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

So basically I I'm we've we're Facebook friends now, so we talk a little bit there. But I first met you at HustleCon, I think, this event that I hosted in two thousand and Nineteen. And you're one of the best people we've ever had. We've had hundreds of people. And I'll uh I'll tell you why. Two things.

The first I think you spoke. right when so this is Max, he started Grammarly. We'll do an intro in a second. But I think you spoke when You guys had just raised maybe a hundred million dollars at a billion dollar valuation, or something like that. Is that right? Yeah, that was uh yeah, that was uh hundred twenty uh and uh

Uh we didn't disclose valuation at the time. But if I had to gu yeah, you didn't. Uh but I think I'd heard rumors and like I just am guessing it was like in that range. And it doesn't matter. But but basically Um I made a comment to you, I'm like That's pretty cool, right? And you You kind of replied back, you weren't cocky, but you were very confident

And still humble. But you kinda had a grin. And I forget exactly what you said. But it was something like Yeah, it's gonna get much bigger too. And I o I loved that like subtle confidence. And then at the event

What you talked about, I don't even remember the title. But the idea was basically like you're an engineer. But you've done a really good job of like evolving past just engineering. And you like said this is how like I engineer like good products and this is how like everything you looked at was from an engineer like uh about reverse engineering different stuff. And I thought that was incredibly fascinating. You do do you remember what I'm talking about? Oh yeah, I do, I I remember that. I I actually

use at Mantra a lot in inside the company as well when we look at uh different markets and uh where to go next and uh it's just a universally good framework that uh Uh works for many things. Yeah, just kind of looking at uh things narrowly. Identifying the sweet spot and then just Going far from there. So this is Max Litvin Litvin. He started this company called Grammarly. Before Grammarly you had another company called like Blackboard, I think, right?

That was not my company, that was a company that bought my company. So my company was my Dropbox. Uh not to be confused with Drawbox. It was a plagiarism detection company and uh it was bought by Blackboard in two thousand seven. Um and then they spent two years with Blackboard.

Kind of a part earn out, part just being uh Being there. And that was like a a a Compared to Grammarly a mild success, right? Like it was it was financially good, but it wasn't like this huge, huge multi billion dollar company.

Oh yeah, that was uh that was uh just a start. It could have grown big, uh but Education is was at that point a relatively difficult market to to be in and wasn't as big of a market. Uh plus our product was fairly narrow. It was just doing one thing uh for one group of people.

So we kinda saw It can grow to this point. But further it's gonna be Very slow and very difficult. So that's why we decided to sell bus. We had And you started Grammarly and at this point can you reveal can you reveal how big it is?

Because I I like it's shockingly large. Yeah, uh so we raised that uh thirteen billion uh valuation and we disclosed that valuation. I still think it's a conserv it's conservative one. Why because Grammarly is a very nonstandard.

company and very non standard product. Uh it's easy to seed for less when it is. Um and uh and that uh that's uh kind of reflected uh often in uh in in perceptions of uh of everyone, of investors of uh Uh sometimes even potential team members we have to explain why it's big and you know. But uh That also helps with uh

Last competition. And and by the way, you guys bootstrapped it for a long time. So like you and your co co founder, like it's not like you own like four percent of this company. You guys probably you own like a s a very substantial amount. So like Actually It's uh

Well you're a On paper, you're you're probably a multi billionaire at this point. Uh it depends on whom you believe. Uh there is some information that's not Fully accurate. Uh but uh yeah, we we

We managed to keep significant portion of the company with the founders and employees. Um employees own actually quite a lot of the three. When I heard about Grammarly, the reason why I wanted you to come on to the podcast and at HustleCon is because I think My reaction is the same reaction most people in business had, which is like A This is just a Chrome plugin. 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

Th it just looks like that. It's way more than that. Did most people Where like there's n the were most people dismissive of like it just being a Chrome plugin. Some people are dismissive, uh quite a lot. And uh I wouldn't say dismissive cum it's not like completely oh there's nothing. Uh but um

Underestimate the impact and the importance of it. And that's that's an interesting uh conversation, always uh always very similar. Because Um they kinda 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. Uh and then

Uh they try it and uh it helps. It helps the material ways and Uh especially when you measure results. 'Cause you know, when you're don't measure things, uh and and just you know Typing away. uh it saves you from an embarrassment or helps you phrase more clearly

Kind of Yeah. Yeah, it's cool, but Well being back to paint. Show me the money. But when it's done on the business scale. uh and it's measured and it's uh kind of assessed, uh you can see like percentages, improvements in in m different metrics, productivity, satisfaction, so on.

And that adds up. We bought it at the hustle, so I I had it for Uh the whole company. Um, I don't remember what it what it what it costs, but I remember seeing the bill every month. Hundreds of dollars a month. We and everyone loved it. And I loved it. I I still use it. So it like I totally I totally buy it. I I totally Once I started using it, it's like Oh my God, I get it.

But one thing that I've always been fascinated with is is Just plug ins as a business. Um Particularly two types of plugins. WordPress plugins.

Um there's a bunch of guys that have like some substantially sized substantial size businesses selling WordPress plugins, you know, like 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. As a business, I I don't think you are, but like

It's definitely like the one of the main ways in which most people interact with you, right? Uh for now yes. Uh we Just recently. uh switched over to our flagship product being uh operating system level integration. So it works.

Similarly to Chrome plug in, except it integrates with all the apps, not just Uh so that's uh that was a big switch over that happened uh Uh in uh December.

So just Um so that's uh it expands the surface area for Grammarly. Now it's in Microsoft PowerPoint and uh No Oracle applications and wherever wherever you want, basically.

Um Did you uh Why'd you hire a CEO and when did you do that? Uh It's kind of jumping topics, but uh yeah, we um we brought in uh a CEO I think in

One T eleven. Uh and um One reason one big reason for that was that Um both uh Alex Microfounder and I we have a philosophy that everybody should be doing should be in their zone of genius.

Doing what they like and what what they're good at. Uh and Nobody, no one of us was really Experienced or Or even

that passion about scaling organization. Uh and that's what we were kind of the biggest thing we were looking for from as uh from uh CO. Um Teaching us and and doing that basically scaling the company'cause we realized that to do what we need to do we need

A lot of people we need a big company. It's uh Yeah. 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 uh twenty people or thirty. How many employees did you have when you hired Brad? Uh I think twenty something. Oh wow. Nothing. I mean small. Small. Yeah, we were fairly small.

Um We were we were uh making good revenue and being profitable at the time already. Uh but the company was still very small. Um and that's that's kind of a

That that realization we need to The opportunity is big and we need to scale. А да пуш токф. Kind of external expertise. Because at that point

You I guess you didn't raise money, so you and your partner like own it was like your business it was your company. And like your money. How did you How did you not micromanage Brad? Um because I did the same thing and

m not micromanaging is tough because you're like, Oh my God, if you make a mistake, you're gonna lose money and that's like my money. And so it's like really stressful to like let someone fail sometimes and learn Were you micromanaging or were you pretty emotionally healthy about it? I'd like to think we were emotionally healthy. Uh maybe Brad would disagree, I don't know. I wish he I actually will ask him. But um

I think part of it was out of necessity. There was just so much to do that if you micromanage you get stuck. You don't you not make progress. So there was just no time or resources or energy to micromanage anybody? uh we had to divide and conquer to to actually keep making progress

Uh'cause that's a that's a lot of work. So just just from the volume of things to do. Everybody had to do their own thing. So that that happened naturally. And part of it is a 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. Ah, so that's uh that's that made it easy to kind of a give freedom and give space to to Brad and and other um leadership team members at Mention.

Where when you started the business where 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 w what were your go goals early on? Um I think we decided that it could be a multi billion dollar business. During our conversations with Brad, partially.

Uh so kind of Alex and I we we we hoped that it could be, but then once we started talking with Brad about valuation plans and all that. Um when he was thinking about joining Then it became pretty clear. That. Yes, there is a multi billion dollar market out there.

Uh are we gonna capture it or not? to be dis to be determined, but Um at that point. But uh there is definitely an opportunity. So the size of the opportunity became clear fairly early. Um but uh past there, that that took years to be.

that made or what what did you see that made you feel that it could be a multi billion dollar opportunity and what was the vision and were there any Was there any numbers that you saw? early on. That which said like, Oh my gosh, there's something here.

Yeah, so I think the breakthrough moment was when we saw that it is possible to help not just professional writers, people who write for a 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 now

No, like novelists or or researchers who are published and so on. So when we saw that it's possible to make a product that's useful for everybody else. Uh then it clicked. And very simple formula. If you look at Amount of time we spend communicating and creating knowledge

uh as a humanity as All people in the world. It is a huge percentage of our time and it's increasing because we spend less time doing things with our hands. Manufacturing is Being automated. It's not Like we were doing it.

menu anymore. Uh as much. So if you take this time that we spend communicating and creating knowledge And make it even one percent more effective.

The impact is in Trillions. Not not even billions. Uh so can we do something that makes communication one percent more effective? On average for everybody.

That doesn't sound impossible. That sounds like something's doable. Uh that's doable. So so we just except I did it in such a horrible worse way. So basically, um I learned how to be a copywriter. So like I read books on copywriting and like on persuasive writing. And my theory was like, Oh my gosh, like with texting

Or like online dating. I I was single at the time and and twenty one, so it was all about like dating. I'm like Oh man, if I weren't 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 learn how to write better, I could sell more stuff. If I learn how to write better, I can make people feel emotion 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 Yeah. Yeah. Uh makes you think better. So like if you can if you have an idea for something

And you're forced to write it out. You'll see all the holes in idea and you'll and you'll force yourself to like lay it out. And so I was like, Oh, I'll teach people how to write better. And so I created a course on how to write better, of course, like Obviously creating a software product it was out of my league, but like that was clearly the the better move to do. But the same insight was like Mm.

w 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 uh

Uh, and actually w w what you said about writing Uh it also applies to speech. Um we uh when we do user research we notice that Um People who use grammarly repeatedly

Um adopt patterns of communication, more effective patterns of communication translated to uh non written communication as well. So for example If Gramley keeps suggesting that you don't use kind of a Wordy or wag or weak sentence structures. You stop or reduce use of them in speech as well.

So kind of good habits rub off and and translate to other modes of communication. So Have you ever heard of copy work? Right. So in like the um 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 right. go write a piano song. I would say 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. Um, 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 cop popular way to learn how to write now. But in my opinion, it's one of the most powerful. I would say grammarly

In a sense it's doing that because in real time you're learning. But it's far better than just saying like go and write like just like spend a lot of time writing your own stuff. I think copying other people is Far better. Um

Anyway it's something I've been playing with. I'm I'm sure I'm I'm uh not a lot of people have heard of copy work. I thought maybe you would have, but uh It's like not very well known. No, I haven't heard of it uh but uh seen it done in uh many many fields. Um like uh At at one point I I was passionate about photography. And uh same there, you just basically try different uh try to basically copy

different photographs and recreate them and and this way you learn the language of of that art. Um so so yeah, that applies to many, many areas. How technical were you and your co founder? Were you technical enough to build the first handful of iterations? Um so I was very technical. Um so for example the pl previous uh plagiarism detection company Uh I wrote uh the core

uh the core algorithm and and uh most of the uh code uh originally most of the kind of back end code, not the front end. Um But When we were uh working on Grammarly I

Don't think I did any production code. I coded some of the like experiments, landing pages, payment check out processes. Some stuff. Yeah, yeah, yeah, yeah. So I coded some of that, but I didn't code the like uh like a real production grade stuff. Mostly because I'm uh I'm not a formally a software engineer. I'm a kind of a self trained coder. But uh 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 start out Uh I was responsible for uh Finance, marketing, uh

Like pretty much. Thanks lots lots of things. Like basically everybody has to wear a lot of hats in a small company. So the Running the business occupied pretty much my whole time, so

Was no. Time for for So you just hire you you did you guys just self fund it and hire a couple of people to help build the first version? Uh we hired quite a num quite a significant number of people. Uh we also had a uh technical co founder on board. Um uh

Dima Leader. uh who helped uh build out the technical team. uh so he was responsible for um uh for the technical side uh initially Uh but yeah, uh because of our previous exit we had uh um some savings that we could put into grammarly, some substantial savings we could put into Grammarly. So basically we were

both owners and the first investors. How much did you spend to get the to to make it work until like it was a sellable product? Uh I don't remember. Do you remember? Uh I think it was close to a million.

Um But 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 Right. Book. A chapter of a book'cause it couldn't Check the whole book at once.

Uh or you write a research paper, you submit it to Yeah. The initial like the old grammarly. Uh and then you go make a cup of coffee and then you drink the cup of coffee and then you wait a little bit more and then it spits out the result. Uh and

The result was probably half of it was real issues and half of it was false positives. But At the time the audience the the Target market was fine with that because

If you spend Like two months writing a book. Like what's extra half an hour to review all the potential issues, right? Even if they're not real. But that won't fly with uh 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 positive. And did that Version get you to profitability? No shit. What you charge for it? A hundred dollars a year? Uh

We charge I think ninety dollars a year, something like that. Uh yeah. Um Yeah, four hundred. Yeah, I think nine ninety five over the years. How did the people hear about it? The first users. Uh So that was uh interesting because we launched two

Carol's Feeds. One to consumers. And one two uh businesses uh educational institutions publishers uh Basic companies, consulting companies.

And Um The consumer channel to call. Like it grew exponentially from basically week one. uh in enterprise or

B to B um it took a longer to build. So Once we kind of pushed e both of them in parallel for about half a year. Uh we saw that well

Kinda makes sense to focus on consumer for now because it's just Growing like Wildfire. Uh but uh B to B requires much more pushing, much more hiring, more people intensive'cause you need sales team and all that.

So we kind of uh Decided to Sloral it a little bit. Um And focus on consumer for first few years. And do with it through paid marketing or organic?

Uh we did everything. Um We we tried uh all the channels available to us and uh obviously different channels have different benefits. Um at the time Social was also easier to to get free uh promotion from.

Uh right now obviously kind of uh Facebook and others just want to capture all the value they create. Uh but back then uh it was easy to it gets easier to get stuff viral on social and and just get like free promotion from that. Um SEO was easier as well.

Um so many things were just uh like many channels were uh quite easier to do. Uh but we relied on paid. uh early on quite a bit. Uh because it's uh It's a very quick feedback.

Uh You design an ad. You send it. Uh or kind of put it in a 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. Uh it's a in in more traditional world it's a weeks of marketing. Yeah.

So that's uh that was uh that was kind of why we were so uh bullish on paid from early on, even though it costs a lot of money. What companies Are you guys trying to buy companies? Um

Not Specifically, I mean we're open to that. Uh but uh we're not like Hunting to bike home. 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 I let me give you an example. Uh the founder of Jet. You know, Jet.com. They sold to 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 w inside of Grammarly we're like, man, we haven't figured out blank yet? But if someone did figure out blank, that's a cool company we would buy. That's a cool problem solved that we would buy. Uh

Yeah, there may there are many things. Um like things around Um doing more on device. uh like doing more and more processing on device. I think that that that would be very interesting to us because uh Um it it didn't it Enables

Uh Better user experience, lower lag. uh performance Um it also helps uh alleviate some uh potential privacy concerns. So kind of a uh a no brainer to do more stuff on device. And it's cheaper for for for us to Sorry what what does that mean? You mean uh

Like instead of you paying for all this cloud space for everything. For the the for Yeah, calculating the suggestions on device. So basically Whatever. Uh we say, Oh, this needs to be shorter or we rephrase it.

Like that making that determination. on your phone or on your laptop rather than sending it to cloud and and having our service Crunch the numbers. So that's uh that's kind of a That that that has number of benefits for uh for both users. Actually I I don't know what those costs are. So how much does it cost to h like what percentage of your revenue do you spend on

Or maybe like how does the Payroll compare the payroll costs compared to like your hosting costs. I I would say it's comparable. Uh hosting costs are like even though we don't host much of the data like we're not like draw box where we store files. uh but the processing the processing is quite expensive especially if you consider that we have

Uh tens of millions of Free users who are not paying us anything. Uh and uh we're not we don't monetize them in any way at all. Um'cause we don't we don't sell user data, we don't show ads, we don't do any of that. Uh so basically all the free users are not monetized until they subscribe.

Um so that that makes it uh that makes us be conscious of uh processing costs. Especially for regions where Uh not many people can Upgrade to premium, uh like developing countries. How many employees do you have?

Um I don't recall exactly, but I I would say somewhere around eight hundred. Damn, so then you're paying a shit ton for those host that hosting. Uh yeah, I I would I would say It could be less than P I don't remember exactly. Uh but uh yeah, it is significant amount. I mean that that many you supporting that many users. Uh and providing a reliable service it it does. Who do you pay?

Uh Amazon. Like it it just runs the internet. It's crazy. Well yeah, we Evaluate from time to time. Bring in some things in house.

Um and uh actually some things we do have in house, not uh not necessarily like the the hosting infrastructure, but uh like some train model training and all that stuff we do in house. Um but uh Uh so we we look into that. Uh so it's not like we are just Amazon and forget it. Uh, but it is an effective way to scale business, it is an effective way to run.

It's just like crazy that It's crazy that it always freaks me out a little bit that like Uh we use Cloudflare. And I remember one time Cloudflare went out. And like our website was dead, and so was like

A quarter of the internet. Yeah. Yeah, it's uh it is um uh this concentration, it is kinda scary. Um Yeah.

It freaks me out a little bit. Yeah. It it has its benefits, but it is uh yeah, uh it a lot of places have a single point of failure for significant portions of our uh infrastructure. Are you uh and we'll wrap up here in a second. But um

I uh I asked you about Hemingway earlier. Do you do you view them as competitors at all? Not really no. They they they do something that's similar and something that's basically part of what we do and uh number of people use both products simultaneously. So we don't view them as a competitor because they don't take

Business from us, uh so yeah, so it's not like Who do you view as a competitor? Uh who do 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. Um

But other than that. Once you get to certain size. Everybody becomes a potential competitor. Uh, because you know, when you look at big tech companies, they all compete in some ways and all do some

Things that are similar or the same. So that's that's kind of the mindset that basically at any point anybody can become a computer. I've never seen any like Upstarts or any small companies try to compete with you guys. Is there m m is there many?

Uh there's some, um but most are Uh focusing on either a niche like a Primarily for a specific market. Um And uh 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. Um There there there's similar products. Uh mic Microsoft I think has a similar product, but again it it only does part of what we do Uh so it doesn't take away much business from us, so if any um so So yeah, so I wouldn't I wouldn't say that there are any

Kind of direct competitors at this point. Um and um I'm not too worried about competition, frankly, because it's just such a new field. Uh, that most of the market is just untouched by anybody. We're gonna wrap up now and uh I'm gonna let you know when this is live. It should be live in like

A week, I think. But I appreciate you coming on. It means a lot. Uh great. Thank you. Thank you so much for having

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