506: I Ignored Investors and Built a $975M Company | Joe Thomas

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0:39Just head to omnisend.com forward slash founder without the E to get started. All right, now let's jump back into the show. When you're in that window of time, like what is your coping mechanism? A lot of people just put the blinders on. It's like, did I have a backup plan? Yes, it was hard. Yes, we were doing like 16 hour days, seven days per week. We had been doing it for eight months at that point. We were trying to build something that we felt like had proof of value and enough users and usage in order to get to the first round of funding. And we asked each other this, hey, do we still want to do this?

1:13We were all like, I wouldn't trade off being anywhere else and doing anything else. So let's just keep going. That is kind of like the entrepreneurial journey.

1:24Before we dive in, I want to extend a warm invitation to join our thriving founder community. It's the perfect place to discover more insightful interviews aimed at helping you build, grow, and scale your business. So don't forget to hit subscribe. Your support means the absolute world to us. Thank you so much for subscribing. Let's get stuck in today's discussion. Hear the stories, learn the proven methods, and accelerate your growth and future through entrepreneurship. Welcome to the Founder Podcast with Nathan Chan.

1:59All right, so welcome Joe. The first question that I ask everyone that comes on is, how did you get your job, aka how did you find yourself doing the work you're doing today? Yeah, you kind of have to go all the way back, which is, went to school at a university called Indiana University and I was an econ major. there. And my freshman year was 2008, which a lot of people have pecked in their head is like the great financial crisis. And so when you're freshman year and you're looking at what internships that you might go and get and spend the summer doing, it was all at these financial institutions that I wasn't a huge believer in.

2:42And so I had kind of like this crisis moment relatively early on in my college experience, which was, I don't know that I want to do anything associated with my degree if this is like where I'm going to end up. And so that summer I went home and just started talking to my childhood best friend who went to a school called University of Illinois, which will be important later. And he is an industrial design major. And he was like, hey, I actually just started an agency. I'm working with like local businesses at this college town, but I do web design and development with them. You can get Adobe Creative suite for free through university.

3:19And so why don't you just, I'll teach you some things and you can bring that back to school. And so I started a design agency, quote unquote, started, I wrote on the rails of my friends and I actually fell in love with the process of designing and building products. And then I ended up doing that full time at school. And then for a year after school, and we decided that we could do the agency anywhere. So we moved out to Los Angeles together. and that's when I started working with software companies and I saw that software companies they had an exponential model whereas an agency model is linear hours in equals dollars out so I was like okay I gotta figure out this software thing and I got a job offer for to be a product manager with my favorite client at the time which is a 15 person startup that was called MediaPass and they're like do you want to come on full-time as a product manager I was like sounds great like Let me think about it.

4:16I went home and I literally Googled, what is a product manager? What do they do? And it was this perfect confluence of analytical perspective, which is my econ background, and then design and building great products, which is what I've been doing with the design agency, and then business strategy, which sounds cool, and thought I wanted to do a little bit of that too. And so I took that full-time gig, did that for about a year, then I moved on and was a director of product at a different company, but I'd gotten the entrepreneurial bug when I had a design agency. I always like to say, like, I'm kind of a bad employee, honestly.

4:53Like, if I diverge from strategy or perspective, like, I'm a pain in the butt to my bosses and my bosses' bosses. And so I was fortunate to meet Vinay and Shahid, my two co-founders of Loom. And the reason why University of Illinois was important is that Vinay was randomly doing a motorcycle trip from San Francisco down to San Diego. I was living in LA at the time and he started hitting up people on Facebook Messenger being like, we're not going to make it all the way to San Diego. We just need a place to crash for the night. So fortunately, he had hit up my roommate. And so Vinay crashed with me for that night.

5:30We spent like six hours talking into the wee hours in the morning. I was like, okay, I got to latch on to this guy. He's brilliant. And he was our CTO. And then we just became fast friends and we started working on something together and uh yeah we can get into the founding story of loom but that was kind of like the series of events that led up to uh starting loom yeah there you go and so you started loom what 2018 2019 right no earlier than that uh this is the classic like eight year overnight success story um like we we started moonlighting back in September of 2015, we incorporated November of 2015, and then we launched the product that we're working on today, June of 2016.

6:13There you go. Okay. So what are the first 60 days look like when you launched Loom in its first iteration? Yeah. I mean, I would say that the first version of what we built was under a moniker called OpenTest. And it was supposed to be a next-gen version of usertesting.com. And we just felt like there was an opportunity to build a better UI, UX, and a better network of testers. And our first application of that was to have of product experts, whether designers, product managers, engineers, that could give feedback at any stage of the product lifecycle, whether it's like a PRD or prototypes or something that was in production.

7:03And we just built and deployed that as rapidly as we possibly could. Like we are trying to brute force some sort of like earned secret is what I like to call it. And we launched that on Product Hunt. It was one of those like classic, we got a bunch of users and signups within the first 12 hours. And then the very next day, it basically went back to zero again. But it was enough people to get feedback, which was the fact that we actually have full-time people that are product managers and designers. Like we don't want to pay people for their time in order to give us feedback. We'd actually really like, because we had built a video component, which was like screen recording with a superimposed camera bubble on top of it.

7:45And they're like, actually, can we get feedback from real-time users? on our website. And so we went off and then we built that over the course of the next couple months. Once we launched that, we very quickly got feedback that like, hey, we actually just want to have this screen recording with camera bubble on top of it in order to record day to day. Like we don't want to associate it with some sort of survey. And so we separated that out and launched that. And so all of that happened over the course of nine months, right, from basically September to June. And so the first 60 days after we launched what we're working on today, which is Loom, it was within the first couple days that I always tell the story about.

8:28I was at a friend's wedding on Saturday and Sunday, and we had launched Loom on a Friday, and we had only 14 days of runway left. This is including 25K worth of angel checks and then all of our personal savings. Like we were going like all in credit card debt and all that stuff. And this was kind of like our last ditch effort in order to see, can we launch something that gets traction? And so that Saturday when I woke up, the first thing I did was open our analytics dashboard at the time, and we were getting more signups per hour than we were the previous day when we had launched on product hunt.

9:08And I turned to my girlfriend at the time, not wife, and I go, we did it. I don't know what we did, but we did it because it was not that like straight line up and then straight line back down right after it. And so the first few days was like, and weeks and months was actually just trying to learn what change were we bringing to the worlds? What could async video be for people at work? And so, you know, it was basically crash course in terms of what did we deploy and what value does it offer folks yeah interesting because i i've been in the online space for what 10 11 12 years and i remember when loom first came out because before that the product that i used to use i think it was called bing or zing or something do you know what i'm talking about and used to have to pay for it i was a common screen sharing tool you could record and it was a real pain to be able to share and what was special about loom was yes you had your 10 minute limit but you had to try and get it done in 10 you had to try and finish the recording in 10 minutes but it was really easy to record and it was really easy to share but there were other products out there in the market i remember but nothing is good and it was free and it was awesome like what why why did you decide at first not to charge for the product and go for a mass user adoption uh play there's a couple different things within there.

10:35One is that I want to give a ton of credit to my co-founder and Loom CTO Vinay in terms of like the differentiation from what existed in the market before Loom, which is we always like quick time screen recording had existed for 20 years prior to that. There was many other screen recorders in the market. And what he did and said was really important was that videos need to render instantaneously. So instead of having to manually upload something to YouTube or Google Drive or Dropbox that takes 5-10 minutes back in 2016 era, a video was rendered instantly. And you could take that link and you could share it with others.

11:14And so that was the key differentiator was that we took a lot of the manual work out of what Async video could be used when recording on your screen and we made it instant. So that, I think, was the biggest differentiator for Loom beyond some of the user experience stuff that we We tried to steal like copy and paste from consumer products that we felt like were doing video incredibly well. But then when it came to monetization, honestly, the reason why we didn't have monetization for right out of the gate and all the way up through our series A, which we can get into the story there in terms of the challenge of getting to that stage, was the fact that like we just didn't have time or resources to do it.

11:55to build pricing and packaging associated with limits and features and all that good stuff. Like we were just trying to survive. Like we were trying to build something that we felt like had proof of value and enough users and usage in order to get to the first round of funding or pre-seed. So it wasn't like this intentional decision to say, hey, should we monetize or optimize for more users? We literally did not have time in order to build monetization in that first kind of initial launch. Yeah, got you. So how many pivots did you do and how long before you reached Loom, like in its form today?

12:33And how long did it take? I'd say that was that September 2015 through June 2016 timeframe. It was nine months and it was two major pivots that we went through in order to land on what we've been building now for, you know, seven, seven and a half years, which is Loom. The core of it is like video recording and sharing and making that as purpose built for work as possible. And when it comes to kind of, I guess, for founders watching this, listening to this podcast, what advice would you give them when it comes to, I guess, finding product market fit? Because there was every reason for you to continue on that particular traction with that particular product or the various previous iterations.

13:18And you probably would have been able to find some form of traction eventually where you could get customers, you could build a business. Like, yeah, what distinguishing factors, what advice would you give? Yeah, it's funny that you bring that up because I was just actually sending to an early stage founder a couple of months ago, our pre-seed deck, which I hadn't opened for years. But we actually were still pitching the core platform and product, which was OpenTest at the time, which was like a user feedback platform. and then there was like a few slides on like hey we have this we had not rebranded to loom at this point it was called open vid was the chrome extension we're like oh by the way there's also this chrome extension that has like 5 000 users on it already and like they've recorded you know 25 000 videos and that was like burying the lead you know a lot of investors were like why is that on slide eight why isn't that on slide two and we were confused at that time you know like we we thought that OpenVid was actually going to be this user attraction platform that would feed back into testers on the, you know, open test platform that we would have more companies that would run more tests, but we'd also have this OpenVid tool that would be more like a viral go-to-market and awareness offering.

14:39And so when we were raising our pre-seed, to be clear, there was one investor that was like, we will fund you all if you like triple down on the user testing platform versus OpenVid. And we actually as founders, we were like, okay, which one do we want to work on? Which one do we think is most interesting, most exciting? And fundamentally, there's a couple different reasons why we ended up focusing on Async Video. One is that the feedback that we were getting for the user testing platform was that it was going to be a very real sales cycle in order to go after, call it mid-market and enterprise companies.

15:24The three co-founders, I was a product manager by trade, Shahid was a designer by trade, and Vinay was an engineer by trade. None of us actually wanted to do enterprise sales in the early days. We all looked at each other and we're like, who's going to do this? you know nobody raised their hand and so then there was uh you know at the time plg product led growth was just kind of starting to be like talked about in earnest in this like 2016 2017 era and we're like well we have a viral product over here that is plg in nature and it's going to sell itself it just felt like one was a lot more scalable and a lot easier for us to focus on the end user value and platform overall.

16:07And so that was kind of how we decided was one was like what skill sets existed. There's like the skill will bullseye, you know, like we didn't have the skill and we didn't have the will either. So like this business model doesn't really fit for us. And then the other side of it was just like we had users coming in to the funnel every single day on OpenVid, what is now Loom, whereas on the OpenTest platform, we were getting put in Gmail spam account list because we were each sending 100, 150 emails per day for emails that we scraped from the internet. And so we're like, that one is just not nearly as fun.

16:47Yeah. So how do you create a product where people just naturally want to share it? And you talk about product-led growth um how do you get to that point was this by mistake that you guys got there because like that that's that's the dream right like you know the paid acquisition game or you know like like long so like long long long uh sales cycles like tackling mid-market or enterprise that's a long game like you know product-led growth is is where it's at i i talked to early stage founders about this all the time, which is clearly it took us like nine months to get to a product that could spread itself.

17:29It was actually one of the like core questions that we were asking. So even when we had the user testing feedback platform before we had like Loom as like a separate video messenger, we were getting people to install this Chrome extension and we felt like, oh, if we could get more people to install this Chrome extension, then we could use that in order to drive more users naturally into the platform through viral mechanisms. And so this was always something that we were thinking about just because, like you said, it is a gold standard in order to get a PLG viral motion going. And so I always tell founders, I'm like, this is not going to be something that you figure out overnight.

18:09This is likely going to be a year plus journey for you to go on. And you just need to constantly keep this question top of mind. Because for us, we always thought that this was an opportunity that we should be going after just based off of our skill set of like engineering product and design. And so when we did builds, what we launched in June of 2016, that was one of the things that Binet was like, hey, if we want this to spread itself, if we want people to take a Loom link and share it with others, it needs to render instantly versus right now people will likely just think, oh, I just recorded something, I'm going to download it and then upload it to another sharing platform.

18:51And so, you know, like it came through like a series and call it like months and months and months of being like, hey, how can we build a PLG component or a viral mechanism into the product? And then from there, you know, if you fast forward a little bit, we actually ended up making what we call video first views as our North Star metric. So a lot of people might think it's like the number of recordings in the platform. A lot of people might actually think that it's the total volume of video views that happen on the platform. No, like still to this day, we say video first view is our North Star metric because every video can only have it triggered once.

19:29We know that communication happened on our platform if somebody didn't just send a Loom link out, but somebody actually viewed it. And so from there, that is the viral mechanism, which is like somebody else viewed a video that was recorded on the Loom platform. and the more videos that end up getting video first views is the like gold standard for us because then it also pairs with the fact that we wanted to build day-to-day communication using async video so a video that's recorded once but gets 50 000 views is not as valuable as 10 000 videos that get 50 000 views because the there's just more value that aligns with the change that we were trying to bring to the world so we made our north star metric virality oriented Yeah, no, it's super clever.

20:16And like, it's such a great product. And you're bringing me back to the pains that I had and how I started using Loom and actually became sticky because, yeah, that rendering piece was annoying. Like the old software that I used to use, it was similar to yours. And it was by like a reputable software company. Like they did a suite of tools. They used to have a screenshot tool as well. Like, oh, do you know which one I'm talking about? i do yeah now that you said um it was like zing or something i can't remember i know exactly what you're talking about uh it's on the tip of my tongue yeah yeah but i remember i used to use that tool when i used to pay for the screenshot tool and then the screen recording tool and it would take ages to upload and share it back with somebody and so yeah no you you guys just nailed it and this is your first business right well I mean I had the design agency which I actually felt like I learned a lot of like the business fundamentals about like call it um what is important from like a craft perspective what is important from like uh G &A perspective on like finances and all that good stuff and so it wasn't my first time kind of realizing I think the most important thing for all founders.

21:40When you're asking what advice that I generally have in terms of product market fit or learning, it's like what I learned from having an agency is it is the velocity that you move, right? How much can you get done every single day is the amount of learnings that you'll get every single day. So if you are maximizing your learnings every single day, that compounds over the course of time. And I think that that's the most important thing for founders generally, especially in the earliest days, is like, what earned secrets have you gotten? And usually that comes through direct kind of like brute force and velocity and moving as quickly as possible.

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22:53And you said you guys were going all in, you're down to like, you know, credit cards. What was your backup plan if it didn't work? Did you have one? What was going through your mind? Because for many people listening, watching, hearing this, that's pretty scary. And some of us have been there. You know, I've had times where it's just like, well, we're cutting it fine. And for some people, it doesn't work out, right? Like, yeah. Yeah. No, I mean, I think that to some degree, when you're in that window of time, like, what is your coping mechanism? A lot of people just put the blinders on. It's like, did I have a backup plan?

23:34As far as that thought got was, I have student debt. I'm living in California currently, which is notoriously one of the most expensive states to live in in the United States. And so I would have to go back to living with my parents, which right after school, I was living in their basement for like six months. And I had a job as a caddy, like carrying golf clubs for five years. And so I was like, well, I know I can make good cash and I can live in my parents' basement for free back in Chicago. And then I'd figure it out from there. So at least I had like some sort of like landing pad. but that that was as far as the thought had gotten is like um yeah yeah so you had a somewhat of a doomsday plan and you played it out in your mind that it's not possibly as bad as as you would think because i think sometimes we catastrophize these things right when it's all on the line really what's the worst that could happen yeah and i think that the other thing that i would say is like it's not just blinders on and coping mechanism it's what were vene shahid and i all feeling when we were building every single day.

24:43Yes, it was hard. Yes, we were doing like 16 hour days, seven days per week. We had been doing it for eight months at that point. We were like long term exhausted, not just like, you know, didn't get enough sleep the night before. But we all, and we asked each other this, we still, you know, you know, Shahid has gone on to do his own thing starting back in 2019. But Vinay, Shahid and I, we got good advice from other founders, which is like we did Sunday dinner together every single Sunday. And this was like actually to get away from the business as much as possible and talk to each other about what's top of mind.

25:19And one of the questions we would ask ourselves back then is like, hey, do we still want to do this? You know, are we having fun? And all of us felt like we were doing the right thing. We were in the right place. Like we weren't questioning that. And even like two weeks prior to running out of funds, we were I wouldn't trade off being anywhere else and doing anything else. So let's just keep going. That's awesome. Well, look, you eventually went on late last year. So recording this early 2024, you went on to Sell Loom in late 2023 to Atlassian. So you're in Atlassian headquarters right now in Sydney.

26:01Would have been great to catch up in person when you get there. but you sold it for 975 million so it's quite the feat incredible growth I'm curious what did you have to learn from I guess making that transition from those early early stage scrappy days to then you've got a product that's growing super fast building teams scaling, managing infrastructure, leadership, people management, all of that stuff. Yeah. Like you said, all of it.

26:41Look, I think one of the most critical moments for us to go from being a product to a company is when you start generating revenue. And I actually think that there's quite a bit of scar tissue from a lot of SaaS companies coming out of like the 2022, 2023 era, which was like, how do we think about not just growth, but like sustainable growth? And I had hinted at kind of like the series A was a real challenge for us because we were like still optimizing for user growth at all costs. And we had not generated a dime of revenue where we were going to raise our series A. A lot of investors actually took that as like a filter function of Loom have been I can't invest in a Series A B2B SaaS company with no revenue.

27:28That makes no sense. And I wish that in terms of going back in time, I actually wish that we had started monetizing earlier. I think that it actually just aligns so many forces across the company in a really powerful way, which is like, what do your customers care about? But what do they care about enough to pay for? and then from there how do you end up creating systems and structures within the organization in order to make sure that you are serving your customers in the best way possible that that then allows you to capture some of that value and so I think that when it comes to all of the things that you asked me about like you know what did I learn over the course of that time another thing that I think was really challenging as like a b2b sass company that was plg in nature is how do you actually layer on going up market and an actual sales-led motion, I think, is another challenging window of time that, again, is oriented towards monetization.

28:30But there's a great series of blog posts from this gentleman named Oliver J, named the PLG Trap, that if anybody out there is working on a company that has some virality or wants to build a PLG company, go out and read those blog posts because it was exactly what Loom went through, which is that you know we we struggled to go up market call it back in like 2020 or 2021 i mean we've cracked some of that now at this point but um yeah then there's like the ceo role is a perpetual gauntlet is what i'd call it is that like every 90 days i would create my own kind of like personal okrs and it changed what was the most important thing i may be in one quarter saying that i'm hiring a VP of engineering because our CTO is like, hey, I'm like struggling from an operational and management perspective.

29:24Like we should bring in somebody who scaled teams before and having to hire a VP of eng for the first time to the next thing is like your next most important thing is figuring out how to sell, you know, five figure contracts the very next quarter. And like that, that's just like a world of difference, you know? And so like that never stops. Every 90 days was radically different. But I think that the most important thing that you can do is be ruthless with your prioritization and honest about what the company needs to do in order to get to that next stage, to that next step. What my chief of staff and I talk about every day is like one foot in front of the other.