Asking The Founder Of Grammarly How He Built A $13 Billion Company

so basically i i'm we've for facebook friends out so we talk a little bit there but i first met you at hustle khan i think this event that i hosted in two thousand and nineteen if 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 grammar we'll doing it 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 yeah that was hundred twenty and i we didn't disclose valuation at the time yeah but if i had to get you yeah you didn't but i think i heard rumors and like i just am i'm guessing it was like in that range and it didn't matter but yeah but basically i made a comment to you i'm like that's pretty cool right and you you kinda replied back you weren't cocky but you were very confident and still humble but you kinda had a g 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 a 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 about reverse engineering different stuff and i thought that was incredibly fascinating you do you remember what i'm talking about oh yeah i do i remember that yeah i actually use it mantra 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 works for many things yeah just kind of looking at things narrowly identifying the sweet spot and then just going broader this is max lit lit vin he started this company called grammar before grammar 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 pla detection company and it was bought by blackboard two thousand seven and then they spent two years was blackboard kind of a part earn an out part just being being there and that was like a a a compared to grammar 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 that was just a start it could've have grown big but education is was at the the point relatively difficult market to to be in and wasn't as big of a market plus our product was fairly narrow it was just doing one thing for one group of people so we kinda saw that it can grow to this point but further it's gonna be very slow and very difficult so that's why we decided so plus we had bigger ideas and you started grammar 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 at thirteen billion valuation and we closed that valuation i still think it's a conservative it's conservative one why because grammar is a very non standard company in very non standard product it's easy to see it for last one it is and and that that's kind of reflected often in in in perceptions of of everyone if investors of sometimes even potential team members we have to explain why it's big and you know but that also helps with last company well and like and and by the way you guys bootstrap it for a long time like you and your c c founder like it's not like you own like four percent of this company you guys probably you own like a a very substantial amount so like actually so you're a on paper you're you're probably a multi billionaire at this point it depends on who you believe there is some information that's not fully accurate but yeah we we we managed to keep significant portion of the company was the founders and employees and employees own actually quite a lot did when i heard about grammar the reason why i won you to come on to the podcast and at hustle con is because i think my reaction is the same reaction most people in business had which is like a this is just a chrome plugin 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 the it just looks like that it's way more than that did most people were like there's were most people dismissive of like it just being a chrome plug in some people are dismissive quite a lot and i wouldn't say dismissive it's not like completely all there's nothing but underestimate the impact and the importance of it and that's that's an interesting conversation always always very similar because they kind of think oh this is a good product this is a cool product but not for me because well i i know what i'm doing and then they try and it helps it helps the material ways and especially when you measure results well because you know when you don't measure things and i'm just you know typing away 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 show me the money but what it's done in the business scale and it's measured and it's kind of assessed you can see like percentages improvements in in different metrics productivity satisfaction and so on and that is up there is a we bought it at the hustle so i i had it for the whole company i don't remember what wait what it cost but i remember seen the bill every month hundreds of dollars a month we 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 i like oh my god i get it but one thing that i've always been fascinated with is is just plugins ins as a business particularly two types of plugins wordpress plugins there's a bunch of guys that have like some substantially sized substantial sized businesses selling wordpress plugins you know like twenty five fifty million dollars a year and then chrome plugins which do you you i don't know if you like describe yourself as a chrome plugin 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 for now yes we just recently switched over to our flagship product being operating system level integration so it works similarly to chrome plugin except it integrates with all the app not web apps so that's that was a big switch over that happened in december so just twelve months ago so that's that expands the surface area for grammar now it's in microsoft powerpoint and you know oracle applications and wherever wherever you want basically did you watch you hire a ceo and when did you do that it's kind jumping topics but yeah we we brought in a ceo i think in twenty eleven and one reason one big reason for that was that both alex my founder and i we have a philosophy that everybody should be doing should be in their z genius doing what they like and what what they're good at and nobody know one of us was really experienced or or even that passionate about scaling organizations and that's what we're were kind of the biggest thing we were looking for from as from ceo teaching us and and doing that basically scaling the company because we realized 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 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 do it with twenty people are thirty how many employees did you have when you hired bread oh i think twenty something oh wow yeah ground nothing i mean it's small small yeah yeah we were fairly small we were we were making good revenue and being profitable at the time already but the company was still very small and that's that's kind of a that that realization we need to their opportunity is big to scale that pushed us to look for kind of external expertise how did you because at that point you i guess you didn't raise money so you and your partner like oh it was like your biz it was your company and like your money how did you how did you not micro manage brad because i did the same thing and not micro managing 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 micro managing or were you pretty emotionally healthy about it i'd like to think we were emotionally healthy maybe brett would disagree i don't know i wish he i actually will ask him but i think part of it was out of necessity there was just so much to do that if your micro manager you get stuck you don't not make progress so there was just no time or resources or energy to micro manage anybody we had to divide and conquer to to actually keep making progress because that's 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 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 so that's that's that made it easy to kind of a dear freedom and give space to to bread and and other leadership team members of made what over your girl goals early on like we're when you started the business for like man i think this can make ten 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 girl goals early on i think we decided that it could be a multi billion dollar business during our conversations was brad partially so kind of alex and i we we we hoped that it could be but then once we started talking with bread about valuation plans and all that when he was thinking about joining then it become pretty clear that yes there is a multi billion dollar market out there are we gonna capture it or not to be just to be determined but at that point but there is definitely an opportunity so the signs of the opportunity became clear fairly early but past there that that took years what was the vision that may 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 no like nova lists over 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 then it clicked and a very simple formula if you look at amount of time we spend communicating creating knowledge as a humanity as all people in the world that is a huge percentage for our time and it it's increasing because we spend less time doing things with our hands manufacturing is being automated it's not like we 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 billion billions 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's doable that's doable so so we just i have that aim same insight except i did it in such a horrible worse way so basically i learned how to be a copywriter so like i read books on copy 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 and in twenty one so it was all about like dating i'm like oh man if i were learn how to write better in my messages to girls who i match with like my life is gonna be better and then i was like wait a minute if i learned how to write better i could sell more stuff if i had 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 it 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 an idea and you'll and you'll force yourself to like laid 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 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 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 three hundred dollar course yeah software is more scalable that's that's true and and actually we we will just said with writing it also applies to speech we when we do user research we noticed that people who use grammar repeatedly adopt patterns of communication more effective patterns of communication and translated to non written communication as well so for example if grammar keeps suggesting that you don't use kind of a worthy or wave or weak sentence structures you stop or reduce use of them in each as well so i so kind of good habits is rub off and and translate your other modes of here's my opinion so have you ever heard of copy work alright so in like the seventeen hundreds eighteen hundreds and up until like nineteen ten 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 right 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 grammar in a sense it's doing that because in real time you're learning but it's far better than just saying like going right 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 i'm i'm not a lot of people have heard of copy i thought maybe you would have but it's like not very well known no i haven't heard of but but i've seen and done in many many fields mike at at one point i i was passionate about photography and same there you just basically try different try to basically copy different photographs and recreate them and then this way you learn the language of of that art so so yeah that applies to me many hear you sir where you how technical were you and your c cofounder founder were your technical enough to build the first handful of iterations so i was very technical so for example the previous pla detection company i wrote the core the core algorithm and and most of the code originally most of the kind of back end code not the front end but when we were working on grammar i don't think i did any production code i coded some of the like experiments landing pages payment to checkout out processors like some stuff something you don't even need a code anymore today if you don't want to yeah yeah yeah yeah so i coded some of that but i didn't code the like a like a real production grade stuff mostly because i'm i'm not a formally a software engineer i'm a kind of a self trained code 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 i basically everybody has to wear a lot of has and small company so the b of the business occupied pretty much my whole time so was no time for for so you just hired you you did you guys just self fund it and hire a couple of people to help build the first version we hired quite a numb quite a significant number of people we also had a technical founder on board demo leader who helped build out the technical team so he was responsible for for the technical side initially but yeah because of our previous exit we had some savings that we could put into grammar some substantial savings we could put put into grammar so basically we were both founders and the first investors how much did you spend to get them to to make it work until like it was a sell product i don't remember well it was like a million or ten million five hundred thousand do you remember i think it was close to a million what it was a product that worked only for very small audience way very small use case and it was not real time so basically what happened was you write a book a chapter proof of a book because it couldn't check the whole book at at once or you write a research paper you submit to the initial like the old grammar 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's without 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 for you but that won't fly with with business writers for example if you're writing a business email that you need to send in twenty seconds you're not gonna deal with false positives and did that version get you to profitability yeah oh shit would you charge for a hundred dollars a year we charged i think ninety dollars a year or something like that yeah yeah we're hundred so yeah i think nine ninety five hours a year how did the people hear about it the first users so that was interesting because we launched two peril streams one two consumers in one two businesses educational institutions publishers basic companies consulting companies and the consumer channel two call like it grew exponentially from basically week one and enterprise or b to b it took a longer to build so once we kinda pushed both of them in parallel for about half a year we saw that well kinda makes sense to focus on consumer for now because it's just growing like wildfire but b to b requires much more pushing much more hiring more people intensive because he sales team and all that so we kinda of decided to floor it a little bit and focus on consumer for first few years and deal with to paid marketing or organic we did everything we we tried all the channels available to us and obviously different channels have different benefits at the time social was also easier to to get free promotion from right now obviously kind of facebook and others just wanna capture all the value they create but back then it was easy to get easier to get stuff viral and social and and just get like free promotion from that seo was easier as well so many things were just like many channels where quite easier to do but we relied on paid early on quite a bit because it's it's a very quick feedback you design an add you send it or kind of put it in the system and then you get back resolve 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 it's a in in more traditional world it's a weeks of thousands of dollars so yeah so that's that was that was kinda of why we were so bullish on paid from early on even though it cost a lot of money what companies are you guys trying to buy companies not specifically anywhere open to that but we're not like hunting to dubai companies is there a problem that you need to be solved and then you saw that this other company was solving that problem that you'd buy it so like let me give you an example the the founder of jet you know jet dot com they sold a 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 instead of grammar 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 yeah there are there are many things like things around doing more on device like doing more and more processing on device i think that that that will be very interesting to us because it it didn't it enables better user experience lower lag potentially higher performance it also helps alleviate some potential privacy concerns so kind of a an brainer to do more stuff on device and it's cheaper for for for us to sorry what what does that mean you mean like instead of you paying for all this cloud space for everything for the the for yeah yeah jacob can yeah calculating the suggestions on device so basically whenever we say oh this needs to be shorter or re 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 that's kind of a that that that has number of benefits for for both us actually i i don't know what those costs are so how much does it cost to host like what percentage of your revenue do you spend on or maybe like how does the payroll compare the payroll cost compare to like your hosting costs i i would say it's comparable hosting costs are even though we don't host much of the data if we're not like dropbox where we store files but the processing the processing is quite expensive especially if you consider that we have tens of millions of free users who are not paying us anything and we're not we don't monetize them in any way at all because we don't we don't sell user data we don't show ads we don't do any of that so basically all the three users are not monetized until they subscribe so that that makes it that makes us be conscious of processing 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 on the so then you're paying a shit ton for those that hosting yeah i i i would i would say it could be less than here what i don't remember exactly but yeah it is significant i that that then you supporting that many users and providing a reliable service it it does what do you pay oh it's mostly i'm crazy man like it it just runs the internet is crazy well yeah we evaluate from time to time bringing some things in house and actually some things we do have in house not not necessarily like the the infrastructure but like some train model training and all the stuff we do in house but so we we look into that so it's not like we are just amazon and forget it boosting fuck it is ineffective way just scale business it isn't effective with right yeah it's just like crazy that it's crazy that it it always freaks me out a little bit that like we used cloudflare and i remember one time cloudflare flare went out and like our website was dead and so was like a quarter of the internet yeah yeah it's it is this concentration it is kinda scary yeah it freaks me out a little bit yeah it it has its benefits but it is yeah it a lot of places have a single point of failure for significant portions of our infrastructure are you em we'll wrap up here in a second but i i asked you about hemingway earlier do you do you view them as competitors at all not really no did they they do something that similar and something that's basically part of what we do and number of people use both products simultaneously so we don't view them as competitor because they don't take business from us so yeah so it's not like who do you view as a competitor who do we 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 to other than that once you get to 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 basically at any point anybody can become but are there any i've never seen any like ups start there any small companies try to compete with you guys is there is there it many there's some but most are focusing on either niche like a primarily for a specific market and i think that's that's a good way to start and obviously we're we're watching them and and seeing what they're doing right what they're doing wrong and so on there there there's similar more products my microsoft i think has similar product but again it it only does part of what we do so it doesn't take away much business from us if any so so yeah so i wouldn't i wouldn't say that there are any kind of 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 just untouched by anybody cool thanks for coming on i'm gonna we're gonna wrap up now and 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 great thank you thank you so much for having