What's up, everyone? This is Cortland Allen from NDHackers.com, and you're listening
to the ND Hackers podcast. On this show, I talk to the founders of profitable internet
businesses and I try to get a sense of what it's like to be in their shoes. How did they
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in general? And what makes their businesses tick? The goal here is so that the rest of
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Today I'm talking to Max Lippmann. He's a serial entrepreneur and the co-founder of
a company called Grammarly. I'm guessing that many of you have heard of Grammarly and
might even be Grammarly users because they have over 7 million active users every day.
I found Max to be an extremely rigorous thinker. He's not somebody who enjoys leaving things
to chance. Instead, he's always forecasting, planning ahead, trying to figure out what
pitfalls await him in the future and how he can best avoid them in the present. We've
got a lot to say on those subjects that we can all learn from, but I also thought it
would be fun to talk to him about something less tangible. So we spent a good deal at
the beginning of this conversation talking about what it means to have a vision for your
company. How do you come up with one and whether or not it's something that actually helps
you grow your business or if it's just some sort of fluff that you tell the press so you
look good. Anyway, it was fun talking to Max and hearing what he had to say. So without
further ado, let's jump into it. Max, thanks for joining.
Thanks, Gordon. It's a pleasure to be on this podcast.
Yeah, it's a pleasure to have you. I'm excited to talk. So you are the co-founder of Grammarly,
which is a set of products that help people communicate better. And maybe that's a little
bit vague, so why don't you tell us what Grammarly is and why so many people are using it?
I think your description is a pretty good one. It is a set of products that help people
communicate in a way that's clear, effective, and error-free. So kind of focusing on three
pillars of communication. Clarity, making yourself understood. Effectiveness, achieving
the goals of your communication. Essentially making it error-free because if it contains
errors or if it is not a quality writing or not a quality communication, it can cast a
shadow on the credibility of what you're trying to say. So essentially having all these three
things in check and having them to be as good as possible is a goal of Grammarly. And as
you said, it's a set of products. So we started out as a standalone web editor app where basically
you could write your text, a document mostly, and then have suggestions for it. And then
we built a Chrome extension, now mobile keyboards, Microsoft Office add-in, and so on. So it
is essentially a set of products that can help people communicate better wherever they
communicate.
You guys first popped up on my radar last summer when I read I think a TechCrunch article
about how you raised $110 million, some astronomical amount of money. And I thought, okay, well
of course this company, this is like a Series C or a Series D or something. And I looked
and it was your very first fundraising round. You had in fact bootstrapped from just this
nascent business with you and your co-founder and to this gigantic company with hundreds
of employees. And you were killing it before you ever decided to go to investors. I thought
that was amazing. I've heard very few companies who followed a path like that. And I would
love to dive into sort of this pre-fundraising period of Grammarly, just to find out how
you did it. How do you go from just a couple of people to such a massive business without
raising a dime?
So my co-founder and I, we know each other since 1997, so quite a long time. And Grammarly
is not the first thing we're doing together. Before Grammarly, we sold another startup
which was much smaller and it was in a similar space. It was in a writing space. It was plagiarism
detection technology. While working on that startup, we often had to answer questions
asked by our clients why people plagiarize in the first place. Like what do we do to
discourage that and what do we do to make it less likely? And we kind of researched
the topic and we realized that, well, most people actually do it because it is just so
crazy difficult to put your own thoughts into writing, put your own thoughts into a document
or a message. Then we decided to, when we sold that company, we decided to address this
problem on a more fundamental level, build a tool that makes it easier, makes it easier
to just take what's on your hat and your hat and communicate it in a way that somebody
else gets exactly the same image in their hat. So that's how the idea came about.
Can I ask what your goals were at that point? Because I think for a lot of people who are
trying to start a business, coming up with an idea is really hard. There are a lot of
constraints on the ideas you can come up with. You know, is this idea going to make enough
money or is it going to be impactful enough? Or is it something that matches up with my
skill set? How did you guys decide that helping people improve their communication skills,
helping people with their grammar was a place that you guys wanted to start at and a problem
that you felt good about solving?
So first kind of why we decided to do that in general, to do another startup or to do
another technology company as opposed to taking jobs somewhere or doing something else. I
think at that point, both of us try the taste of doing something on your own and kind of
being a master of your destiny. And we were at a point where we would not want to be employed
by anybody. So that kind of left starting something new as the only option we liked.
And when thinking about what exactly to do, it was just so obvious to us. We knew the
problem. We knew the technology that can solve this problem. And yeah, we questioned two
things when we started. We questioned whether this is big enough. And there, the answer
is pretty simple. We communicate all the time. We are moving from many people as a whole,
moving from manufacturing economy to knowledge economy, where most of what we produce is
knowledge is information. And this information is in documents. And we collaborate as teams
where messages, emails, text messages, just communication in general is our medium of
collaboration. So fixing or improving these documents and messages and just communication
in general is a huge problem and a huge opportunity for humanity in general. If we can improve
productivity and success of people by even 1%, it's going to be gigantic.
So that's why the question of whether this can be big wasn't a question for too long.
But the question, whether we can do it, adds something that lingered for a little while
because when we just started out, what we wanted to do, it was not possible technologically.
It couldn't be done. Of course, we realized that technology is moving forward at a very
rapid pace. And in year two, maybe five, it is going to be possible. And we wanted to
be the first ones to get it done. But when we started out, when we just conceived the
idea, we realized that, well, right now, if we try to do it, this very moment can kind
of completely solve at the same moment, we're going to fail because it just there's just
no technology there. We'll have to invent it. And inventing it requires tremendous resources
and a lot of time. So and that kind of goes back to what you mentioned, you mentioned
grammar, fixing people's grammar. And that wasn't really part of the original idea. The
idea was about communication, right? But you got to start somewhere. And a smart thing
for somebody with striping is to start with something that's more obvious and simpler.
And that's why we started with grammar. It's an element of communication that's easiest
for computers to to grasp to to help with.
How did you guys go from having this tremendous massive vision to improve communication for
the entire world? And whittle that down to a product that would help people fix their
grammar mistakes? I mean, did you talk to customers and discover that that's what they
wanted? Or was this more you guys looking at what was realistic, given your finances
and the technology that was available at the time?
It's a combination of that combination of what we could do, given the resources we have.
And what problem would resonate with with the target market? So where we started, we
picked the smallest possible target market that was the most motivated to look for solution
to this problem. At that point, it was academic market, researchers and students. Why? Because
in academia, the standards for writing and standards for communication are very rigorously
defined. Basically, it needs to be perfect grammatically. It needs to use certain conventions.
Otherwise, it's not publishable. Otherwise, you're going to get a bad grade, something
like that. So very well defined standard. And a lot of work evaluated through writing
were clear criteria that made this pain very strong and very visible in academia. So we
picked this market because it was essentially cherry picking our part, picking a target
that's the easiest to get to. So yeah, so basically, simplest, simplest element of communication
from the technology standpoint, plus the market with the market segment with the strongest
and most obvious pain. And that kind of converged in this first version of our tool, which was
something which was in kind of an online text editor that helped write documents that were
more consistent with academic writing standards.
So I talked to a lot of early stage founders who often feel pulled in all directions, because
they have to simultaneously figure out what their vision is going to be, what features
their product is going to have, what their business model is going to be. And oh, by
the way, they're not even sure if anybody's going to use any of this stuff. How did you
guys early on at Grammarly reconcile your vision with the actual practical features
that you needed to build into the product? So we combined kind of vision, what we just
wanted to how we wanted the future to look to look like, kind of almost like a dream
like imaginary world we created with conversations with real users. So we started, of course,
with vision, and was just mocking up how our product is going to look now how it can look
in five years, what we can do. And we went really far there. I remember our discussions
in like 2000, early 2009, we went as far as kind of as drawing things like similar to
what Alexa is now. Then we paired it down to something that was manageable and was easier
to explain to users and went to users to start to explain it to them. We tried to kind of
sell product before we even build it. We tried to sell it to academic institutions first.
Then we tried to sell it to individual students. We saw feedback from both universities, colleges,
and individual students and individual researchers. We took that feedback into account and then
we actually built a product. So it was kind of interesting then we went to several trade
shows to kind of pre-sell the product that didn't exist. And we were of course were upfront
about the product not being ready. But it was a very, very useful thing that we did
that because we got tremendous amount of feedback from potential buyers and potential users.
And it helped us focus our very limited time resources on what was really important.
I like what you said earlier about having some sort of dreamlike vision for how you
wanted the world to be, and then constructing a product to make that vision a reality. And
I think that's the opposite of the approach that most entrepreneurs take. Most of us look
at the way that the world is. We try to predict the way the world is going. And we look for
some sort of opportunity or gap in the market that we can exploit and create a product that
fits into that particular shape, which just feels less risky.
How did you decide that having this sort of vision-led product was the way that you wanted
to operate? Is it just a part of your nature to do it that way? Or is it a result of experiences
that you've had in the past? Yeah, I think it was a result of our previous
experience because before that, we were doing exactly what you said. We were looking at
a gap in the market or at kind of unfulfilled need and build a product or a service to kind
of fix that, to bridge that gap. And it resulted in ideas, businesses that had very limited
potential. Once you plug that gap, the gap doesn't exist where wells do grow. You cannot
make the gap bigger to fill a bigger gap, right? Or you need to pivot completely to
do something different. So we realized that. And instead of fixing an existing process
or plugging an existing gap, we decided to try to invent something new, something that
doesn't exist yet. So that's kind of why we went to just try to set with a bigger beam.
And the risk, if you do it that way, is also that it's a little bit scary because you're
not sure if the dream is even possible. Maybe there's some unforeseen force or something
you're not considering that will kind of lead to your company hitting a dead end. Was that
something you guys ever worried about when you were coming up with a vision? Or did you
figure that no matter what happened, you'd find a way to make your vision work?
We were very much aware of that risk. So there was a real possibility of it not working out,
especially with this product where you have market unknowns, so you don't know if people
are going to like the product or want the product. And you have technology unknowns.
You don't know if you're going to have the enough people money or just technological
capacity to make a good product. So both these sides were very risky and we were not certain
it was going to work out. And because of that, we broke the problem down into smaller pieces
and made sure that each piece is solving its own tangible problem.
So for example, just going back to my original story about us targeting the targeting educational
market or academic market, that was that small first piece. And although it was a piece of
a big vision and kind of a building block at the foundation of the big vision, it was
a complete product itself that people were actually using, getting value from and ready
to pay money for.
How much of your roadmap did you guys have planned out from the beginning? Because it
seems like you had a piecemeal approach to sort of step by step getting to your final
end game vision of improving communication for everyone. Did you have a path mapped out?
Did you know exactly what would come after your grammar product? And what would come
after that? Or was it more of a case of you guys would just figure it out once you get
there?
It's a hybrid. In our case, it was a hybrid. I think it's a common approach in general
where basically you have a north star, you have a direction where you want to go. And
then the detail gets fuzzier on how you're going to get there the further you get. So
roadmap for next six months, next year was pretty well built out, always rather disciplined
about that. But then next two years is a little bit open ended. Next three years is just broad
brush strokes, next five years, kind of a more of a dreamy thing, at least in the beginning.
As a company got more mature, of course, we had to have more precise and more rigid plans
going forward. But initially, I'd say we had basically like a six to maybe nine months
of very well detailed roadmap. And then everything else just kind of became less and less detailed
the further in the future to go.
So I know we're talking a lot about vision here. But I have to say one of the things
that I've always it's always struck me is that when people tell me the vision for their
company, most of the time, I think it sounds like bullshit. I think it sounds like something
that they put up on a plaque so they can hang on the on the wall in their office somewhere
and tell the press because it sounds better than saying, Yeah, I'm here to make money.
And that's my goal. How much of your vision for Grammarly is something that you guys care
about personally and deeply? Or is your vision something that you look at as like a practical
thing that actually makes your company more likely to succeed?
Just just a remark on what you said in the beginning about vision often being something
that that's hard to believe. And this was our experience as well, just telling people
that Oh, yeah, we're going to build a software product that's going to take whatever you
want to say and help you say it much, much better and better in so many ways, clarity,
effectiveness, correctness, it just didn't seem realistic to people, especially back
in 2009. It was when, you know, before even autocorrect got bearable. So so people were
like, Oh, yeah, this is this is not gonna happen. Like, Google cannot do that. How guys
you can do that. So we ran into this, this challenge ourselves. And that was part of
why we kind of created more palatable versions of our vision, we were comparing ourselves
to, at some point to automated proofreader, because people know what proofreader is. And
we just automating that kind of sounds more palatable, sounds more realistic, even though
it's not exactly where we go. It's not the end goal. But it's just a way to explain it
in a very in much less in much fewer words, that's kind of about explaining the vision.
But on having the vision, I think it is extremely important to have something that's big enough
where you can see that, yeah, well, if, if I can actually do that, I'm okay spending
my 10 years of my life on it, or maybe even more, because it does take a long time to
do something significant. So the vision has to be big and inspiring for you to be ready
to actually put that long into it.
Yeah, that makes so much sense. And I think it even really applies to people who have
I think, more modest ambitions, like if you want to start a company, and your goal isn't
necessarily to change the world, it's to, you know, maybe provide a living for you and
your family or to allow you to quit your job, you're still going to have weeks or months
where it's a slog. And you're asking yourself why you're doing this. And if the question
is something that's depressing, if you're working on something that you don't care about
at all, then you're probably a lot more likely to, I think, just quit and give up because
you don't care and the vision isn't inspiring to you.
Yeah, some people when I talk to some people about vision, they say, Oh, maybe I don't
need a vision that goes as far because like my technology or my company is likely to be
acquired to in like two, three years. And I personally not a huge fan of like strategies
of kind of counting on an acquisition. But that's that aside, my response is usually
well, you still need a longer term goal and a bigger vision for your product or your company
to be attractive to an acquire, because it, why does it get acquired? Why would anybody
need it because it becomes part of something bigger and creates value for them. So you
need to see, you need to foresee how it's going to happen, how it's going to play out
in the next few years. So that's why even if you're not envisioning building a building
an institution, a company that's going to potentially outlive yourself, you still need
to have something like your vision still needs to be bigger than just, Oh, yeah, I'll build
some technology for a year or two and then I'll sell it.
So you're not a fan of building a company just to get acquired, which makes a lot of
sense because companies are typically bought, not sold. And so that's adding your hands
anyway. What are, what do you fall on on this debate between bootstrapping versus fundraising?
Because I know you guys bootstrapped yourselves for quite a long time before you ever raised
any money. Was that because you felt strongly about bootstrapping or because it was your
favorite particular strategy or was it more out of necessity?
I don't know if bootstrapping is, I would call it bootstrapping my favorite approach.
It is an approach we chose out of necessity, partially because we wanted to have as much
control over what we do as possible. And partially because our vision was fairly difficult to
explain at the time, fairly risky, and we didn't want to pay penalty for that risk.
So that's why we chose bootstrapping, but it may not be for every business. It may not
be for every idea. Some ideas are kind of obvious enough or I wouldn't say obvious,
but are clear enough or are structured enough that you may be able to raise money right
away at pretty good valuation. And why not? Why not kind of get a boost, especially if
you can do it with good partners that are on board with what you do. Maybe you're going
to end up losing some control, but it all can be done really well.
So I think early funding is not necessarily evil, not necessarily a bad thing. It is just
a different approach.
How much of your decision to bootstrap is because you guys weren't located in some sort
of tech hub, like the Bay Area with investors on every street corner. And instead, you're
working out of somewhere else, I think. What was it, the Ukraine?
Actually, we're working out of Toronto, not out of Ukraine, but they did play a role as
well. Yeah, we knew that the investor ecosystem in Toronto wasn't as big as in Silicon Valley
especially at the time in 2009. It was smaller than it is now. So we knew that we had limited
access to funding, but that wasn't a big factor, to be honest. If we were set on raising initially,
we would have been able to do so.
Do you think your decision to bootstrap and kind of take on all the responsibility yourself
without any sort of external capital kind of giving you a head start affected your strategy
a lot? I mean, did you have to start sort of earlier in your vision and not as close
to your end game vision because you bootstrapped? Or do you feel like the path that you guys
took is the path you would have taken even if you had raised money?
No, actually bootstrapping did affect our strategy quite a bit. Because we bootstrapped,
we had to rely on revenue to fund further growth. So we had to work towards revenue
right away. And if we raised early, especially if we raised a lot of money because it's an
expensive technology, it's something that's really, really hard to build. But if we raised
a lot of money upfront, we could have maybe short cut some of these steps and not necessarily
try to monetize early on and not spend some of the engineering resources on building funnels
and building ways to convert users into buyers and focus just on technology, only on technology.
It would not have mattered that much, but maybe it would have saved us 10, 20% of engineering
resources over that period of time.
I think most people listening in are people who also kind of want to take that approach
where maybe they're in a situation where they can't raise funding and they need to get to
profitability as quickly as possible. So I'd love to hear more details about that sort
of early phase and Grammarly's history where you guys were trying to figure out how to
make your first dollar and how long it took you to get to the point where you were able
to sustain salaries for yourselves and hire your first employee.
I would say less than six months. It was very quick. It was very quick because we had really
solid plan on how to get there. So we approached it from two dimensions. We didn't know who
was going to buy our product. So we tried to sell the product to institutions, to organizations,
and we tried to sell the product to individuals. And we tried to do it at the same time to
see basically what sticks, to see what starts to work better.
But as a result of those early attempts, us trying to sell the product before we even
really built it fully, by the time we finished building version one, we had a pipeline of
buyers lined up and we had some good understanding of how to sell to individuals. We nailed down
our messaging. We nailed down our advertising channels. We kind of understood unit economics.
So by the time the product was ready, we were ready to sell both to institutions and to
organizations and to individuals.
That's so cool that you guys are able to approach it that way. It's funny. I talked to somebody
people who lie on different ends of the spectrum in terms of how much they like to plan everything
and have a very well articulated and understood strategy before they go into things. And then
people on the other end of the spectrum who are just like, you can't plan anything. You
just got to go. And you seem very much like a planner where you did things in sort of
a textbook way. You were selling a product before you really had the product and you
were acknowledging that you didn't quite understand everything about your business. You didn't
understand necessarily why customers were buying or which customers would be best or
what messaging would appeal to them the most.
And so you guys had very targeted strategy for going about that and it paid off. How
did you learn to do that? I mean, how long did it take you as an entrepreneur to realize
that that's the way to go? Because I think most people on their first or their second
or maybe even their third business aren't really that strategic and aren't really that
skilled at knowing exactly what to do.
One thing that made us do that was necessity. Essentially, we realized that building this
product is really hard and really expensive. So by the time we are done with MVP, we'll
probably be out of money. So we'd better have customers lined up by that time. So that's
why we worked in parallel on kind of figuring out how to sell it and how to build it or
building it. That's why we kind of parallel processed it. And in hindsight, it was a really
good decision because it also enabled us to build a better product. The learnings from
how the product would be sold, the feedback from potential buyers was invaluable to actually
building a better product.
But as a side benefit or as kind of the essential benefit, we got very early revenue very quickly.
I like what you said about kind of projecting forward to what things might look like when
you guys have finished the first version of your product and realizing that you're going
to be pretty much out of money by that point in time. And so you will hope that you had
customers.
It reminds me of this book. Well, it's actually this book review that I was reading the other
day. The book is called The Time Paradox. And it kind of argues that there are people
who have sort of a past focused vision of reality and then people who have sort of a
future focused vision of reality. You can actually do a test and it'll tell you what
kind of person you are. And if you are a future focused person and they say, give you a maze
and tell you to solve this maze as fast as you can, all of the future focused people
would start at the very end of the maze and kind of work backwards. And the present and
past focus people would start at the beginning and try to work forwards. And the future focus
people would win every single time because they would eliminate, you know, they would
see what's coming well before everybody else was. So it strikes me as very analogous to
what you guys did here, which is to look at where you're going to be in six months and
avoid falling into this predictable situation where you finish your product, but you run
out of money before you have any sales.
Yeah. And in our case, it was it was some of the result of prior experience where you
build a product, you assume it's going to be great. And it is great, but then you put
it out there and like nobody's interested or nobody gets it. And that's terrifying because
you spend all this effort, you spend all this money on getting something done and you love
it and it's just out there and nothing happens. It is something it is an experience that that's
just terrifying and can make somebody not want to do that ever again. But we've done
it. We were in such situations and we were determined not to be there, not not to be
there again. That's why we kind of parallel processed channel work, sales and marketing
and learning more about our potential customers in parallel with building the core technology.
So let's talk about some of those some of those earlier failures that were so painful
that you you're forced to sort of do it right the second time around. Because so far we've
talked about Grammarly, which is doing excellent. We talked about your other startup that you
sold to Blackboard, which seemed like a successful acquisition. Did you guys ever fail at anything?
I don't really see anything that I could call a failure because of just my personal philosophy.
So also experimentation. Like when I try something, try to do something, there is a very big possibility
of me not being successful at that. That's just the reality. So it's like A-B testing,
experimentation in marketing where you build an experiment, you run a test and test is
either positive result or negative result. But negative result is not a failure. It's
just an expected one of the expected outcomes and then you just do it again. So basically,
in my personal philosophy, you fail when you stop trying. As long as you can keep trying,
you haven't failed yet. So that's why it's kind of hard to pinpoint anything as a failure
because, well, there is always expectation that there is a good chance that it might
fail. And the more ambitious it is, the higher the chance of it failing. But there was one
instance that comes to mind that was very kind of a blunt learning for me personally.
It was before Grammarly in our previous company, MitraBox, which was plagiarism detection technology.
It was really good, actually. It was better than a competitive product at the time, which
was dominated market. And we sent a whole lot of brochures to big trade conference and
prepared for a barrage of emails and calls to buy our product. And there was no single
reaction. Nobody. Nobody cared. No single one. And I was in such disbelief. I thought
that maybe the brochures got lost or maybe they were not delivered yet. I just couldn't
believe it. And then I started calling people, like cold calling people who were supposed
to receive them, who were at those trade shows and talking to them like what actually happened.
And many of them found it interesting. Many of them actually read our brochures, just
didn't have urgency or didn't have a trigger or didn't have the budget. So there was always
some reason, but kind of that expectation of just immediate reaction. Everybody's just
going to learn about this great product and just go out to buy it or at least to talk
about it with us. It just didn't materialize. And it was stark learning that, well, it's
not build it and they will come. You need to be very much connected with your users
and need to talk to them, need to kind of create sense of urgency and need to explain
to them why your product is valuable and what you're doing is important to them.
Yeah, I think every entrepreneur has been in that situation where we all are sort of
in disbelief at how disconnected our own vision for our product is and how useful and good
it is, how disconnected that is and what customers think when they actually see it. So it's just
one more data point and sort of the argument for building a minimum viable product and
talking to customers and trying to sell what you're building before you've even built it.
I saw you give a talk at HustleCon last year and you actually spent a lot of time talking
about building an MVP, which for listeners that stands for minimum viable product. And
you had some really strong opinions about it. You said that most entrepreneurs approach
it the wrong way. How did you guys approach it grammarly and what is the right way to
approach building an MVP?
Yeah, thank you for the question because it's one of my favorite topics. So I think the
wrong approach and unfortunately popular one is to kind of take your market, the market
that you're envisioning in the future and build a little bit of everything for that
market. And that's spreading yourself to them. That usually results in spending a lot of
effort to build something that's not quite good enough for anybody. What I think is a
better approach is to pick the enthusiasts of this from your market, pick the core audience
or pick even a subsection of your market and build for them, but build a better product.
Smaller but a better product. That allows you to cross the threshold of building something
really useful that your users can engage with and kind of make it part of their day-to-day
and not just a toy. And it also potentially opens opportunities for quicker revenue as
well. So I think that that's an important distinction that MVP is not just minimum viable
product for everybody, but it's also picking a minimum viable market and then building
for it, building a minimal product for it.
I think one of the things that bites a lot of founders, especially first-time founders,
is that as consumers, we spend all of our time interacting with these very mature, very
successful companies. And if you don't have a lot of experience as a founder, you might
naively assume that the way these companies look today is exactly how they looked in their
early phases. And so you're sort of using them as an example. One of the realities is
they're terrible examples for you. You should not be copying what they're doing. You should
be trying to find examples of companies in their early phases who eventually went on
to success and try to figure out what they did early on because that's the phase that
you're at. You don't want to walk into a weight room and try to lift 400 pounds just because
the biggest guy in the room is lifting 400 pounds. That's not a good starting point.
And yet that's what most founders do because they're obsessively copying their role models
and these big companies without really taking the time to understand sort of the complex
and winding path for how these companies got to where they are today.
Yeah, that's true. That's true. And in some cases, it's just luck. Some companies just
they build something and then they see deficiencies in it and they just iterate and get to something
that looks very different. And in some cases, it's blending and luck combined. Well, but
there's always some degree of luck.
What do you think is the luckiest thing that's happened to you guys at Grammarly?
It's hard to say because same things can be seen as luck or as you're doing. And even
like increasing the odds is kind of you're doing, but the end result is ultimately luck.
So it's kind of you can argue in either direction. One thing that was pivotal for Grammarly
is switching from premium model, premium only product to premium product where we have free
and premium products. That idea, that kind of a step was such crucial for our company
that we're really lucky we didn't kind of change our mind somewhere in the middle or
the test didn't fail because of some issues or something like that.
You had to, I imagine you had to be very nervous going into that, that it might not work or
it might end up going the wrong way.
Yeah, we actually tested for I think nine months before we pulled the switch. So it
was a really, really long process for us because we had a functioning business model, we had
a profitable company. So breaking that to build something better was a really big decision.
That's why it took us so long. I think we're really lucky we didn't run into some issues
that would have made us turn back.
So let's jump back into the Grammarly story. I think where we last left off, it took you
guys about six months to get to the point where you were pretty much profitable with
just the two of you. What are some of the bigger challenges and strategic decisions
and changes that you guys had to make to grow from such a small size into a company that
is big enough to justify a $110 million investment?
Yeah. So as I mentioned in the beginning, we started experimenting with two markets,
enterprise and consumer. And we quickly saw that consumer was growing much better, much
faster. So we had to make a decision at one point to focus slightly less on enterprise
and go full speed on consumer. So that was one of the kind of core key decisions.
Another interesting decision was to bring a CEO on board, neither of us nor Alex, Michael
O'Connor and Mariah, our CEOs. We partnered with Brad Hoover, who is now CEO of Grammarly.
And our decision to bring on board an external CEO was driven by realization that, well,
the company is going to grow to a certain scale that none of us grew company before.
And that will require certain skills and certain talents that we may not necessarily have right
now and may not be as passionate about growing necessarily. My passion is around growth and
around customers. Alex's passion is around designing magical experiences for users and
beautiful products. But building a world class company requires many more things beyond that.
So that's why we decided to bring on board a CEO with a kind of more rounded experience
and talent profile.
It makes a lot of sense, but at the same time, it seems like an extremely difficult decision
to make because you guys have grown this company by yourselves the entire time and an outsider
kind of risks ruining everything. So how do you even go about that process of finding
the right person?
It was hard. We actually worked with Brad for six months or maybe even more in the consultant
capacity before we started talking about him being CEO. So that was a long process. But
I think what helped us make this decision was that both Alex and I are generally very
humble people. We didn't have an ambition to, oh, yeah, I'm going to be the master of
this company or I'm going to have the highest title in the company. It wasn't for us ever
about that. It was just about doing something cool, something interesting and seeing how
far we can push it. Because we were not focused on titles or power, it made the decision so
much easier for us. It wasn't seen as a sacrifice or as a step back. I often see discussions
where founders vilify investors because investors suggest hiring an external CEO or hiring an
executive of some kind. And that just doesn't make much sense to me. Well, in some cases,
there is something wrong there. But in general, that concept is very valid. Just because you
started something doesn't mean that you're an optimal person to be the CEO of it in every
stage of that company's growth.
I think just as important, if not more important, is choosing your original co-founder. How
did you and Alex start working together? What advice did you have for people out there who
might have an idea or a set of skills on their own, but who are looking for a co-founder
and aren't sure how to find somebody that's worth working with?
Yeah, we started working together a long time ago, as I mentioned, back in college and meant
to late 90s. So we knew each other for a very long time. And what made our collaboration
very successful was us being very different. And it may sound paradoxical, but it actually
really worked, really clicked. Things that were inspiring to me maybe were things that
Alex would overlook and vice versa. And because of that, together, we would miss fewer opportunities,
we would be discouraged in fewer situations, and so on and so forth. So essentially, it's
just complementing each other. So I think that's one advice that I would give somebody
who's looking for a co-founder, don't look for a person who's exactly like you. Look
for a person who's compatible with whom you would be able to work and wouldn't hate the
experience. But don't look for somebody who's exactly like you because you're going to miss
out on a lot of things.
What about areas where you guys align? Because at the same time, you have to both agree that
you want to bootstrap the company, or you have to both agree that you want to work on
something with a really big vision. How did you know that Alex would be someone who would
agree with you on stuff like that?
Oh, we didn't always agree. We had many discussions. Some of them were heated, some of them were
just very lengthy. I think that's fine. One thing that absolutely needs to be common is
values. You have to like similar things and think that similar things are good. It may
be hard to explain, but I'll try. Let's say risk tolerance. If it's drastically different,
let's say one co-founder thinks that risk is inherently bad and another co-founder thinks
that risk is thrilling and just looks for it just for the sake of it, it's not going
to work out. You have to be somewhere in the same ballpark. For Alex and me, it was basically
kind of an insane ballpark. That's just an example of matching values. As long as values
match the personalities, interests, everything else, you're actually better off with having
diversity there rather than similarity.
That's a good way to frame it. It sounds like such a daunting task, especially if someone's
just trying to find a co-founder right now because it's like, man, how long is it going
to take to really spend time with a person and evaluate them and all these things? I
just want to start right now.
I think one of the best things people can do is just work on smaller projects together.
If you're in a situation where you don't have a co-founder and you're trying to find someone
that you want to be your co-founder, rather than dive in on some hugely ambitious thing,
you can work on a few one-month projects or two-month projects and see how you guys click
and take the time to learn whether or not you align on values or whether or not you're
sufficiently different and your interests and stuff. Is that something that you and
Alex did or did you guys immediately start working on really big things together?
We did exactly what you suggested. I think it's a very good point and very good suggestion
for somebody who's just starting. You've got to learn a lot about your co-founder,
and the easiest way to do it or the best way to do it is to just do something together.
It can be a project, it can be a hobby, it can be a hackathon. You can even be on some
sports team together. That already will give you some opportunity to learn about each other's
values, temperament, many things. That is essential before jumping in and starting something
big.
I want to talk a little bit about you personally. What are your goals in life? How do you know
that working on Grammarly is something that you really want to do? How would you know,
for example, if the day came where your time at Grammarly was done and it was time for
you to do something else?
My goal in life is, in general, just to do significant things. I'm not necessarily focused
on specificity of those things. I don't necessarily think there should be growth, for example.
I tend to focus on growth because that's what I know and that's what I'm passionate about,
but if I have an opportunity to do something significant elsewhere, I will likely take
it. But yeah, just trying to make the biggest dent in the universe, even though it's a cliche,
I think that doesn't make it untrue. That's what I'm looking forward to.
With Grammarly, Grammarly is just a rocket ship. It's a quickly growing company that's
making a product that's used by so many people and benefiting so many people. It provides
me with a tremendous platform to make significant things. That's why I envision myself being
with Grammarly for a long time.
I think from the outside looking in, it's easy for entrepreneurship to look super glamorous.
It might look like nothing but numbers going up and to the right and large amounts of money
changing hands in your direction. But the reality is that sometimes there's drudgery
and sometimes there's too much responsibility that you don't want to deal with. You just
want to break. And sometimes there are times where you just want to quit because it feels
like you're not going to succeed and you're working yourself to the bone.
Has there ever been a time like that for you? Have you ever thought that you might be better
off getting a job or have you always had the heart of an entrepreneur?
I always had a heart of an entrepreneur. There were times when I was just too tired, but
that quickly passes when you just gave yourself a little bit of time to take a breath. Yeah,
as soon as I saw the difference between working for somebody and working for your own company,
I realized that this is much better. And when I say working for your own company, it doesn't
necessarily mean being a founder, even though it was the case in my case, even can be a
company where you just matter enough to be material to the company's success or the company's
path.
Yeah, you're describing my exact situation. So I think you guys got acquired by Blackboard.
Was that your first job at kind of a normal company?
Yeah, first real job, real full-time job in normal company.
So I'm also at my first real full-time job at a normal company as a result of an acquisition.
But I suspect that most listeners are in the exact opposite situation. They spent their
careers working as employees and maybe have never actually started a business before.
So after your time at Blackboard, what would you say to somebody in that situation who
wants to branch out and start a company? What are some of the big differences between being
an employee and being a founder? And how can they prepare for those differences?
Well, they're positives and negatives, of course. And for many people, actually negatives
would outweigh the positives because on the one hand, you are in control of pretty much
everything you do whatever you want, or at least so it seems you matter everything you
do matters. But on the flip side of that, well, everything you do matters. So you cannot
do anything wrong. If you do anything wrong, like anything you do wrong or suboptimally,
anytime you slip up, you'll see it in disappointed faces of your team. You'll see it in your
bank account, like you will know. So that's yeah, anytime you kind of stop working early,
you'll know. So it's a different experience. It's very different. And it's a lot of pressure,
a lot of risk. So how to go into that with the eyes wide open.
And what about for people who do have their eyes open, and they know that this is something
they definitely want to do? What's some practical advice for when and how they should get started?
Or what would you do differently if you could go back and start over?
First, I would make sure that I have some savings and I have a lifestyle that can be
supported by those savings for some period of time, because that just gives you more
room for manure. You can maybe bootstrap for a little bit longer, maybe you can dedicate
more time to get the product to maturity before you have to look for funding. Maybe you can
even hire somebody and pay salary out of your pocket. It's good to have these opportunities
and preparing for it, even though that means starting something a little bit later, I think
is a good idea. Because if you start something and you have to drop it, because you have
to pay bills, it's just a shame. And I've seen people who had to kind of quit their
startups because they either ran out of money or ran out of patience. And it's just never
a good experience. So prepare as much as possible financially and maybe trim down your lifestyle,
but be as prepared as you can.
I think it goes back to what you were saying earlier, that there's really no such thing
as failure, because you're always learning and you're always moving ahead, unless you
stop trying, unless you quit. And if you put yourself in a position where you're going
to have to quit much earlier than you would really like to, then you're kind of setting
yourself up for failure. So I think that's great advice. Make sure you're ready financially
as well as mentally to be in a position to give your company your best shot and not have
to quit early.
Yeah, for some people, it may mean just keeping their day job or maybe quitting their day
job, but freelancing on the side. And I think that's valid, but it requires an additional
level of discipline where you can still give your idea, your startup enough time and enough
mind share while also providing for yourself.
Well, thank you, Max, for the great advice. Hopefully, our listeners will find it useful.
Can you tell everybody where they can go to find out more about what you're up to personally
and also the things that you guys are working on at Grammarly?
We're very active on social media, Twitter, Facebook, LinkedIn, support us and me personally.
So that's how you can learn more.
All right. Well, thanks so much, Max, for coming on the show.
Thank you. Bye.
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