Loom's Road to $975 Million Exit by Atlassian - Shahed Khan

When we started Loom, it was actually a result of 2 prior pivots that we did after we had launched the product. No one was really using it. 6 months after that, we were begging people to use our product for free. We weren't even charging it. One which is even hard today is knowing when to pivot. So I think the one biggest takeaway was— My name is Shahed Khan. I am one of the founders of Loom. Loom is a product that allows you to record your screen, your face, and your audio in a single stream. And a lot of companies use Loom today to communicate with their coworkers, whether they're remote, whether they're engineers, salespeople, designers. It's a tool that allows people to share what they're seeing, share what they want with one-to-one or one-to-many people. I grew up in the suburbs of Chicago in Plainfield, Illinois. I went to school out there. It was a really difficult path because I'm a child of 2 immigrants. One's from India, one's from Pakistan. They moved here shortly after marriage. I was also the one who misbehaved the most of my siblings. My goal was always to start something of my own. Since I was 6 years old, I enjoyed dressing up in suits because that meant that I was like a businessman. The general idea is my childhood was just kind of all my free time was spent on the computer. You know, when I was eight years old, I started playing this game called RuneScape. RuneScape was actually just taught me so much about what I later learned in life, which is learning about economics from like selling things, buying things, or harvesting things, and then selling them for a greater price. I would be on the computer maybe six, seven, eight hours a day, and that got me into high school. That's when I started to shift my focus from like. Games and being on forums and learning design to pivoting into technology and startups. There was a video by Peter Thiel in 2011 where he announced the start of the Thiel Fellowship. He would give 20 kids under the age of 20 $100,000, call it effective grant, to either drop out or not go to college. And that really inspired me because I was like, I was never an academic. I never really did good in school. But there were certain subjects where I was just so into that I just obsessed over. Even though I didn't get the fellowship, that was the inspiration that I needed to know that there's a world out there, a world called Silicon Valley, where I can go to. And that was kind of like my young self's American dream, which is going to a city where there is a lot of like-minded individuals. I wanted to pursue that. I was really passionate about product design when I was 15 years old. The For the first logo that I designed, I got $25 on PayPal. That was going to buy me like digital coins in the game that I was playing at the time. It just slowly escalated from there, right? $25 turned into $100. I was like, now I have lunch money for the next month. That led me to when I graduated high school, I got an offer to go work at a company called Backplane. The idea was always that I would go to college. But at Backplane, I actually met Vinay, who's my co-founder at Loom. I was a designer. He was an engineer at Backplane. At the end of my internship, I got an offer to go work at a company called Weebly. I showed the offer letter to my parents, who are very conservative parents. So in their eyes, it was kind of always this temporary thing where they're like, okay, like, it's only going to be 1 year. You know, we can skip 1 year of college for him to go learn. They took a bet on me. They allowed me to move to California. Initially, it was just for the internship, and then it turned into 1 year, and then that year turned into 2, 2 turned into 4, realizing that I really wanted to start something of my own. Before I could have done that, I needed to also get the experience in the real life world, right? So that's why I worked at Backplane. That's why I worked at Weebly. That's why I worked at Upfront Ventures, because I wanted to gain as much information. I wasn't there to have a cozy job with, you know, good salary where I'd go home at 5 PM. I was fortunate enough that by surrounding myself with engineers and designers in San Francisco when I lived there, Vinay, who I mentioned, my co-founder at Loom, he worked with me at Backplane. Joe, my other co-founder, I lived with When I was working at Upfront, that ultimately led to you know one night we had dinner. We kind of just passed the question around where I was getting ready to leave Upfront and I wanted to start a company. We're like you know we all have a unique set of skills. I'm a designer. Joe was leading product and Vinay was an engineer. So the three of us kind of came together. We're like let's just write down a bunch of ideas on a whiteboard. I think we wrote down maybe six or seven. The first one was my idea, which was a user testing platform. Platform, you can get advice from experts. If I'm building an e-commerce store on Shopify and I want feedback from someone who's built Shopify products before, I would basically hire them through this platform that we had started called OpenTest, and I would pay $100. What I would receive back is a video with a circle on the bottom left, which is the person's face and their audio, and of them walking through, say, like the checkout process of my product. After we had launched the product, no one was really using it. I think we might have made $400, which means we had 4 tests that were purchased on the platform. So then it was time for us to pivot. The feedback we got back from people at Facebook and Twitter at the time was they have the experts in-house. They pay these big comp packages because they have the experts in-house. They told us that the thing that they would be interested in purchasing was the ability to run a user test and segment to a very specific cohort within their user base. They wanted to kind of collect feedback from their own users. And then we pivoted one more time because I would say 6 months after that, we were begging people to use our product for free. We weren't even charging it. There was no brand recognition that Open Test had at the time. People turned away and because they didn't see big logos on our homepage, they didn't use the product. One which is even hard today is knowing when to pivot. I think the hardest thing, especially when every single day, 7 days a week, You're just obsessing over one idea, and after 4 months, 5 months, you're too married to that idea to let it go because it's all you've been thinking about building, designing for the last 4 or 5 months. So I think the one biggest takeaway was don't be married to the solution. I remember there was this one evening we were kind of burnt out. We had spent collectively all of our money because we were bootstrapping at the time. We were also fundraising. I remember there's— to this day, there are 74 people that said no, that they did not want to give us money. 18 or 19 people that just didn't even respond. They opened the email, they didn't respond. And that was kind of a chip on our shoulders to find something that worked and just completely obsess over finding something that people wanted to use. And then our final— that turned into our final pivot, which was people don't want to use this for user testing. What we had realized was there was one person, I believe it was Harvard's research lab, that had adopted the product because they're running a case study. They're running research on a segment of these users and wanted to use a platform like Open Test to collect that information. What we had realized was they, they used the product the way that it was supposed to be used. But the person that set that product up, set that test up, Used the exact same extension that was built for the people to give feedback, but recorded a video of himself summarizing all of the feedback that he had collected. This spotlight went off in our heads at the time. We realized that, you know, there's a world that we haven't been thinking of where people could use this and not just limit it to user testing, but they could use it as a means of communication. They can record a video of themselves, and whenever they're done, They click on the extension again, the video is completely uploaded, the link to the video is copied to their clipboard, and they could share that in Slack and email wherever, and it would expand into a video. So we quickly stripped the extension out of the existing product, rebranded the product from Open Test to Open Vid because we didn't have time to come up with a good name, and launched on Product Hunt June of 2016. We quickly became the number one product for the day because it resonated with a lot of people in the community. And I believe on our first day, we had about 2,499 people more than we previously had on our platform. Right. So people were sharing it. It was a great product, but we ran into one unique problem, which was people would download the extension, they would start recording a video, and then it would be a— typically their first video would be a test video. After that, they would stop using it because they didn't know what they could use it for. They're like, it's a really cool tool, but Where do I incorporate this into my daily workflow? We know that we've landed on something that people resonate with, and now we have to figure out how do we find product market fit, which is the biggest question, right? That's where we started to build a very cohesive onboarding. We built use cases, we built personas. So salespeople use it for these purposes, engineers use it for code reviews, designers use it for design handoff. And then our seed round was, okay, now we have users and they're referring it or coming back, whether they're coming back weekly or whether they're coming back daily. We know that there's usage here, so we're getting closer to product market fit. And that was our pitch during our seed round. For our Series A, we had users, we had usage, we had good metrics. We were raising our Series A to start to basically turn on monetization. But our plan all along was how do we become ubiquitous within the companies that are already using Loom? I'll use HubSpot HubSpot as one example because they're kind of the poster child company within Loom that had kind of grown on Loom so quickly. I remember when we launched on Product Hunt in 2016, we had someone from the marketing department at HubSpot sign up to use Loom, and this individual lived in San Diego and HubSpot's headquarters were in Boston. This is when the company had a couple of distributed employees, but not as distributed as that company is today, and because they were in a distributed role, they were an individual contributor. They wanted to use new tools to communicate more effectively. They installed Loom, started using it, and they shared that video within their Slack, and other people within the marketing department started to adopt that tool naturally because they're like, I see you using this tool. I want to use it as well to record my presentation. That individual is what we call the champion within an organization. He would record a video. I believe it was like a quarterly presentation, and he would send it to his entire team. And now that there's like the champion to influencer line drawn, we knew that if we could replicate that use case, that we could quickly adopt usage within each company that we were growing inside of. So when we had shown that to our investors, you know, they were aligned with us that, you know, kind of growing freely. Was probably the best path for Loom. And then we got to our Series A, we started to monetize, and we launched Loom Pro. It didn't have the big aha launch that we thought it would. We thought people would immediately convert over, but we didn't really give them a reason to convert. The free product was good enough for them, and we were monetizing on new features. The process of someone who's been using the product for free for years is now asked to pay for it. What we did was we launched a whole new set of features at the time. I remember we had launched our desktop app and you had the ability to draw on the canvas and point to things. There were just so many features. You were able to append a CTA, a button at the end of the video. So if you're a sales rep and you're like, hey, I drafted up this contract, I attached at the end of the video, just go ahead and click there. It'll take you to the DocuSign. We had launched these features. Thinking that it would get people to naturally upgrade, and it did for some, but I don't think it was in the general realm that we thought it would be. So that's when we went back to the drawing board and we're like, how do we convince all of our active users to seriously consider the Pro product? What does it have to look like? How often do they use it? Like, where would they feel that they're hitting the ceiling of their usage where they're like, it makes sense for me to just upgrade because I get so much more usage. I get so much more tooling and features that I can leverage if I just upgrade to the pro product. You know, for any company, their goal is to find what is the amount of like constraint you can put into the product where it's just enough. It doesn't necessarily ruin the free experience because then people will just be mad and angry and will leave, but it's just enough constraint Where they're like, I think it makes sense. It's well worth the $8 or $10 I pay per month. Let me just go ahead and convert. After we had launched Loom Pro the second time, there was a resoundingly positive response to that. And then we had launched Enterprise. Sequoia Capital invested in Loom in November of 2019. They gave us $30 million because they're very bullish on where Loom was going. I remember Andrew Reid, who's the investment partner from Sequoia, had seen people at Figma using Loom. So I think that naturally led him to reaching out to Joe, Vinay, and myself at the time. Once that deal had happened, there was this thing around the corner that no one was really expecting, and it was COVID.

Hi there. My name is Joe. I'm one of the co-founders and CEO here at Loom. And in response to COVID-19, we are making some changes to the Loom platform. The first one One is that effective immediately, our pricing structure is going to change. For Loom Basic, which is our free offering, there will now be unlimited recording and sharing. For Loom Pro, we're extending the trial period from 14 to 30 days, as well as reducing the prices by 50%. We're also making Loom Pro free for the education sector for forever. These last 6 weeks have been an incredibly sobering experience, and we believe that it's far from over.

I believe we're close to about 2.5 million users globally. And when COVID started, the world kind of shut down and people were forced to kind of work from home. So they're scrambling to find tools that would enable them to have that same rapport with their coworkers and be able to get the quality of work done that they did when they were face to face in an office. We basically made the product free for teachers because even schools, students had to Hop online from home in the morning. So how do you grade papers? How do you you know have that rapport with your students the way you did in a classroom? So teachers would start using Loom, but we didn't want to charge them. We made the product free for students, and we actually made the product free for K through twelve. And then we had also delayed our monetization during COVID because we wanted to onboard these users and these people and these employees to Loom. We didn't want them to think about pricing and upgrading, and it just it's. It seemed like a weird time to introduce that, especially in a world where there's just fear of what's going on. So we made the product free. It had a net positive in the long term for the company. I would say that year was probably the most eye-opening year from a growth perspective for Loom, where we went from 2.5 million users in March of 2020 to 10 million by the end of the year. So when we started Loom, it was actually a result of 2 prior pivots that we did. But the general thesis still remains the same today. It's how do we allow people to communicate something that's rich in context to either a single individual, make it very personalized, or to a broad audience? You know, when we started the company 8 years ago, the notion of remote work was relatively new. There were maybe only 2 or 3 companies in Silicon Valley that were fully remote or fully distributed. I think the biggest thing that we learned was we weren't really chasing this remote environment. Our thesis was how do you bridge the gap of communication and do that through a rich medium? The other kind of big wave that we rode was this product-led growth idea. It was that you build a product so great that It ends up compounding where people want to share with others so that they could also be efficient in the way they communicate. So I think those are probably the biggest takeaways. Like the journey is hard in and of itself. Find co-founders that you can work with, that you have a good rapport with. And I think that made things a lot easier. That made it the speed bumps less bumpy was, you know, when I'm down, Vinay would lift me up, or when Joe's down, I would lift him up. There was never one moment where all 3 of us were like just exhausted to the point where we wanted to quit. And final takeaway for from the pivots is it's too expensive to quit, right? Because if you quit, you're never going to make it. But if you just reinvent yourself, eventually you'll figure out something, some path that will work. And Loom had to reinvent itself twice before it could become Loom. I've only hit my first 10 years. Right? This is my my first decade. People in this industry have been here for many decades, and I hope to find my next journey beyond Loom. I'm really excited to explore you know new opportunities, new problems, and you know continue to give back to other founders. And I try to do that through means of you know I invest in startups, speak at conferences, I'll do interviews like this. What inspired me? Were videos of people speaking at TechCrunch Disrupt announcing the Thiel Fellowship. You know, you just need one person to kind of shine that light. For me, it's really professionally, it's to find the next frontier, the next company that I want to build, but also to kind of inspire many others that are coming after.