Download podcast transcript [PDF] here: Max Lytvyn Reveals How He Grew Grammarly to 10M+ Active Daily Users without Funding TRANSCRIPT PDF
Time-Stamped Show Notes:
- [00:42] Before we jump into today’s interview, please leave a review and rating and subscribe to the Growth Everywhere Podcast!
- [02:13] Max is originally from the Ukraine.
- [02:24] He began working with tech in the early ’90s by building his own computer and picking up coding.
- [02:45] In 2002, he moved to the business side of tech.
- [02:56] He has lived in Canada and the US most of his adult life.
- [03:08] Max started a plagiarism detection service with a friend.
- [03:45] They did research into why people plagiarize.
- [04:15] This is what spurred the idea for Grammarly. At the time, the idea seemed “out there”.
- [04:45] Grammarly was broken down into stages. They started with spelling, then branched out into grammar, clarity, style, tone, etc.
- [05:20] Grammarly has over 10 million daily active users.
- [05:43] In November of last year, they made over 4.5 billion suggestions.
- [05:53] The team is 150 people spread across three different offices.
- [06:05] Grammarly has a free product and a paid product.
- [06:12] The premium service runs $30/month or $145/year.
- [06:46] Students use Grammarly because so much of their success is dependent upon their writing.
- [07:07] Professionals use it for similar reasons.
- [07:25] Others use it to punch updating profiles or job postings.
- [07:45] Grammarly started in 2009.
- [08:10] They bootstrapped for a very long time.
- [08:25] Because of this, their growth was slower than if they had accepted funding.
- [08:55] The first few years they were concerned with survival. Everything had to have a quick payback.
- [10:48] They focused on getting enough revenue to continue existing and building. They finally gained enough surplus to grow.
- [11:30] Their payback period was nearly instantaneous (at least in terms of marketing).
- [12:50] They approached acquiring customers from two different directions.
- [13:00] They did B2B sales, attended conferences and trade shows, etc.
- [13:20] They marketed through social media and paid ads directly to consumers.
- [13:45] Content marketing is an instantaneous feedback loop.
- [14:15] Based on reactions to ads about specific features, they could gauge the worthiness of those functions of Grammarly.
- [15:10] As soon as you get good at something, you scale; you scale until it stops working.
- [15:33] No one thing is responsible for Grammarly’s success.
- [16:24] Hiring a great team is helpful, but the culture and processes are also important to product success.
- [16:51] Focusing on the process of trying new things has helped them with customer acquisition. “There is no magic bullet”.
- [17:34] There is always a new struggle.
- [18:03] They struggled with finding the right marketing channels.
- [18:49] Doing bigger things and looking at aggregate change, understanding the value of brand are all things that helped them succeed as a company.
- [20:00] After doing everything, you eventually realize you need to specialize and delegate tasks.
- [20:45] Creating leaders at your company is the next important step.
- [21:10] They have engineering teams in San Francisco, Kiev, and New York. Each team in independent.
- [21:35] The Kiev team is the largest.
- [22:01] The time difference is a challenge.
- [22:28] They don’t want people to compromise their lifestyles, so they overcome the time difference by making sure teams aren’t’ beholden to each other.
- [23:38] Max recommends the books Mindset and Grit. These books don’t give specific answers, but give you values by which to find solutions.
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Full Transcript of The Episode
In November of last year, we made 4 and a half billion suggestions in text written by our users. That's kind of another number I can share, and our team is about 150, just over 150 people in three offices around the world.
Eric Siu: Got it. Okay, and how does pricing work for this product?
Max Lytvyn: We have free product. It is essentially a premium model. We have a free product that has subset of functionality, and then we have a premium product that has everything. And premium product is, pricing ranges from $30 per month, to $145 per year.
Eric Siu: Got it. Okay, and you mentioned, so you mentioned, or I guess backing up a second, the premium model, what kinds of people are using the premium model? I mean, for myself if I can take myself back to college, I can definitely see myself using something like this, but, yeah, what kind of person would use the paid versions?
Max Lytvyn: It's a very broad range of people because there are so many ways people get value from the product. Students is one example that you brought it up, and it's a very good example. Students use Grammarly because so much of their work is in writing, and so much of their success depends on the quality of their writing, but they're not the only segment that's in this position. Consultants, marketers, financial analysts, also can ... Knowledge workers, much of their output is actually written documents, or messages. In their case as well, their productivity, and their degree of success, to a large extent depends on the quality of their communication, the quality of their written communication. That's on the professional side.
On non-professional users, people want to rent out their apartment, want to update their resume to find a job, want their dating profile to look better, and these might be kind of instances when they decide to upgrade to premium product.
Eric Siu: Right. Okay. I guess, what year did you start the business again?
Max Lytvyn: 2009.
Eric Siu: Got it. And so you started the business in 2009, you guys have raised, according to Crunchbase, have raised $110 million, but that was way later, right? It wasn't like you guys just started this, and it blew up, right? You started it, and I guess, I want people to kind of get an idea of what that growth trajectory looked like for you guys? What did it look like over the years? 'Cause everyone all thinks it's sunshine and flowers, when it really isn't.
Max Lytvyn: Well, we bootstrapped, and we bootstrapped for a really long time. We only got our first funding around less than a year ago, which as a premature company, and we bootstrapped up until then. And because we bootstrapped we grew in a very responsible way, which maybe was slower then we could have grown if we took funding, but at the same time we had full control over what we were doing, and we were not distracted by fundraising, so there are pros and cons, but part of the reason it took us so many years to grow to this scale, is that we bootstrapped, and the first few years we were really concerned with just survival. Anything we did, we had to make sure it had very short, very quick payback period. Kind of any new feature we build. Any new investment we made in the product, or marketing, it had to have a quick payback. That was a very strong limitation early on when we didn't have any money, but then eventually as the company built up its kind of profit cushion, we could afford to be more strategic, and think about future more, and build for the future, and not just for a quick return.
That's how kind of bootstrapping shifted our, well not shifted, but shaped our strategy to some extent. Yeah, and that kind of gives you some idea of trajectory.
Eric Siu: How long did it take for you to build up those cash reserves? 'Cause you talked about bootstrapping, you needed to be kind of mindful of cash reserves and all of that.
Max Lytvyn: Well, it's not binary, so it's hard to say that we were kind of building up cash reserve for two years, and then we switched to kind of high growth mode. It's not like that. It's a gradual process. Early on, we were just, it was a singular, survival was a singular focus. Maybe for first six to twelve months, and then starting from there we could afford to think more and more about, oh, what company do we want to be when we grow up? And what's our mission vision? And how do we want to impact this world?
Eric Siu: Yeah. I'm just wondering what was your guys' timeline? I'm not saying it's binary or anything. How long did it take? Was it three years, four years? I think it's just good for people to look at this story.
Max Lytvyn: Yeah, definitely. What I'm saying is around a year, probably first year we were just survival focused. You know, kind of, of course, we had our vision, we had some ideas of how the future would like, but what we did in practice was focused on just kind of getting enough revenue to continue existing, and to continue building. And then after about one year we had enough surplus to be more strategic in how we build our product, in how we do our marketing, and so on.
Eric Siu: Great. Love it. Okay, and you talk about, I mean, not a lot of people, even though we have a lot of SaaS entrepreneurs on this podcast, the concept of payback period is really important. Can you kind of talk about definition of payback period, and just how it looked for you guys? And how you see that term?
Max Lytvyn: Yes, sure, for us, initially our payback period was pretty much instantaneous because we spent on acquisition less, and user paid us right away when they needed, when they bought the product. Basically, payback was just right away. At least payback period for marketing. Payback period for product enhancements, that's hard to calculate. I can't even calculate that because, well, some of the things we designed back then are still generating revenue. That part is just too fuzzy.
Eric Siu: Right.
Max Lytvyn: But for kind of [inaudible 00:12:00] economics, in terms of marketing, it was instantaneous payback period, and we had to do that because we would, we just didn't have any cash reserves when we started, we bootstrapped.
Eric Siu: Right. Makes total sense. I mean, looking at your payback period, you guys don't have the luxury of waiting, you guys needed to raise money, right? It's not like you had a cushion to protect yourselves, so I think it's not a particularly sexy product, or not product, but term to talk about what it's really important, especially with, for any kind of a subscription business to pay attention to their payback period because if you can payback faster, you can reinvest, and you grow faster at the end of the day. Okay. In the early days, I mean, you guys you have, 10 million you said, daily active users, right?
Max Lytvyn: Yeah.
Eric Siu: In the early days, I guess, how did you go about acquiring, let's just say, your first, well, 100,000 customers.
Max Lytvyn: We approached it from two dimensions, from directions, we didn't know which one is gonna work better, so we approached it from directions of ... What we're doing B2B sales, went to conferences, trade shows, showed our product, talked to potential buyers. It was very helpful to kind of get feedback, and to learn about what the pains we can solve, and what are the pains we can solve for our users.
That was one direction, and then another was consumer. We marketed to consumers, and we marketed it through social media, and paid advertising. And paid advertising, many early startups shy away from paid advertising because it's viewed as expensive, and it is expensive, but the benefit of that, compared for example SEO, or content marketing, is that it is an instantaneous feedback loop. Let's say you design a banner, or write an ad copy, and you can measure its effectiveness. How many people click, who see it, or how many people who click convert. You can measure it in hours. Within hours, you can get feedback on that, and it allows us, allowed us at the time to test different ideas. To test different messaging positioning, even features.
For example, we included descriptions of specific features in ads. We use short descriptions of course, and by reaction of potential users in those ads we could see if the feature is worth building, or not even. That's kind of some trick that you can use with paid advertising, but you cannot use with organic channels. Because organic channels if you create a piece of content, you promote it, whereas SEO, and it's already there, it's relatively static, you can't really do much experimentation with what's in it. That's why I would not discourage any starting entrepreneurs from dabbling with paid. Just because you have so much control over it, and you can use it for learning, not necessarily for mass acquisition.
Eric Siu: Great, and so what do you think, I mean, and today, today your team is much bigger, so what's one unique thing you think you're doing in terms of customer acquisition today?
Max Lytvyn: Well, it is an interesting question because that is the thing about marketing, there is no one thing because as soon as something, as soon as you get good at something, what do you do? You scale, and you scale until it stops being good. Until you hit the kind of marginal benefit, it equals marginal cost, so it's like, it's no point in increasing it anymore. And then what do you do next? You discover something else. There is not one thing because as soon as we hit gold mine. We basically tap it, and when it's fully tapped, we look for next one. The one thing that I think is really important is building a process, or building a machine, a team capable of discovering those gold mines on a reliable schedule, and that's incredibly hard. It's very hard because it's almost like and I'll go into a casino, and predicting how much you're going to win by the end of the night, but that's what it takes to generate reliable growth because everything taps out pretty quickly, and you just have to build a machine that is kind of capable of drilling new wells.
Eric Siu: You're talking about hiring a great growth team, right? Essentially?
Max Lytvyn: Yes. Yeah. Hiring a group. It's not just hiring. It starts with hiring, of course. When you get right people, it's much easier to build the right team, but team is not just hiring. It's also the culture. It's also the processes, yeah, it's a lot of components.
Eric Siu: Great. The reason I'm asking that is 'cause I think a lot of people are here are, they understand the concept of building a great team, a great culture, and everything, I'm just looking more for tactically, is there anything you think there is something unique that you're doing from a customer acquisition perspective?
Max Lytvyn: Yeah, just as I said, focusing on the process of trying new things on a fairly aggressive schedule. I think that's one thing that is often underestimated because there is just no magic bullet. There is just thousand different things you need to try. Some of them will work, some of them are not gonna work. And the quicker, and the better you are at trying those different things, the faster you're gonna generate growth, that's pretty much it.
Eric Siu: Okay. What do you think, in terms of going back to the early days of the business, or even, maybe even later stages, what's one big struggle you faced while growing the business?
Max Lytvyn: I hate sounding like a broken record, but it's a somewhat similar answer because it's always a new struggle. You run into challenge, and then the challenge seems like it's huge, it's bigger than anything you've seen before, and you don't know how to solve it, but then eventually you solve it, and then two, three months later it seems like, oh, yeah, that was so trivial.
Eric Siu: Do you have an example?
Max Lytvyn: Yeah, for example, starting with marketing channels that cannot be measured precisely. We struggled with that. We didn't know how to do that. Kind of making a switch from where you spend a dollar, and you get two dollars back, to when you spend a dollar, and you don't know how much you got back. You have to estimate it. You have to triangulate it, or you have to make a leap of faith, and wait for several months for it to materialize. Kind of switching to, or increasing the proportion of those channels was a little bit of a struggle for us, and we just learned how to do it, and now it isn't.
Eric Siu: Got it. Okay, great, and so did you guys build some internal tools where you can measure that out pretty easily? Because nowadays there's a lot of SaaS solutions, but I imagine a couple years ago, what did you guys do to solve that?
Max Lytvyn: A number of things. It's not just one thing, but one is just kind of doing bigger things, and looking at aggregate impact, or aggregate change using more sophisticated measurement things. Understanding the value of brand better, and so on, and so forth. It's rarely just one thing. If it was one thing, it would be too easy, and it would not be challenge. It would be something you just redress at the end, and execute on the recipe, but, yeah, things that become challenges, usually then are solved with not just doing one thing.
Eric Siu: Great. And so, I mean, you started early days, I mean, you started when the company, at the inception of the company. I mean, how has your day to day changed since the inception to now, with we're talking over 100 people?
Max Lytvyn: It changed a lot. Initially, it was just basically everything. You had to come up with an idea. You had to execute an idea. Code your mock-ups. Then you had to market that idea to users, and then you had to do accounting, and taxes in the end. Basically, one person doing everything. And then eventually, oh, we with time, you're starting to specialize, you're starting to think, oh, what am I best at? What should be mine? And what I should hire someone to do that? That's kind of the step one.
And then step two, you just stop doing things on your own at all, and then become just manager or leader, and just make things happen. Not do it themselves, but just arrange the pieces so that the things start happening. Hire teams, build processes, and so on. That's kind of the next stage. And the stage after that, is not even arranging things, not even building teams yourself, but creating leaders who do that inside your company. That's kind of the next stage after that.
Eric Siu: Great. And actually this transitions to the next thing. I mean, I talked to a friend, he has a lot of his development team in Ukraine. It seems you have an office in Kiev, right?
Max Lytvyn: That's correct.
Eric Siu: Got it. Okay, so, I mean, talk about that a little bit. I mean, talk about working with developers in Ukraine. Is most of your dev team over there? How is the engineering team structured over there at Grammarly?
Max Lytvyn: We have engineering teams in San Francisco, Kiev, and New York. And each team is relatively independent, and it's not like managers are in one place, and then developers are in other place. There are just independent, relatively independent units. The team in Kiev is the biggest by size. It's not, at least in our case, it's not any kind of outsourcing, or offshoring, it's just three geographically distributed offices.
Eric Siu: How does that work? I mean, different timezones and everything. Do you expect them to work, how do you deal with the timezone difference? Because some of our developers are, well, they're Eastern / Western and European. I'm just curious how you guys do it?
Max Lytvyn: Time difference is a challenge. Communication is not a challenge because there are video calls, and asynchronous work on documents, like Slack, and JIRA, Asana, and everything. There are tools to communicate across distance, but timezone is one thing that is harder to overcome because we don't want people to compromise their lifestyle. We don't want people to be uncomfortable, and to kind of create debt with their families. The way we are overcoming this is making teams not log to each other. Nobody is waiting for the other team to wake up, or to respond to call. They're independent enough not to have to just wait for each other.
Eric Siu: Got it. To make things simple, just, I guess, I'm trying to visualize this, right? You might say, just to give an example, Ukrainian team might focus on working on sales related items, right? SF team might be focused on working on, I don't know, marketing focused items, right? Is that kind of how you break them out to different tasks?
Max Lytvyn: You could say that. Yeah, it's not exactly like that, but I think this is a good simplified analogy, that, yeah, they do have different tasks that they are equipped to complete on their own, with maybe some feedback, some questions, but not frequent, and not blocking.
Eric Siu: Got it. What is one must read book you'd recommend to everyone?
Max Lytvyn: This is hard one because there are so many good ones, and they kind of a, you need to read more than one book to be successful entrepreneur, and I can't pick which one is more important. And it's gonna be one for some people, and the other for other, but I think two books that are absolutely essential would be Mindset, and Grit. Simple names, I don't remember. I don't want to butcher the authors names because I don't remember them exactly, but I think these books they don't give you recipes. They don't give you specific answers, but what they give you is values that are gonna guide you to find solutions to the challenges, and to make right decisions.
Eric Siu: Right. Love it. Both those books are good. We'll drop them in the show notes, but, Max, this has been great. What's the best way for people to find you online?
Max Lytvyn: Linkedin, that's the tool I use the most for professional networking. Twitter, as well, yeah.
Eric Siu: Wonderful. Max, thanks so much for doing this.
Max Lytvyn: Yeah, thank you. It's a pleasure.
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