How Grain Intelligence Reached $7M Raised and 10,000 Free Signups on a Freemium Model (Interview with CEO Mike Adams)

Introduction and Guest Background

Nathan Latka

00:00Hello, everyone. My guest today is Mike Adams. He's the CEO and cofounder of Grain, a tool that empowers remote teams to record, transcribe, annotate, and share the most important moments from virtual meetings in a highlight reel. He previously cofounded Degreed and MissionU, which is acquired by WeWork. Mike believes that recorded conversations and spoken knowledge, they generate fundamentally expand our ability to listen, empathize, and connect with each other. Mike, ready to take us the top?

Mike Adams

00:20>> I'm very excited too.

MissionU Exit and WeWork Acquisition

Nathan Latka

00:22Alright. So you get an exit at WeWork. By the way, was that sort of a life changing event that allows you to take bigger risks now, or is that sort of a nice sort of flat exit for everybody?

Mike Adams

00:30>> It's a flat exit for everybody. And the big win I got was discovering the need and ultimately the product for Grain that I'm building now over solving my own, you know, my own need for two years, building an online school. And so our students were able to actually get absolved of their income share agreements and still, you know, for the most part, get jobs. And so it ended up being kind of a

00:52>> win win for everybody.

Nathan Latka

00:53So what happened to that? That sounds very interesting. Is that the one WeWork bought?

Mike Adams

00:57>> Yeah. So WeWork bought MissionU, fully remote on the back of Zoom, started in 2016. So we were one of the first fully embracing the remote learning environment and cohort based model. We ran into a lot of regulatory challenges at the state of California that has since made extremely clear that their position is the income share agreements, where you pay a portion of your income in the future once you get a job and only if you get

01:21>> a job that's aligned with the students, that those were not actually legal in the state of California. They took an anomalistic stance on that. So that created a lot of challenges for our business. We looked forward to

01:35>> our ability to return venture, to make a venture outcome and ultimately made a determination that an acquisition was the best situation for us.

Nathan Latka

01:43How much are you raising that company?

Mike Adams

01:45>> We raised 11,500,000.

Nathan Latka

01:47Got it. Cool. So I imagine a lot with this just sort of going to WeWork stock.

Mike Adams

01:51>> Yeah. So it went into WeWork stock. Our investors got we still had an $8,500,000 in the bank. So we made a call. It's not like we ran out of the money. We looked at the future and we said, this ability for us to actually deliver on the projections that we made upfront, given the change in climate, given a lot of the unit economics that we were learning over the next couple of years, we looked at it

02:15>> and we said, I think it's actually best for our investors to you know, get their as much of their money back as they can, and

Nathan Latka

02:21then the rest was made up for

Mike Adams

02:22>> it and WeWork stock.

Nathan Latka

02:23And I had the opportunity to start a new company. I would say kudos to you for doing that.

02:27I mean, right, there are so many founders I know that they they see the writing on the wall, but they feel stuck because they raise VC money. They don't want the negative headline, right, if they shut the company down. But ultimately, a biggest opportunity cost for anybody is your time. Right? So you don't wanna waste you don't wanna even though you have 8,500,000, you can pay yourself, you can pay your team, you don't wanna do for

Mike Adams

02:46>> years. Yep.

Grain Founding and Early Fundraising

Nathan Latka

02:47Kudos to you for doing the right thing there and getting that out. Grain is born. What year did you start coding Grain?

Mike Adams

02:52>> So we the acquisition from WeWork was in 2019. And so I started full time on Grain September 1. So my obligation through the WeWork acquisition expired 08/31/2019, and I started Grain September 1. So we raised some venture capital right out the gate from a lot of the people who backed me in the past. They still were big believers in me, they really loved the vision that we had because I was building Grain just to solve the

03:21>> same problem for future people that I had solved for myself building a school in the back of Zoom. The insight I discovered was that spoken information, it's unstructured, it's largely ephemeral, it's usually not even captured, but it is the key to being able to bridge the gap in the future of work between seamless, between remote synchronous and asynchronous communication. So asynchronous communication tends to be text based, and the medium is usually the documentation. I wrote the

03:48>> message. They go and search the Slack logs. The same is not true of the synchronous spoken world, but it is true if you record it, if you transcribe it, if you make that content searchable. But you need a new wave of tools or software that can make it as easy to work with the content of spoken knowledge as it is to work with the content of written knowledge. And so that's how Grain was born. I started

04:10>> it with my brother who was the first employee at Branch Metrics, and so he had a four year, you know, unicorn run as the first employee there.

Nathan Latka

04:18And split equity fifty fifty, or do you have more?

Mike Adams

04:21>> We we split slightly less slightly different, very

04:24>> close to Like 51/49 sort of situation.

Nathan Latka

04:26That's very close.

Mike Adams

04:27>> No. You wanna have good Thanksgivings moving forward.

Nathan Latka

04:30There's Yeah. Leader, you can't tie.

Mike Adams

04:32>> Yeah. We'll say I have been a co founder twice, and Jake and I are dramatically closer to fifty fifty than I ever was as a as a first time cofounder, even a second time cofounder.

Nathan Latka

04:41Fair.

04:42Fair. Fair. Okay. How much did you raise in that first round?

Mike Adams

04:45>> We raised so what we did on our financing is we did about 1,000,000 right out the gate, which is us and a pitch deck Yep. And a vision and a belief, that was on a safe. And then we did a priced round about nine months later. This is fall of oh, I'm sorry. This all started in 2018, not 2019.

Nathan Latka

05:05So it was That million that million was 2018.

Mike Adams

05:08>> It was 2018. So it was about 2018. MissionU got acquired in 2018. So it's about but almost three years ago, MissionU got acquired. And then we did a seed round nine months later in 2019. So this is a year before the pandemic, and we were onto this kind of trend we knew it was inevitable, and then the pandemic has just really accelerated it. And then we did a follow on round that hasn't been announced yet, but

05:28>> it's with Freestyle Capital. And so we did an additional 3,000,000 on a safe there after the price round. So it's been about $7,000,000 total that we raised, and our team is about 15 people.

Nathan Latka

05:38Yep. So just to be clear, so there's seven total. Four is unannounced, but with with freestyle. One was the beginning or sorry. Three was with free free freestyle.

Mike Adams

05:46>> So it's

Nathan Latka

05:46one at the beginning Then three.

Mike Adams

05:48>> And then three in a price round. That four was announced, and and we've raised an additional three that has not yet been announced.

Nathan Latka

05:53Got it. Yep. Okay. So so let me ask about that. Right? When when you do make that announcement, people will go, oh, wait a second. It's very rare you see a price round. And then going back to unpriced, they'll go, wait. Was there a down on they're trying to manage through here? What's the story there?

Freestyle Capital Up Round Story

Mike Adams

06:05>> Yeah. The story was an up round with amazing investor on amazing terms, and we wanted to work together very, very quickly. So what happened is we launched on TechCrunch a year after that price round. This is about a month after the pandemic, and we made a positioning bet to say, we're on the back of Zoom. We are the Zoom app. When you think about Zoom apps, think of Grain. So we had a TechCrunch launch, and then

06:29>> one of the investors that I really had a great experience with, her name is Jenny Lefcourt at Freestyle VC a year before. Timing wise didn't work out for her to lead the priced round, but she really wanted to get involved a year later, and so this was a really easy way. We had a huge amount of insider interests, and so the rest of it was just bought up by insiders. So that's where we did the

06:51>> 3,000,000, and they took, like, a much bigger check than they would normally do just because she was so eager and excited to work with Grain, and we got really nice, you know, up terms on it as well.

Nathan Latka

07:00So it's just a When you look at it simple, easy way to get more capital. It was a cap higher than your last price round. Is that Exactly. Yeah. Substantially higher. Interesting. Okay. Very cool. Let's dig more to the product because I think this is interesting. Right? You know, when I had Sid from GitLab on, he said the reason he has all of his companies, all of his team members post meetings, even private meetings on YouTube,

07:18If you go to their YouTube channel, you'll see you can open the transcript that Google automatically does and search the meetings quickly. You're sort of doing that, but in a much sort of more formal way, you're building business around it. You're using it right now actually on this call. So what is Grain?

What Grain Does and How It Works

Mike Adams

07:31>> How does it work? Yeah. So Grain taps into this recognition that the the tools for the spoken world that we live in, are primarily designed to facilitate the conversation, not to facilitate the transfer of information across the bounds of synchronous and asynchronous work. That's where Grain comes in. We recognize that while like what GitLab does, you can upload videos and these artifacts, if you record it all, the world is open to you, Grain takes it one

08:01>> step further and recognizes that you're doing cognitive processing. You're identifying moments in time that matter. That moment mattered. Instead, we don't have the time to go back after the call and rewatch all the time. It's nice that we have that option, and that's the GitLab approach. Where we come in is we give you a real time annotation layer. You can take notes like you would normally take notes in a Notion or an Evernote or whatever else,

08:23>> but they get time stamps, and they get turned into highlights. So you can share a moment that you identified or flagged as important in the moment as it happens, independent of the underlying recording.

Nathan Latka

08:37Literally right now, you're telling me some fun stories and I'm taking notes in my Apple Notes app on the left side of my screen right now. Where would I do that where it gets integrated with Grain? Like, literally, if I was using it now, how would I do that?

Mike Adams

08:47>> So you download Grain onto your desktop, and you can actually use it on the web here in a couple of weeks. And we hook into Zoom to where when you are recording, either through Zoom or through our native recorder, there is a notepad that is live for the time that you are recording. As soon as you stop recording, the notepad goes away, and it takes the content that you identified or flagged as important and it brings

09:14>> it into your web app where it synchronizes it with the transcript, with the full recording, and it becomes this iMovie for the web where you can create and edit the video itself and create highlight clips using just the transcript. So you select the text you want from the transcript, and you pull that out, it becomes a Loom like link where you can embed it, you can share it anywhere you want, or you can turn any of

09:39>> your notes into a highlight with with a single click.

Nathan Latka

09:41Okay. If I fall in love with this thing, what's the average customer paying you guys to use this technology per month?

Pricing Plans and Team Economics

Mike Adams

09:46>> Yeah. Totally. So we have, two plans. So there's a pro plan, which is a $144 a year, and then we have an unlimited plan, which is $436 a year per creator seat. So Grain is a tool for teams from default. So we don't have this idea of Grain of, well, there's this individual usage and the team usage. It's built to be used by and for and with your teams from the very beginning. And so you can

10:10>> have your entire team on Grain and not actually have to pay for everybody who's in there, who's accessing and getting value out of viewing the content and having this centralized source of spoken knowledge for the team, you pay a license for those that are contributing and adding and editing the content in there. So if you just view it you want view only, that's a free seat. But if you're contributing and collaborating and editing and adding new

10:35>> recordings, you get an allocation of recordings according to your license type, whether that be pro, it has a set number of recordings, or unlimited. Unlimited, you can use it on every one of your calls.

Nathan Latka

10:49We will So what's use the sweet spot, Mike? What's a team on average paying you? Because you're looking at number of seats and then the plan they're on to get up that average. Are we talking like $100 a month?

Mike Adams

10:58>> Yeah, totally. So we find that it ends up being depending on the team, the average team is about three people right now, so it's growing a lot. Have some teams that are dozens and dozens of people. We have some teams that are three. Our self serve model, we don't have a sales team yet. You sign up for Grain, you start using it, and you can grow and expand that usage. The average team right now is about

11:21>> three On a

Nathan Latka

11:22month, at three times 12 a month, you're talking about $36 per month is Exactly. Probably

Mike Adams

11:27>> It depends on how much you need to use it. What we found is that teams come into Grain with one of two mentalities. It's either I want a very specific use case in mind where I want to use Grain instead of the regular Zoom recording or instead of uploading my files and transcribing them, and I use it for research interviews or whatever. And oftentimes, teams find themselves selecting into the pro plan. We're like, okay, that's enough

11:50>> allocation for me. And then there's this other group of teams that are like, we use Grain for everything. We use it for hiring interviews. We use it for team meetings. We use it for sales calls. We use it for customer success and support, and we also use it for customer research and for interviews. And those teams don't want to have to think about, oh, well, is this one going to cost me? Am I going to have

12:08>> to pay more? And so that's why we've created our unlimited plan, is you just embrace this record by default mindset, and then you pay Grain for your service, and then you just are living almost in a new way of operating in the knowledge economy where you can make use out of your spoken knowledge without ever having to think about I the don't mean

Nathan Latka

12:29to cut you off, but we're running short on time. There's a bunch more that I wanna learn. So you got your first customer back in 2018. It's really yourself. You're building this for yourself. Help us understand how you've scaled today. How many customers are you serving now?

Customer Count and Freemium Conversion

Mike Adams

12:38>> Yes. Right now, we have several hundred paying accounts, then across that, we have a lot of users per account. We

12:50>> have well over 10,000 that have signed up for the product, and obviously you can kind of calculate our conversion rates from there. And so we are a freemium based product

Nathan Latka

13:01that has Well, I actually don't know, obviously.

Mike Adams

13:03>> I've had Bloom on, I've had a bunch of folks on the conversion rates from freemium to paid are always all over the place, basically as low as 1%, and so I think we saw as high as 5%. Where are you guys coming in?

13:12>> Yeah, so on an account basis, it ends up being at about a 3% conversion rate on the new companies that come in and that are getting into a paid account.

Nathan Latka

13:23And are you happy with that conversion rate from free to paid

Mike Adams

13:25>> since It's actually a great place to start, but we believe that we can go upwards of 10% on that conversion rate. Slack has a 25% conversion rate to pay, and we believe because we're a team based product that as the functionality grows and the power and the usage of Grain grows, our conversion rate

13:46>> will continue to increase.

Nathan Latka

13:47So Mike, can I take 300, that's what 3%, 300 teams, right, times an average of three per team on that pro plan, 12 per seat, so 300 times 36, you guys are about $11,000 a month right now on MRR?

Mike Adams

13:59>> There's

14:02>> also a split of people who are on the unlimited plan. The

14:06>> $12 a month, we're about fiftyfifty between people who are on unlimited and people who are on the pro. And so the average account tends to be a bit higher.

Nathan Latka

14:15Yeah, yeah. So you're maybe closer to like 20 30 ks in MRR. Do you think you can break a million dollar run rate by the end of this year?

Path to $1M ARR and Growth Confidence

Mike Adams

14:20>> Oh, absolutely. Yeah. I mean, for us, the growth rate is continuing to grow out and increase. We've just begun to tap the market. And so we're absolutely on track for that, that being our goal this year.

Nathan Latka

14:33And what sort of gives you that confidence? I mean, did you get significant growth over the past twelve months? What was that growth rate?

Pre-Revenue in 2020 and Go-to-Market Build

Mike Adams

14:39>> Yeah. So, I mean, we just turned on pricing at the end of last year.

Nathan Latka

14:44You were pre revenue last year?

Mike Adams

14:47>> We were pre revenue last year.

Nathan Latka

14:48Oh, wow. Okay. Got it. Got it.

Mike Adams

14:50>> So we just turned on pricing. We don't have a sales team. It's all self serve. And so what we've done is proved that there's a tremendous amount of willingness to pay and economic value that businesses are getting by using our product. And so as we layer in more and more of our go to market team where we are adding in our inside sales team and eventually adding in an outside sales team

Nathan Latka

15:13And what's the team's pay, Mike? How many people?

Mike Adams

15:15>> It's all engineering and product and design.

Nathan Latka

15:17That's how many people total?

Mike Adams

15:18>> 50? 15.

Nathan Latka

15:19Yeah. One five.

Mike Adams

15:20>> Mhmm.

Nathan Latka

15:21How many engineers?

Mike Adams

15:22>> So of that, it's there's three that are not that are not so myself and then two others that are not

Nathan Latka

15:31So heavy heavy engineering. You're you're you're the you're the sales guy right now. Talk to me about churn. It's obviously critical in this sort of business.

Churn Rate and Activation Threshold

Mike Adams

15:38>> Yeah. So what we found is that those teams that have reached the threshold of either five highlight so there's five people on the workspace, those those teams don't churn. So once you've established that there's a that there's a a core use case for Grain, we found a less than a 10% churn rate there across time. Like and we've had those teams for well over a year now. And so a lot for us, our challenge of what

16:08>> we're focused on over the next year is getting activation rates increased and higher and and by getting you faster to that time of where you're like, oh my gosh. Like, I can never go back to a pre-Grain world. Like, how did I ever let all this information go ephemeral? Whether that be you use a research interview, a podcast interview, a hiring interview, a team meeting, etcetera. And so the teams that reach that threshold are they

16:32>> they stick around. Yeah.

Nathan Latka

16:34Yeah. Look. I imagine one of them I mean, a mistake, I would argue, in a business like yours is you think utility value is number of recordings. Right? And that's actually what you price against. But really, if I start using your tool and then I hit a paywall because I'm automatically reporting everything, I but haven't actually figured out how to use the reporting, so utility value, I'm gonna churn. So isn't the real question what you're doing

16:52with the recordings, not how many recordings you've done?

Engagement Metrics and Content Sharing Loop

Mike Adams

16:55>> Yeah, totally. So baked into that stat is that because if you reach a recording threshold and the fact is that those that reach the recording threshold are not churning, the product has established value. By virtue of the fact that you're adding recordings into the system, those users are experiencing the value which usually comes from sharing. As soon as I create a piece of content that's derivative, not sharing the whole entire recording, but a piece of that

17:25>> recording, and I drop that in Slack or I embed it in Notion or I put it in Airtable, that is where our engagement metrics are focused, on the percentage of people who are coming into the product and are creating content that gets shared externally, and then that gets viewed. And that's the magical moment that I have as a Grain user is like, oh my gosh, this was valuable to you. I created something in this amazing tool,

17:50>> and then you got value out of that. I'm going to do that more often, and I'm going to do it in more areas. And so we see that account expansion for those teams that reach that engagement threshold.

Nathan Latka

17:58Oh, Mike, we're out of time. Congratulations, Check out grain.co. I'm not gonna record and highlight important moments in your Zoom meetings. They're basically just on revenue about a year ago. They they launched back in 2018 with a million dollar round. They raised 7,000,000 to date as they look to break a million dollars in ARR this year, serving 300 accounts and many, many more users inside of those accounts. Mike, thanks for taking us to the top.

Mike Adams

18:19>> Hey. Thanks a lot, Nathan.

Nathan Latka

18:21One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU, CAC, LTV, you name it, they share it. And the buyers try and make a deal live. It is fun to watch every Thursday, 1PM

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