This story is part of CNBC Make It’s The Moment series, where highly successful people reveal the critical moment that changed the trajectory of their lives and careers, discussing what drove them to make the leap into the unknown.
There are more than 1.5 billion English speakers in the world. Grammarly wants them all as customers.
The San Francisco-based company makes software that checks writing for spelling and grammar mistakes in real time, and offers style suggestions and artificial intelligence-generated writing prompts. Founded in 2009 by three Ukrainian software developers — the original headquarters were in Kyiv — the business was most recently valued at roughly $13 billion in 2021, CNBC reported at the time.
The company’s growth is the result of a big, risky bet that nearly left co-founders Max Lytvyn, Alex Shevchenko and Dmytro Lider broke and unemployed.
Schevchenko and Lytvyn were friends from college, and Lider worked for them at their first startup, a plagiarism-detection software called MyDropBox. Even before selling MyDropBox to education tech company Blackboard in 2008 for an undisclosed amount, the trio started thinking about their next startup.
As non-native English speakers, they understood the challenges of avoiding unnecessary mistakes when writing anything from research papers to professional emails. “It just takes an incredible amount of time, effort and psychological pressure to take your thoughts and put them in writing,” says Lytvyn, 44. “It is genuinely difficult … So we decided to make it easier.”
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AI was in its infancy, so the co-founders built what they could, marketing Grammarly to users who could afford to wait 10 minutes for each document to be processed. Then, they waited for the technology to catch up with their “big vision,” they say.
The business nearly went broke multiple times, Lytvyn and Schevchenko say. The co-founders didn’t take salaries until 2011, when the company hit 300,000 paid subscribers, they add. A few years later, Grammarly switched to a “freemium” model and its customer base soared, hitting one million daily users in 2015.
Now, Lytvyn and Schevchenko — both Grammarly board members, with day-to-day positions on the finance and product teams, respectively — say their business is well-positioned to ride the wave of the AI revolution.
“The technology is there 1738073755. There’s been breakthroughs with generative AI and large language models, so this feels like absolute Day 1, where we are today,” says Shevchenko, 44.
Here, Lytvyn and Shevchenko discuss the anxiety of making a huge financial bet with no guarantee of success, how they bolstered their confidence and the “many times” Grammarly came close to dying before finally taking off.
CNBC Make It: How risky did it feel to take the money from MyDropBox and immediately put nearly all of it into a new venture?
Lytvyn: It was nerve-wracking, because Grammarly was an investment to build. It wasn’t a very lightweight product that’s just a website and shopping cart. It had a heavy technology core, which took [nearly two years] and money to build. [Within a year] we were on the edge of running out of money.
How much of your savings did you put into bootstrapping the business?
Lytvyn: It was close to all we could do at the time.
Shevchenko: It was sub-$1 million. Having these [financial] constraints really put a lot of tangible pressure on learning fast and moving fast. It’s not like when a company has VC money to burn, and you can always [spend time getting the product] close to perfect. We did not have that luxury.
How confident were you that you could actually create the tech behind Grammarly?
Lytvyn: It’s funny, because when we started building [Grammarly], everybody we talked to fell into one of two camps. The first camp was: Nobody needs this. It’s a solved problem. Everybody has a spell-checker, and nobody needs more than that.
Another camp, people who actually understood what we were trying to do, said, “It cannot be done. Period.”
The second group was actually closer to the truth, because our big vision wasn’t technologically practical at the time. For our first version of Grammarly, basically, you uploaded the documents, you pushed the ‘Process’ button and then you’d go make a cup of coffee for five to 10 minutes. And then you would get the result.
Now it’s instantaneous. It’s real time. But the underlying technology had to progress independently of our work just to make it possible.
Shevchenko: Confidence is relative. When you start something new, you obviously have a bunch of doubts, which you try to suppress. You look for validation all of the time.
These mood swings are constant. It’s always a work in progress. You always should be ready to course correct and adapt, depending on what you’re learning every single day.
How did you test to see whether anyone would even buy it?
Lytvyn: We did two so-called “painted door” tests.
One was for consumers. We put up a website advertising our product, but when users tried to buy it, it would show an error message and ask them to come back later. We just wanted to see if anybody would do that, and people did. We got the first few attempts to purchase within hours.
We also went to an educational conference in San Francisco and tried to sell it to universities and colleges. We got purchase intent from several organizations and that, again, gave us confidence to basically spend all we had to finish [building Grammarly].
How did you navigate living entirely off your savings for three years? Was it worth it?
Lytvyn: We started selling the product right away. Essentially, we had revenue on Day 1, and used it to fund further development. Our users paid for building the rest of Grammarly.
There were ups and downs, for sure. Multiple times, we thought, “Oh, this might be it… or, maybe not.” Dying, or being on the verge of death, is not an unusual state for a startup, especially for a bootstrapped one, so that happened many times.
We just saw that every dollar we put in increased the company size and the potential to earn future revenues. It felt counterintuitive to use it elsewhere, to just take it for yourself. So we tightened the belts and kept going.
This interview has been edited and condensed for clarity.
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