The Indie Hackers Podcast March 16, 2018

Turning a Vision Into a Massively Profitable Business with Max Lytvyn of Grammarly

Episode #045

Isn't having a vision just fluff? Doesn't every business need to start with the practical realities first? Max Lytvyn doesn't think so. In this episode he tells the story behind how he and his cofounder started with nothing but a vision, and used that to bootstrap Grammarly into a massively profitable business with hundreds of employees.

  1. 2

    My Main Takeaways:

    • Grammarly was bootstrapped until it raised $110 million in it's Series A.

    • Max and his co-founder, have known each other since 1999, and they've worked on another business before Grammarly, that they sold. This business was smaller, but still in a similar space, it was about plagiarism detection.

    • They got the idea for Grammarly from problems that their customers from their previous business would mention. The problem was "Why do people plagirise" and the answer was "because it's so hard to write down our own thoughts clearly, concisely, and correctly." So after selling their first business, they decided to address this problem in their next business which was soon to be Grammarly.

    • Their vision for Grammarly was to improve communication. But they chose to start small and only focus on improving grammar at the beginning, hence it was named Grammarly.

    • Their first market was academia, because it was small, and the problem of having good writing for academic publications was a big and important one.

    • Max and his co-founder's approach to coming up with the vision was to create "a dream-like vision of what the world could be, and creating a product to make that vision a reality". This is the opposite approach of what most beginners (including themselves in their first business) do, which is "identify an existing problem in the market, and create a product to solve that problem".

    • It takes a long time to do something significant, so your vision has to be big enough to inspire you.

    • Companies are bought, not sold. Don't start a company just with the hopes of selling it.

    • Since they didn't raise funding for Grammarly, and rather bootstrapped it. They had to focus on profitability from the beginning, which require more effort towards developing a funnel and converting users. If they chose to get funding, they would have been able to skip these tasks and focus on the technicals.

    • They learned how to sell their product while still developing the MVP out of necessity, because they knew they'd likely run out of money by the time they finished building the MVP.

    • It took Grammarly less than 6 months to become profitable, because they had a solid plan of how they would get there.

    • Generate pre-sales - Max and his co-founder have had bad past experiences where they built a product but didn't do any pre-sales, so by the time launch came they found out that no one wanted it, so they wasted time and money. They did not want to repeat this with Grammarly.

    • You only fail when you stop trying.

    • A Minimum Viable Product should also be in a Minimum Viable Market - a small subset of your target market that your product serves the needs of extremely well, this is how you create a successful MVP.

    • Max and his co-founder decided to get an external CEO for Grammarly, because they wanted to grow Grammarly into a very large company and wanted someone with more experience running large companies than themselves.

    • Max and Alex worked with their external CEO in a consultancy setting in the past, so they kinda knew him and had him in their network.

    • Don't look for a co-founder who is exactly like you. Just ensure that you have matching values, everything else is unimportant.

    • Before starting a business, ensure that you have some savings that can support you for long enough to get the product to maturity. It's better to start later and be able to support yourself, rather than starting immediately and eventually having to give up because you have no more money.

  2. 2

    And there you have it ladies and gentlemen: one masterful interview that probably far surpasses all the knowledge to be gained from a two year $140,000 MBA in Entrepreneurship, taught by PhD's, without any real-world experience.

    Thank you Max and Courtland!
    #worthwhile

  3. 1

    Thanks for an insightful discussion. The part about creating a MVP not just in terms of product features but also market segments makes sense. I will use it personally as I am in the process of creating MVP for my next project.

  4. 1

    Inspiring. The advices and suggestions are very helpful. Thanks for sharing your story, Max.

  5. 1

    This was really good. It was really interesting to see their evolution as entrepreneurs from the lessons they learned through the sale of their prior company.

  6. 1

    Great interview. The advertisements are well done and ubiquitous.

  7. 1

    Thanks for the great interview! Max, I have a question for you. What did you mean saying "we tried to sell our product before we even built it". What actually you did? Have you really sold a copy of nonexisting product? And why did people line up to try your product - other services like WhiteSmoke already existed at the moment? Thanks!

    1. 2

      We went to conferences and trade shows with brochures and demos selling the product, and then used feedback from demos to polish the product plus lined up buyers for when the product was finally ready. We also advertised specific features on adwords and other channels to figure our relative importance of features (e.g., if people click on an add mentioning feature X more than on ad mentioning feature Y, X is probably more important). It's a crude method but cheap, quick and good enough for a bootstrapped company.

      1. 1

        Thanks for the reply, but it's still not clear - you really sold = you got paid or had people just willing to buy your product - before you had a final product? It's a little bit different things, right?

        1. 2

          We did not take any money/advances before users had a chance to see the real product. We were not certain how it would turn out, so we were very careful not to over-commit. But we did sign some deals where money would come after the product was ready and a client had a chance to try it for free for 1-3 months. So we had to have V1 of the product ready before we got any cash flow from clients, but we did have a significant cash flow pre-arranged for right after the product was shipped.