substantial amount so like actually so you’re on paper you’re you’re probably a multi-billionaire at this point uh it depends on whom you believe uh there is some information that’s not fully accurate uh but yeah we we managed to keep significant portion of the company with the founders and employees uh employees only actually quite a lot did um when i heard about grammarly the reason why i wanted you to come on to the podcast and at hustlecon is because i think my reaction is the same reaction most people in business had which is like a this is just a chrome plug-in b this is just spell check like there’s no way that either of those things are interesting and then i learned about it and i was like oh this is like way bigger than it just looks like that it’s way more than that did most people or like there’s most people dismissive of like it just being a chrome plug-in some people are dismissive uh quite a lot and uh i wouldn’t say dismissive it’s not like completely oh there’s nothing uh but uh underestimate the impact and the importance of it and that’s that’s an interesting uh conversation always always very similar because um they kind of think oh this is a good product this is a cool product but not for me because well i know what i’m doing and then they try it and it helps it helps the material ways and especially when you measure results because you know when you don’t measure things and then just you know typing away uh it saves you from an embarrassment or helps you phrase something more clearly kind of yeah that’s cool but what’s the impact of that show me the money but when it’s done on the business scale uh and it’s measured and it’s uh kind of assessed uh you can see like percentages improvements in in different metrics productivity satisfaction and so on and that ends up is updated we bought it at the hustle so i i had it for uh the whole company um i don’t remember what it what it cost but i remember seeing the bill every month hundreds of dollars a month and everyone loved it and i loved it i i still use it so like i totally i totally buy i i totally once i started using it i was like oh my god i get it one thing that i’ve always been fascinated with is is just plugins as a business um particularly two types of plugins wordpress plugins um there’s a bunch of guys that have like some substantially sized substantial size businesses selling wordpress plugins you know like 25 50 million dollars a year and then chrome plugins which do you i don’t know if you like describe yourself as a chrome plug-in as a business i i don’t think you are but like it’s definitely like the one of the main ways in which most people interact with you right uh for now yes uh we just recently switched over to our flagship product being uh operating system level integration so it works similarly to chrome plug-in except it integrates with all the apps not just web apps uh so that’s uh that was a big switchover that happened uh in december so just a lot of months ago so that’s uh that expands the surface area for grammarly now it’s in microsoft powerpoint and uh you know oracle applications and wherever wherever you want um did you uh why did you hire a ceo when did you do that that’s kind of jumping topics but uh yeah we um we brought in a ceo i think in 2011 uh and um one reason one big reason for that was that both uh alex michael founder and i we have a philosophy that everybody should be doing should be in their zone or genius doing what they like and what what they’re good at nobody no one of us was really experienced or or even that passionate about scaling organizations uh and that’s what we’re kind of the biggest thing we were looking for from as uh from uh ceo uh teaching us and and doing that basically scaling the company because we realize that to do what we need to do we need a lot of people we need a big company it’s a kind of a number of people and size is not a kind of a desired outcome in itself it is a necessity because the goals are so big that you can’t do it with uh 20 people or 30. how many employees did you have when you hired brad i think 20 something oh wow nothing i mean small small yeah we were fairly small uh we were we were making good revenue and being profitable at the time already uh but the company was still very small um and that’s that’s kind of a that that realization we need to their opportunities big and we need to scale uh that pushed us to look for kind of external expertise how did you at that point you i guess you didn’t raise money so you and your partner like oh it was like your business it was your company and like your money how did you how did you not micromanage brad um because i did the same thing and not micromanaging is tough because you’re like oh my god if you make a mistake you’re gonna lose money and that’s like my money and so it’s like really stressful to like let someone fail sometimes and learn were you micromanaging or were you pretty emotionally healthy about it i’d like to think we were emotionally healthy maybe brad would disagree i don’t know i wish he i actually will ask him but um i think part of it was out of necessity there was just so much to do that if you’re micromanaged you get stuck you don’t not make progress so there was just no time or resources or energy to micromanage anybody we had to divide and conquer to to actually keep making progress because so that’s a lot of work so just just from the volume of things to do everybody had to do their own thing so that that happened naturally and part of it is a philosophy that again alex and i share that basically if you bring in smart people on board like not listening to them or not letting them think independently is a waste basically there is no point in bringing smart people on board uh so that’s uh that’s that made it easy to kind of uh give freedom and give space to to brad and other um leadership team members what were your goals early on like when you started the business we’re like man i think this can make 10 million dollars a year and provide a good lifestyle or like i think this could or was it like i think this could be like a multi-billion dollar thing like what were your goals early on um i think we decided that it could be a multi-billion dollar business during our conversations with brad partially uh so kind of alex and i we we hoped it could be but then once we started talking with brad about valuation plans and all that um when he was thinking about joining then it become pretty clear that yes there is a multi-billion dollar market out there uh are we gonna capture it or not to be just to be determined but um at that point but uh there is definitely an opportunity so the size of the opportunity became clear fairly early um but past there that that took years what was the vision that made or what what did you see that made you feel that it could be a multi-billion dollar opportunity and what was the vision and were there any was there any numbers that you saw early on that which said like oh my gosh there’s something here yeah so i think the breakthrough moment was when we saw that it is possible to help not just professional writers people who write for living every day but also help casual writers or people who write as part of their job but or part of their life but not like a key part so writing is not their like main product they’re no you know like novelists or or researchers who are published and so on so when we saw that it’s possible to make a product that’s useful for everybody else uh then it clicked a very simple formula if you look at amount of time we spent communicating and creating knowledge uh as a humanity as all people in the world that is a huge percentage of our time and it’s increasing because we spend less time doing things with our hands manufacturing is being automated it’s not like we’re doing it manually anymore as much so if you take this time that we spend communicating and creating knowledge and make it even one percent more effective the impact is in trillions not not even billions uh so can we do something that makes communication one percent more effective on average for everybody that doesn’t sound impossible that sounds like something is doable uh that’s doable so so we decided i had that aim same insight except i did it in such a horrible worst way so basically um i learned how to be a copywriter so like i read books on copywriting and like on persuasive writing and my theory was like oh my gosh like with texting or like online dating i i was single at the time in 21 so it was all about like dating i’m like oh man if i were to learn how to write better in my messages to girls who i match with like my life is going to be better and then i was like wait a minute if i learn how to write better i could sell more stuff if i learn how to write better i can make people feel emotions about like this cause that i want them i’m like just writing better like it changes it makes it life more practical but also it uh makes you think better so like if you can if you have an idea for something and you’re forced to write it out you’ll see all the holes in idea and you’ll and you’ll force yourself to like lay it out and so i was like oh i’ll teach people how to write better and so i created a course on how to write better of course like obviously creating a software product it was out of my league but like that was clearly the better move to do but the same insight was like everything that we do is via a text whether it’s a text message or an email or a website and even if it’s via like the spoken word i have to write that anyway so like writing is like the most important thing that you can master i just wish i would have approached it in a software way as opposed to just selling a 300 course yeah software is more scalable that’s that’s true and uh and actually what you said about writing uh it also applies to speech we when we do user research we notice that um people who use grammarly repeatedly adopt patterns of communication more effective patterns of communication translated to uh non-written communication as well so for example if grammarly keeps suggesting that you don’t use kind of a wordy or wig or weak sentence structures you stop or reduce use of them in speech as well so i so kind of good habits rub off and and translate to other modes of communication so here’s my opinion so have you ever heard of copywork all right so in like the um 1700s 1800s and up until like 1910 one of the ways in america that we would teach children how to write well it’s the same way that we would teach them how to play an instrument so if i wanted to teach you how to play the piano i’m not gonna say like go ahead like write go write a piano song i would say well let’s play jingle bells let’s learn how to play happy birthday then after that we can move to like some more pop songs that you really like and then you do that for like two years and you like see patterns and you like understand you just copy other people’s music and in doing that you see patterns and then eventually you’re like oh i know the rules to the game now now i can decide to follow them to break them but i can make my own and it’s the same thing with writing but we don’t do that and so what that means is i think one of the easiest ways to learn is you find great writing that you really like and you just literally copy it by hand and in doing that you like see the patterns and that’s called copy work it’s not a very popular way to learn how to write now but in my opinion it’s one of the most powerful i would say grammarly in a sense it’s doing that because in real time you’re learning but it’s far better than just saying like go and write like just like spend a lot of time writing your own stuff i think copying other people is far better anyway it’s something i’ve been playing with i’m i’m not a lot of people have heard of copywork i thought maybe you would have but uh it’s like not very well known no i haven’t heard of it but i’ve seen it done in many many fields like uh at one point i i was passionate about photography and same there you just basically try different uh try to basically copy different photographs and recreate them and then this way you learn the language of that art uh so so yeah that applies to many many areas how technical were you and your co-founder were you technical enough to build the first handful of iterations so i was very technical um so for example the previous plagiarism detection company i wrote the core uh the core algorithm and and uh most of the code originally most of the kind of back end code not the front end um when we were working on grammarly i don’t think i did any production code i coded some of the like experiments landing pages payment checkout process like some stuff something you don’t even need to code anymore today if you didn’t want to yeah yeah yeah yeah so i coded some of that but i didn’t code the like uh like a real production grade stuff mostly because i’m i’m not a formerly a software engineer i’m a kind of a self-trained coder but kind of building a real complex software is not my thing plus i had to i had to manage the business full time so when we started out i was responsible for finance marketing like pretty much like lots lots of things like basically everybody has to wear a lot of hats in a small company so the running of the business occupied pretty much my whole time so it was no time for so you just hired you did you guys just self-fund it and hire a couple people to help build the first version we hired quite a num quite a significant number of people uh we also had a technical co-founder on board um a demo leader who helped build out the technical team uh so he was responsible for um for the technical side initially uh but yeah because of our previous exit we had some savings that we could put into grammarly and some substantial savings we could put into grammarly so basically we were both founders and the first investors how much did you spend to get the to make it work until like it was a sellable product i don’t remember but it was quite like a million or 10 million 500 000 do you remember i think it was close to a million um but it was a product that worked only for very small audience very very small use case and it was not real time so basically what happened was you write a book a chapter of a book because it couldn’t check the whole book at once or you write a research paper you submit it to the initial like the old grammarly and then you go make a cup of coffee and then you drink the cup of coffee and then you wait a little bit more and then it spits out the result and the result was probably half of it was real issues and half of it was false positives but at the time the audience the the target market was fine with that because if you spend like two months writing a book like what’s extra half an hour to review all the potential issues right even if they’re not real but that wouldn’t fly with uh with business writers for example if you’re writing a business email that you need to send in 20 seconds you’re not going to deal with false positives and did that version get you to profitability yeah oh what’d you charge for 100 a year we charged i think 90 dollars a year something like that uh yeah um yeah or hundreds so yeah i think 995 dollars a year how did the people hear about it the first users so that was interesting because we launched two parallel streams one to consumers and one to uh businesses educational institutions publishers basic companies consulting companies and the consumer channel took off like it grew exponentially from basically week one uh in enterprise or b2b um it took a longer to build so once we kind of pushed both of them in parallel for about half a year uh we saw that well kind of makes sense to focus on consumer for now because it’s just growing like wildfire uh but uh b2b requires much more pushing much more hiring more people intensive because you need sales team and all that so we kind of decided to slow roll it a little bit um and focus on consumer for first few years and deal with it through paid marketing or organic uh we did everything um we we tried uh all the channels available to us and uh obviously different channels have different benefits um at the time social was also easier to to get free promotion from uh right now obviously kind of facebook and others just want to capture all the value they create but back then uh it was easy to it gets easier to get stuff viral on social and just get like free promotion from that um seo was easier as well uh so many things were just like many channels were uh quite easier to do uh but we relied on paid uh early on quite a bit uh because it’s uh it’s a very quick feedback you design an ad you send it uh or kind of put it in the system and then you get back results like within hours and it tells you if the message resonates if there is a market for that if you’re finding that market correctly you know that within like hours uh it’s in in more traditional world it’s a weeks of hundreds of thousands of dollars yeah so that’s uh that was uh that was kind of why we were so uh bullish on paid from early on even though it costs a lot of money what companies are you guys trying to buy companies not specifically i mean we’re open to that uh but we’re not like hunting to buy companies is there a problem that you need to be solved and you saw that this other company was solving that problem that you’d buy it so like let me give you an example the uh the founder of jet you know jet.com they sold the walmart for some billions of dollars and he’s like man if walmart if we could figure out a way how to reduce returns by helping people pick the right sizes we would buy that company for a lot of money is there anything inside of grammarly we’re like man we haven’t figured out blank yet but if someone did figure out blank that’s a cool company we would buy that’s a cool problem solved that we would buy uh yeah there are many things um like things around doing more on device uh like doing more and more processing on device i think that that would be very interesting to us because it didn’t it enables uh better user experience lower lag potentially higher performance um it also helps alleviate some potential privacy concerns so kind of a uh a no-brainer to do more stuff on device and it’s cheaper for for for us to sorry what does that mean you mean like instead of you paying for all this cloud space for everything for the the for yeah yeah calculating the suggestions on device so basically whenever uh we say oh this needs to be shorter or we rephrase it like that making that determination on your phone or on your laptop rather than sending it to cloud and and having our servers crunch numbers so that’s uh that’s kind of a that that that has number of benefits for uh for both us actually i i don’t know what those costs are so how much does it cost to ho like what percentage of your revenue do you spend on or maybe like how does the payroll compare the payroll cost compared to like your hosting costs i i would say it’s comparable uh hosting costs are like even though we don’t host much of the data like we’re not like dropbox where we store files uh but the processing the processing is quite expensive especially if you consider that we have uh tens of millions of free users who are not paying us anything uh and we’re not we don’t monetize them in any way at all um because we don’t we don’t sell user data we don’t show ads we don’t do any of that uh so basically all the free users are not monetized until they subscribe so that that makes it uh that makes us be conscious of trusting costs especially for regions where not many people can upgrade to premium like developing countries how many employees do you have i don’t recall exactly but i i would say somewhere around damn so then you’re paying a ton for those ho that hosting uh yeah i i would say it could be less than period i don’t remember exactly uh but uh yeah it is significant amount i mean that then you supporting that many users uh and providing a reliable service it does what do you pay uh it’s mostly amazon crazy man like it just runs the internet it’s crazy well yeah we evaluate from time to time bringing some things in-house um and actually some things we do have in-house not uh not necessarily like the the hosting infrastructure but uh like some trade model training and all that stuff we do in-house um but uh uh so we look into that uh so it’s not like we’re just amazon and forget it uh but it is an effective way to scale business it doesn’t affect your weight right yeah it’s just like crazy that it’s crazy it always freaks me out a little bit that like uh we used cloudflare and i remember one time cloudflare went out and like our website was dead and so was like a quarter of the internet yeah yeah it’s uh it is um this concentration it is kind of scary um yeah it freaks me out a little bit yeah it has its benefits but it is uh a lot of places have a single point of failure for significant portions of our uh infrastructure are you uh and we’ll wrap up here in a second but um i uh i asked you about hemingway earlier do you do you view them as competitors at all not really no they they do something that’s similar and something that’s basically part of what we do and 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 uh so yeah so it’s not like who do you view as a competitor uh who do you use a competitor well the biggest one is complacency just people not realizing that they can benefit from this i think that that’s the biggest thing that by far bigger than any any other competitor but other than that once you get a certain size everybody becomes a potential competitor because you know when you look at big tech companies they all compete in some ways and all do some things that are similar or the same so that’s that’s kind of the mindset that basically at any point anybody can become a company yeah but are there any i’ve never seen any like upstarts or any small companies try to compete with you guys is there a map is there many uh there are some uh but most are uh focusing on either a niche like a grammarly for a specific market um and uh i think that’s that’s a good way to start and obviously we’re watching them and seeing what they’re doing right what they’re doing wrong and so on um they’re there they’re similar products microsoft i think has a similar product but again it only does part of what we do uh so it doesn’t take away much business from us if any um so so yes and i wouldn’t i wouldn’t say that there are any kind of direct competitors at this point um and i’m not too worried about competition frankly because it’s just such a new field uh that most of the market is just untouched by anybody cool well thanks for coming on i’m gonna uh we’re gonna wrap up now and uh i’m gonna let you know when this is live it should be live in like a week i think but i appreciate you coming on it means a lot ah great thank you thank you so much for having