How Coda CEO Farid Sabitov grew to $41.1M revenue and 10K customers in 2024.

hello everyone my guest today is the ceo and co-founder of a company called coda he was formerly an executive at youtube where he helped grow the platform the world's largest video destination helping lead operations there he also held leadership roles at microsoft and served as founding ceo of central which is acquired by launchers also an mit graduate shashi are you ready to take us to the top yeah sounds good all right so you launched this thing i think in 2014 you're still pre-revenue today but you're learning a lot based off kind of your alpha and beta launches help us understand what the company does and uh what what you've learned from the alpha launch uh sure so we we started the company 2014 the company we build a new type of document it's an all-in-one document that blends the best of documents spreadsheets presentations applications all into one new surface the thesis is that anybody can build a dock as powerful as an app uh we ran the company a little bit non-traditionally and and we're in quiet stealth for about three years building up the product with small number few dozen alpha customers we launched the beta in late 2017 that grew quickly into about 100 companies uh and we launched the 1.0 this past february about five months ago uh where now tens of thousands of users thousands of companies around the world will launch pricing in the next couple months okay so sorry how many companies are on here now about a thousand uh thousands mid thousands okay so call maybe four or five thousand something like that and where did you tactically how did you sign up these folks going all the way back to 2014 what channels did you use yeah most of it was word of mouth i mean there was a handful of things that worked well in terms of communities we dropped into the product on community is probably one of the best for for coda uh tends to tends to draw a lot of people a lot happened on reddit and various forums a lot of the demand for coda tends to come through uh sort of two different mechanisms one one is people that i think of as sort of tool seekers that are coming after coda as a new type of document purely but the other type generally come after a set of use cases and so they tend to they tend to arrive first in our template gallery i kind of think of it as front doors and side doors uh and in those cases we tend to be relevant in communities of particular types so you know we show up in community forums for you know uh people trying to track fitness or people trying to attract project management or people trying to run better meetings or so on so i want to actually quantify some of this because my team did some research on the distribution channels so back in october 2017 he launched on product hunt got about 5 000 upvotes quantify what that meant for the business so how many new signups did you see that day uh let's see so yeah five thousand up votes is a pretty it was pretty good um first launch uh tens of thousands of sign ups that day uh or that week i should say yep and these were all individual seats or did you see a lot of kind of at google and at uber and at you know you know airbnb signing up you mean as opposed to as opposed to gmail yeah as opposed to individual users using it like personally for fitness um we let's see early on and back then i mean it's probably about the same percentage we're about 80 businesses about uh uh 20 uh individuals and consumers okay now anyone listening to this is going to go wow this seems like they've done a great job signing people up is this like is he betting on a premium plan and also how the heck has he supported himself for the past four or five years with no revenue so you've either raised a ton of money or you've sunk a bunch of your own capital in which one is it uh we raised a bunch of money so we raised about 60 million dollars across a couple rounds financing six or six zero six zero okay so 60 million raised most that capital where's it been deployed uh well most of it's on the bank but the the capitals have mostly been deployed to engineering i mean we were we were probably 70 80 engineers for uh until uh probably in the last year okay so so what's the teams that look like today we're about 50 people all in there in uh san mateo uh no no we're mountain view san francisco and seattle okay very cool and then we have a few people spread out florida new york so on so you know i guess is it fair to say that your bet you're betting hard on a freemium model you want to get up to kind of millions of users quickly and then try and go four or five six bucks kind of a seat per month something like that yeah so it's definitely a freemium model i mean think products like this new documents on they they spread quickly and so you want it you want as few frictions as possible in that spread process and as they stick people tend to find uh more and more important use cases and upgrade through it in terms of the pricing model uh we're going through that now with all the different companies that are using us and you know we'll roll it out in the next couple months but the the current thinking is that it's a creator-centric model so that the the you don't pay for many parts of the space pay for all types of users our current plan is that you you recharge for creators and not for editors um that incense a certain type of behavior of allowing people to share more freely uh might mean the perceived price of the creators a little bit higher but when blended together with all the editors it tends to work out to um pretty similar so a team of 100 might use you but maybe there's only three people creating docs and the rest are actually editing you'll charge for the three that are creating yeah so the ratio tends to be eight to one ten to one tends to be the the general creator to uh contributor ratio uh and that's actually something that's part of the code of thesis from the start is uh before code i spent a while at google before i spent much time on microsoft working in office that ratio of maker to user is a ratio we've seen uh across the office suite as well the the way those products are used too and then so take me back again to kind of some of the earlier days here so your first round of you leave the company you leave youtube you jump directly into this um your first round of capital how much did you raise and the follow-up question on that is was it simply you pointing to your historical resume at youtube that allowed you to raise an evaluation that you weren't getting i mean you have no idea what the valuation is going to be that early how do you even think about that yeah i mean our fundraising process was pretty different than than most this is my second company i started my first one was 20 years ago and that one it took us you know six years or sorry six months for his 500 thousand dollars um and this one we you know managed to raise the first round was about 25 million and it was done basically over a weekend and you know i think there's probably a couple different things that went into it certainly the quality of the team uh was was high on the list as myself my co-founder alex and i both have pretty good track records um both with startups as well as with with larger organizations uh and then it was the market in the space and our approach to it at the time we hadn't really built anything yet but we had a pretty good idea of what we wanted to build um the pitch deck was basically 69 slides of uh of uh product marks and it basically had the the view of what we were going to end up building uh back then have you published that anywhere i haven't come on you you should release that now that's a really interesting story yeah at some point at some point i will there's nothing sensitive in there right it's just early it's early ui stuff right um is there anything sensitive i have to go back and look at it it's uh it i would say it's a it's a road map that we're still following so i go through it with the with new employees and i think there's many companies that start and you end up doing something very different than when you started this one is pretty true to our to our original path we're still basically executing on that plan so it does include a lot of stuff we haven't shipped yet um but other than that it's uh it's pretty close to what we built so 25 million rate is kind of on day one now when i look up your the actual docs you filed from a government perspective it all looks like it's in one round so did you basically set terms and then let it roll and you slowly added more on the 25 on the same terms going up to 60 over the past couple years no no we raised the second round about a year later um that was done so the first round was led by greylock and general catalyst and then we we raised another round about a year later led by um coastal and nea how much on that one how about 35 million that's the rest of it okay in both cases i squeezed in about uh 15 angels friends of mine and so on that that were interested in joining the company so so what do you i mean you were at youtube so you get this right what do you have to scale to okay this is going to sound like a crazy question it's such a san francisco question but i'll ask it because you're the perfect guy to ask okay assume you never have any revenue right let's assume you're going to go public with no revenue right how big do the numbers have to get how strong does the viral coefficient have to be for our analysts stupid wall street analysts to actually understand the future potential revenue opportunities i i uh well that's not our plan we're going to launch pricing so i mean i can answer a theoretical question uh and i i think i mean i think sas businesses and youtube are pretty different i mean i think i think the i mean youtube was bought for 1.6 billion dollars i showed up uh you know 10 months after the acquisition we were doing tens of millions in revenue basically big sponsorship deals it was basically nothing compared to what the what the what the scope of the business was it took us about three years to get to a billion dollar one uh revenue run rate um and uh you know that process like at the time was seen as as not obvious in the consumer space that you could take you could take a scale of what we were probably tens of millions of daily active users at the time um and you know turning that into a billion dollars in revenue was uh was something that hadn't been done many times before but but had been done at least a couple times um nowadays i think in in the consumer space that's seen as somewhat obvious that if you can get yourself to tens of millions of daily active users then then you've got a pretty meaningful um then you can you can build a pretty meaningful business out of it the sas space is different though because the in the sas space not not not having pricing actually stunts growth i mean it's definitely you know we launched in in um february and it's certainly one of our top customer complaints is we want to know what it's going to cost us um and so i don't i don't think it's really that comparable so i'm not sure i would trust a company that got to great uh sas traction without pricing um for for very long so what it what currently what are your do you care more do you look more on a daily basis or do you look less frequently do you measure monthly active users and if so what is the act like what's the activity that says yes they're active yeah i mean we look daily i i i have a whole this is actually similar both consumer world and business world i think monthly active users are really easy to they're just a very flexi they're easy fluctuate metric where you can take very light-hearted users and end up counting them yeah yeah like they logged on once but like did nothing yeah so i mean our basic view is we we think of users it's a pretty typical growth funnel um but we are our activation period we give people two weeks of what we think of as our trial period uh whereas they're getting started they um uh they tend to either stick or leave within that two-week period what do you have to do though in that first two weeks to drastically increase stickiness uh i mean the bit the best signal of it is sharing a doc um and so the the moment they share a doc with someone else that's that's generally which means you have to create it too right which means they have to do all the steps before that to create it make it theirs and so on but sharing is really that moment there are people that start with share it's actually quite interesting that that a product like ours will say hey i'm checking out coda and they'll share it with the with the teammate and that tends to be just as effective so whether they've created a lot of it before or not that share moment seems to be it's you know thinking about in human terms it's your moment of endorsement it's a moment of okay i think enough of this that i want to try it out with with my colleagues um and then after that period after that two-week period we tend to see people either embark or not embark uh and and uh in the product uh at that point our frequency tends to be pretty high it's about um uh it's 80 plus percent of our users are active three or more days a week and what does active mean they've opened the dock so there's the the we i tend to so maybe backing up a moment i tend to think of metrics try to define them as simply as possible um because i find that if you put a lot of nuance in it then you'll spend all your time explaining the nuance so our to be a daily active user encoder you just have to open a document on it on a given day um we then layer on did they take an edit action did they do it take out what we call maker action or just viewer actions are just the three categories of actions we look at um and so on a given day so uh 80 percent of our users are active meaning they open the dock uh at least three out of seven days in a week um which were a product that tends to be mostly during the work week that's i think basically means we're we're used to through the week so uh so that that sort of tends to be the the second phase and the third phase we look at is how it spreads um and how did those set of makers turn into uh bring on their teammates and contributors and at what rate did them they then become makers themselves and create their own docs um and so those are those sort of three phases of how we think about the the teams certainly what is today daily active users uh it's tens of thousands of users okay ten when do you when do you think you break a hundred thousand uh hundred thousand maybe next year okay i think maybe early next year um and what is that i guess transition that to number of docs created over the past 30 days on the platform uh docs created is thousands as well okay um so it tends to be and actually maybe to back into that a little bit so you can understand the dynamics and i think this is i think for your for your listeners it's interesting because coda is sort of two different things one is it's a product that uh you know completes the document and and people tend to use it a lot like you might use um you know google docs or office or so on but the things people build in coda tend to feel like applications yeah i was gonna say by the way you feel way more to me like i i i move from google docs for processes actually now i use airtable plus zapier and i can get a lot done and it makes it feel like english that i'm typing in table is actually codified and it actually feels like an app when it all works together i feel like what you've built is you've essentially been you've taken it out of air table and it's more like actually more like a word doc but it works with all the back end kind of coding parameters yeah that's right so i mean i think and and to use that analogy go step further many of the use cases people describe their code of docs to us they tend to think of them like applications so people use coda and say okay i've rebuilt my crm system or i've rebuilt my my uh feedback tracker or i've our task tracking system or or or so on and so the way the product spreads tends to mimic these two different behaviors how docs spread and how apps spread um and and so you depending on the use case you will end up basically seeing a similar spread um like depending on the app use case we'll see a spread pattern that's very similar to whatever that that category of apps is like so if you end up picking up coda as a crm tool we'll spread like a crm tool does if you end up thinking of coda as your way to track meeting notes we'll end up tracking we'll end up scaling and spreading a lot like how you i don't know like evernote right or actually probably meeting notes probably closer to like google docs is probably closer yeah so over the past 30 days how many kind of apps or docs have been created would you say thousands oh thousands yeah yeah but less than ten thousand yeah yeah yeah okay so it's a little less than a one-to-one ratio between kind of active users and apps created over the past 30 days yeah it tends to be pretty close yeah okay very cool yeah um very good stuff what about churn so like how do you measure if people are getting more or less active and kind of the equivalent if you had revenue would be expansion revenue right or contraction revenue but for you it's kind of expansion usage or contraction usage yeah that's right right yeah i mean i think all the all the you know all those same metrics sort of uh sort of apply um you know the way we tend to spread so there's sort of two different parts there one one you know how we spread inside a company uh it tends to have a very high uh viral spread rate so so basically a group of just to think of it somewhat specifically you know one one maker picks it up they on average end up sharing with 10 people of those 10 people something like three of them end up being makers themselves they share with another 10 people basically until you run out of people in the company um and those are your actual metrics about approximately yeah um and uh in the good cases so as long as that first person is successful and so the first person's not successful um then you know that that tends to you know that doesn't happen at all but when we're successful you know we spread very quickly and so inside of small companies you know we have a long list of companies that run sort of everything runs on coda you know in larger companies you know we will end up growing to hundreds of thousands of users as they um as they start to see that spread process and then the the flip side of that is the churn rate and as people turn out of it we tend to find the churn is very low after those first two weeks in the first two weeks it can be you know it can be 80 of people um but after that it tends to be very small um on a weekly basis you know less than a percent but uh um and over the course of a year you know most of these tend to stay a little less you get activated less than ignoring those first two weeks over the over the first year you'd say churn is what like 20 30 percent something like that yeah in that ballpark okay they'll be like one or two percent a month after the activation period is kind of over yeah so i mean look these activation metrics basically mimic sas revenue retention and expansion cohorts as well right basically the same so what's the biggest risk for you like why haven't you pulled the pricing while trigger yet but there must be like you're doing some extra planning you're doing some extra research i mean why not just stick it up see what happens and then edit quick oh no i think we're the for getting pricing out the big thing for us is we're going to introduce a new um concept we have to we have to introduce a pricing model and it's going to be priced around workspaces which is pretty typical for products in this space um the product doesn't have that yet and so we're going to introduce workspaces which is actually pretty heavily requested feature anyway uh and then you'll price on the the workspace itself will be a paid workspace for free workspace so yeah but not no no no philosophy behind it just time i'm gonna be going out with coda mobile code automation and coda pax all things important to you because you did separate product hunt launches for all of them yes yeah i mean i think each of those basically the way to think about our process up until now is we have this thesis that you can build a dock as powerful as an app and we wanted to launch all the main building blocks of what it takes to be able to build up these apps it's sort of surprising to people to take a thing that like you described starts with a blinking cursor looks like you can just write words and then you gradually can add all these different things you can add an automation layer that allows you to automate all your common activities what we call coda packs is our integration layer so you can from coda you can integrate with everything from slack to gmail to twilio uh and you can go you know pull and pull and things pull on your intercom data your salesforce data and then do things like automate how you send messages out to people um notifying your team when things change and so on and so in that process people end up building these docks that start really small and then grow from there a lot of people like to describe it as built-in scope creep um we're we're we're running here since you're out of time but the last two questions here um how aggressive being to get new kind of that one new user will you spend a dollar two dollars three dollars what's that look like we haven't done any paid marketing yet so we're just starting to test where that where that stands my my goal was you know we're running a few tests in the next few weeks just to get the mechanics up and running but i want to launch pricing before we before we get too aggressive on that yeah yeah that makes good sense and then talk to me about uh burn i mean obviously you're burning your pre-revenue how aggressive are you being though on that are we talking 500 grand a month a million a month something less uh you know it's 50 so employees so you can you know do the math it's about about a million a month that's fine i guess the reason i'm asking is do you have another raise in your future or are you comfortable with the amount of runway you have in your bank right now oh we'll probably end up raising again i mean i think this is a space where as a listen to a bunch of podcasts it's a space where you don't not only have to raise your cover burn but your acquisition cost for customers also goes up are you enjoying the show oh yeah it's great anything you wish i asked that i and i always don't oh that's a good question um well email me if you think about it because i'm always yeah don't think about it i'll think about it you know i have a pattern and sometimes i deviate if something interests me but generally speaking you know what i know what i'm after i think it's a super valuable show it's been interesting listening to people open up about how they're thinking about their business well and thank you for being transparent uh on that note let's wrap up here with the famous five number one what's your favorite business book switch by the heath brothers number two is there a ceo you're following or studying uh danielle from spotify uh number three what's your favorite online tool for building your company uh well we run most dakota on coda so uh but other than that i'd say uh figma probably it's a google docs for design turns out we were their first customer as well oh wow we have a pretty good coat of pack for figma so it integrates well as well number four how many hours of sleep you get every night five to six and situation married single kids married two daughters 10 and 13. that's great how old are you i'm 40. last question what do you wish your 20 year old self knew uh how important those early deep relationships can be my if i went back to my 20 year old self i was dating the woman who i ended up marrying and i just become friends with the person i ended up starting coda with guys those of you in san francisco will look at 60 million dollars raised pre-revenue and go what the heck is going on but shashir is building a an idea in a big space which is essentially instead of you know air table makes marketers powerful because they don't need developers to build systems now he's basically saying you can do all this in a document build applications right inside a doc they've had successful product on launches tens of thousands of active users now about to turn on pricing we'll see what happens they're currently burning called a million dollars a month with the team of 50 as they look to scale and again launch that first paywall share thank you for taking us to the top thanks david