How Loom Reached 1.1M Users and 200K MAU Before Launching a $10 Paywall

Shahed Khan launched Loom back in 2016 when he was just 20 years old with his two other co founders. They sold the company last year in October 2023 for $975,000,000 to Atlassian. Now how much money did Chad make on the exit? Well, the company raised 200 plus million dollars to date, and the founders took home an estimated $100,000,000 each at exit. It's pretty impressive for a 28 year old. Now how'd they grow so quickly? Well, they

added 1,200,000 users across 21,000 company accounts between 2016 and 2019 before launching a paywall for $10 per month, 02/19/2019. When they launched that paywall, they went from zero to a million dollars of sales literally overnight from all that work. You If wanna learn how to grow like Loom did in its early days and get 1,200,000 users and then a million of revenue overnight, you'll wanna watch this full interview. Hey, folks. If we haven't met yet, my

name is Nathan Latka. I launched and sold my first software company back in 2015 and went on to write a book about it, which you guys made a Wall Street Journal bestseller purchasing over 30,000 copies. Thank you so much for that. After the book, I launched this show and one... Went on to create founderpath.com. I raised a large fund to do non dilutive deals with b to b software founders. So far, we've invested in over 400

software founders totaling a $150,000,000. Here in 2024, we're doing three to four new deals per week. So if you're looking for capital and don't wanna give up equity, go sign up at founderpath.com for free to get your offer. Alright. Let's jump into the interview. Hello, everybody. My guest today is Shahed Khan. He's the founder of Loom. He previously worked entrepreneur in residence at NFX, a venture capital firm focused on investing in networks and marketplaces. Prior to

that, he was an analyst at Los Angeles based venture capital firm, Upfront Ventures. Shahed, you ready to take us to the top? Yes. Alright.

Have me.

Very good. Yeah. So you're building Loom now, which I think a lot of people have heard of. You guys have really taken off kind of asynchronous video communication for teams. What am I missing? Anything else you wanna add in terms of what you do?

Nope. That's... That that pretty much nails it. Loom is the easiest way for people to record a quick video of themselves and share that video with the team member. Whether people are remote or distributed, it's easier than hopping on a video conference call or sending a very lengthy email or, you know, screenshots with air... With arrows kinda scattered to lower them.

There was... Think the way I came across you is, I buy and sell companies, and one of my little tactics to find companies to buy is to go to the Google Chrome web store, sort by productivity, look at highest users to fewest. And then if the update date by the developer was more than like a year ago, I assume it's inactive and I think it's worthless. Then I go out and try and buy. And I remember coming across you guys earlier when you had like a 100,000 users, clearly very active though. Now you're up at, I think, almost a million on Chrome. Is that your number one growth channel?

So I would say our growth channel is pretty organic. If you send someone a Loom video, they'll watch it, they're curious, and they'll sign up. There are a couple of growth tactics that we have implemented such as once a user is done watching a video, we try and prompt them to sign up to either reply to a Loom video with another Loom video, but we use those different product hooks and triggers to kind of continue the growth loop.

Have you actually gone deep into kind of k factor invite sent and then try and figure out how to shorten the viral coefficient cycle?

Yeah. So we experimented quite a bit with a referral system where we would give, say, dollars 5 in Loom credits for every person you'd refer back to Loom, and that encouraged people early on, probably when we were at 100, 200,000 users to invite their coworkers because there's inherently a network effect when if I invite another person from my company who's also using Loom and we share videos with each other, we're kind of like incongruency when it

comes to relaying information back and forth. And now it's just part of our process. So we experimented with to do lists, checklists, various formatting. We actually had a growth engineer at one point whose job was solely to launch an experiment once a week. And a lot of those experiments, those that exceeded, we launched into production. Those that did not work, we ultimately just moved forward. What was the frame?

So I'm always interested in testing framework because if you believe that whoever tests the fastest today wins and you look at Amazon that we're probably running a billion tests right now, Facebook, same thing, then you wanna understand testing framework. So how did you set this growth mark? You know, whatever you wanna call him or her. What structure did you give them so they could get the velocity of tests as high as possible?

Yeah. So we came up with a bunch of ideas. There's a lot of things that we can experiment around, whether it's triggering someone to record a Loom video, giving them like jobs to be done, specific use cases, or if they're writing up an email, it's like, hey, you know, we noticed that you're spending a lot of time drafting up an email, just record a Loom video. It'll take you two minutes to, you know, convey your message.

Inside Gmail?

Inside Gmail. Yes. So at one point, actually had a... So anyone who had the Chrome extension was able to either compose a new email with text or create a Loom recording, and then that video would natively insert into the compose window. And for anyone who had the Chrome extension, they'd be able to watch the video in line in the email. And for those that didn't have the Chrome extension, which was obviously most of the users, or

sorry, most of the recipients are receiving the email, It would just be a thumbnail with the play button that they would click on and it would take them to Loom's website.

Got it. Really interesting. Yeah. There's something to be said for this. I mean, I even find myself now when I get texts, I'm just busy. It's just so easy to hit the record audio button. Literally, even if it's only a three second audio, I'm way more likely to do that than try and like knock out a text. I mean, there's something about the like communication and moving away from even text like video audio thing and you're potentially in a very interesting spot to go after that. What feels like it's gonna be a natural big market.

Yeah. So the one thing that we talk about quite a bit here at Loom and also to our customers is, we see that consumer behavior tends to lead the path of enterprise by around two years. So what we saw with Instagram, Snapchat, where people would pull out their phones and they're pretty...

It was socially acceptable to record yourself and send a video of yourself speaking to the camera and like these bite sized video recordings files. We're starting to see that trend in behaviour kind of come into the workplace. And that's why we feel with video and as more companies are becoming remote and distributed, you know, synchronous calls aren't always the best answer. So sending an asynchronous quick message that takes you just two minutes, three minutes to record

tends to be the better option.

Guys, you have it. Shahed is saying he is snap chat, but B2B. Right? That's how it works. Shahed, walk me through. Okay. So we've talked about a lot of stuff here. What do you care most about right now? I assume it's just free user growth, right?

Yeah. Right now, so it's completely free user growth. As we've been launching experiments, we haven't necessarily paid anything. There hasn't been any paid marketing done on our end. It's normally been like the community has been talking about Loom. And if I'm a designer at one company and I hang out with one of my other designer friends, I'll bring it up in conversation. So word-of-mouth is also very key for us.

Is there a paid model though?

So right now, we've been completely bottoms up. And, as of February 19, we just launched Loom Pro, which is our first premium product.

Wait. Shahed, is that code for your first paid product? Correct. Okay.

Yes. So it's at $10 per user per month. And that basically allows you to do things on top of the existing free products such as if you're a salesperson and you record a video for one of your clients and you're trying upgrade them, or if you're recording a video for a lead and you're trying to convert them, you can basically attach a button at the end of your video that'll allow them to go straight to say

your upgrade page. So there's a lot of things that we're allowing. We're trying to take the behavior of people recording videos and making them more tactical in nature. So there is like a call to action or there is analytics in terms of who watched the video, how long they did and where they fell off.

When did you launch the company? What year?

So we launched Loom, the product itself, June 2016.

Okay. And so here's what I'm going ask you, right? People listening here, well, how did he have the luxury of not having to worry about, revenue and a pricing page until now, right? He's two and a half, three years in. So what's the answer to that? I'm going to guess you're potentially raised right out of the gate because you were in EIR.

Yes. So I would say we started off the company, my two co founders and I, we, I mean, obviously very humble beginnings. We lived in a apartment in San Mateo. My co founder Joe actually stayed in my room with me and it was basically us just bootstrapping. In fact, we actually launched, Loom used to be called OpenTest, which was a completely different idea that we spent three months building, couldn't find product market fit, pivoted into a

different idea. Same scenario, built a product, didn't find product market fit. And then at the very end, as we were running out of cash, we had to come up with some hail Mary. And that's when we realized that people were actually using the Chrome extension we had built that was mainly targeted towards user testing. People were actually recording these videos and sending updates to their coworkers with the exact same extension. So we decided to follow that

path and then launched the product in June 2016. And then in two and a half years, we went from zero to now 1,100,000 registered users in about 21 on about 21,000 companies around the world.

Okay. So 1.2 registered users and sorry, how many companies?

1,100,000 registered users and on 21,000 companies around the world.

And so the question I have to follow-up with there is that number is great. It's good bite, but how do you measure who's active or engaged?

So we look at... So we have video recorders and then we also have video viewers. So anyone who engages within the video platform, whether they're recording video, commenting on an existing video, reacting to videos with emojis, that's kind of like what we dictate our active users.

Which is why right now in terms of MAU?

So we have around 200,000 monthly active users.

Okay. That's pretty good on a 1.2 registered. Mean, that's pushing 20%. Yeah. Yeah. No, that's not bad at all. Interesting. Why is now the right moment to put up a paywall?

So initially when kind of going back to your initial question around like, how did we finance this and how did we put off putting up a paywall for about two and a half years? We did raise some venture financing. We raised just under $14,000,000 in total. It was a pre seed, a seed. And then our series A was most recently led by Kleiner Perkins partner, Elliot Fushman, who comes from the background from Dropbox. And we announced

that on February 19 as well. But initially, as we started to see the momentum growing early on, we realized that this was a new behavior. So our initial goal was to get as much and become ubiquitous as a product within a lot of these organizations. So one company we went from 20 employees when we're raising our seed round to today about a year and a half later, we're at just over a thousand employees from that company

had naturally adopted Loom because of products it's inherently viral. And there are some product triggers that led people to also signing up.

So what is the, you know, we've had the tight form folks on, we've had a lot of people that have gone like from freemium to paid, they've built like a million plus base and then introduced paid. It's always interesting to me to ask the question, when you're taking your first stab at a test like this, like how do you come up with a price point and how do decide what to put behind the paywall and what to keep in front? And so what are you, how many users in the first month of this $10 paywall being live do you think will hit the paywall and what percent do you think convert?

Yeah. So, I mean, because we already have the existing user base and we've been kind of promoting and playing with the idea of Loom Pro, we actually had a coming soon video that we launched. So we're hyping it up with our existing user base. And once premium or once Loom Pro had launched, because we're still like in the mid month, we're expecting anywhere from three to 4% of the existing user base of active users converting over

to Pro. And then also putting in triggers where the next step for Loom is to build team accounts where right now everything is a very individualistic product and experience. So if I wanted to collaborate with say another salesperson at my company on a particular project and we're using Loom right now to send these individual videos and files and folders to them. So if I can just get my entire team onto Loom to create again, like that

network effect, That's kinda like what we're striving for with team accounts that will ultimately also be a big revenue player for us.

200,000 active users. They engage with the video, at least one video view it, whatever, send a video each month. 3% of those converted when you put the paywall up, that's 6,000 at $10 a pop. So $60,000 there in terms of monthly recurring revenue you think is gonna happen how quickly?

I would say roughly out the gate. So that's because that's existing users. That's like immediate conversions. Yep. And that's that's more on like, I mean, I'm putting... I'm pulling that number from like a financial model that we put together. So the numbers are a little bit more on the conservative side, but I do think we, you know, as a company and as a community, we definitely will do better.

Yep. Yep. No, that's great. And then you mentioned a little bit getting in, the team space. That's then starting to push up to some companies that have raised a crap ton. You're talking, like, the Mondays of the world, this kind of space. Why kind of get it out? I mean, is there not an opportunity to just, be the video that like the video thing back and forth and just API or or add to the app exchange of these kinds of tools or actually gonna go build a team and kind of project management tool?

Yeah. I would say there's there's a lot of avenues we can go down. The one that's been the most fascinating. I mean, we've gotten a lot of inbound from a lot of, you know, like you said, the Mondays of the world that have reached out to us saying, Hey, you know, we want to take Loom and build it inside of our product using your API.

Did they offer to acquire you?

What's that?

Did Roy offer to acquire you? Did Roy? The founder of Monday.

Oh, no. No. No. Okay.

No. But like, I mean, there's companies similar to Monday that have reached out, some who've tried to acquire for the sole purpose of this, basically what we're doing on the asynchronous video side. But for us what's most fascinating right now is seeing how a lot of the knowledge worker behavior is going from more text based to in live video conferencing to an asynchronous format. People, because, like we said and talked about

are more comfortable broadcasting themselves. We're starting to see that trend and we want to be the leader of that trend. And we currently are riding that wave, which is why now it's like the best time to be working on Loom for us.

What's the team size today? How many people?

16.

One six. Everyone in San Fran?

No. So we are actually due to the product, due to us being like a remote friendly and distributed friendly product, we are a remote first company. So half of our team is scattered kind of across Europe and in Canada. And we actually have our DevOps engineer based in Omaha, Nebraska.

And what if... That's funny. What if you said you're just now announcing a raise. How much was the raise that you just closed?

11,000,000.

Okay. So you've had... You basically have 3,000,000 in the company up to date before then?

Correct. Yeah.

Okay. How much of that 3,000,000 would you say went towards driving the growth of the 1,200,000 users or was most of the 3,000,000 towards salaries over the past two, three years?

It's it's definitely... I would say it's definitely like people budget. So like the... Just like headcount and things like that. Whereas I would say most of it was investing into people and also investing into product.

So let me ask you a question and I don't know that you're able to answer this, but I'm hoping you can still be... Help us learn something here. Most B2B SaaS companies, which I wouldn't put you in this category yet because your economics are more like a consumer app right now. But most consumer apps that hit a million bucks, a million users are actually not valued that highly. You gotta get to like 10,000,000, right? Or like

15 or 20,000,000 before you really start getting good valuations. So in the meetings with VCs that you just recently had when you closed the 11, how did you frame it to make sure you didn't get pushed down on valuation being compared to consumer apps, try and paint the picture of your B2B SaaS?

Yeah. I think a big part of that is showing like looking into the data and the cohorts of how engaged a lot of the users are and like, what are the jobs to be done and like desired outcomes that they're performing with Loom that they couldn't have done prior to Loom being a product. So I think if you look at the specific behaviors and seeing how Loom is adopted, from like an individual contributor all the way

up to an executive, And then an executive record the video summarizing, say like a quarterly update and send that to his entire marketing team. And then you have like this trickle effect where like now the entire marketing team is signing up because they see their manager, their boss using the product as well. So I would say like looking at those behaviors that we start to see in a lot of these companies with Loom was one of

the bigger selling points. And that's kind of what's gonna allow us to see how Loom evolves.

Just to be clear, that is what allowed you to get more of a B2B SaaS valuation.

I would say I would say it was a it was a big part of it.

Yeah. Mean, because most... I mean, look, if you raised 11 and I'm being very much back to the napkin here, if but you're only selling 20% of the company right at 11,000,000, that means pre money valuation is whatever it is, $4,050,000,000 pre money, right, on basically a million kind of a million 2 registered 200,000 active. And and hopefully what becomes a strong b to b SaaS revenue stream, almost like an asynchronous version of Zoom, right? Which is interesting. Eric is potentially about to go public. Would you sell to Zoom?

I love Eric. He's a very nice guy. We have like conversations about selling the company have not been a topic here. I would say everyone is generally excited about the opportunity that's ahead of us. And I think we're pretty... We have a very clear path to get there.

Last question before we wrap up with the famous five in terms of going out to raise 11, you just did. Did you get the company to break even before then? You had the most leverage or were you still burning?

So we, I mean, like from a financial perspective, we were still burning because we were completely bottoms up and we just launched our premium tier. So it was more so looking at, from a cost perspective. So there are a couple of things that went into place. We did patent like the way we do our upload and like how we save costs being a video company. So that was one thing investors looked at. Like, can this scale say if we're 15, And 20 users

then one like my co founder Vinay who is our CTO also has a background in video and his previous company he worked at and led an engineering team at a company called Upthere that was acquired. And that was basically taking on Dropbox and for storage.

Sorry. Just go back to my original question. What I'm trying to understand is how how much time did you give yourself in terms of runway before you started raising the 11 you just closed? So if you were burning a $100 a month and you had 600 k the bank still, you give yourself a six month kind of timeframe to raise. What timeframe did you give yourself to raise?

Yeah. So I would say we had about eight months of burn when we plenty. Yeah. When we started to think about our series A and then the process itself, going from initial meetings to term sheet took about two weeks. That was mainly because we're building relationships from our C to our A. So it made it a lot easier for us to go in and have some of these initial conversations.

Yep. And in terms of burn, I mean, you share generally what you're at? Are we talking like a $100 a month net burn or more?

I would say above a $100. So 16 people, half remote, half here in San Francisco. I would end up ultimately a video company.

I should have guessed a little higher. You're in San Fran. Wait. Can we put a cap on that and say between a 100 and 500 k? Yes. Okay. Fair enough. Good. I won't push you more there. Good stuff. All right. Let's wrap up with the famous five. Number one, what's your favorite business book?

Favorite business book. It's not necessarily business, but it's growth related. And I would say it's something that we handed to all of our employees here at Loom and actually did a book club around is Nir Eyal's book.

Hooked.

Hooked. Yes. It's actually, it's a big driver of how we thought about growth. And then also Brian Balfour, it's not a book, he's a person. He's also been a big advocate and like that's kind of helped guide us in terms of how to think about user behavior and user triggers as it relates to chronic lab growth.

Two, is there a CEO you're following or studying right now?

I am, I mean, I'm following the ball pretty closely.

Angela? Yes.

A big fan of the ball. I love how he thinks and how he communicates and articulates his thoughts around business, around everyday life, work life balance.

Good. Number three, what's your favorite online tool for building the company besides Loom? Notion. Notion. Yep. Number four, how many hours of sleep do get every night? Around seven. And situation, married, single kids? Single. Not married, no kiddos? Nope. All right. And last question, or sorry, not last question. How old are you?

23.

Okay. Now last question. What do you wish your 20 year old self knew?

So 20 year old self, basically where I was before I started the company, that being a founder's very, very tough and you only understand how tough

it is once you just jump in into the deep end. Guys, there you have it. This is how you know Shahed just closed around to funding as he grew his beard out to look older. He probably got a couple points on the valuation just from that alone. Shahed again launched Loom with his co founders back, call it three years ago in 2016. They've been pre revenue to date, but they've gotten 1,200,000 users and 200,000 of which

are actively using the product. They're launching a $10 per month price point now. It's live today, hoping for 3% of the 200,000 registered users to convert at $10 a month. So got $60 a month there in revenue fairly quickly. We'll see what happens. They've raised $14,000,000 to date. Team of 16, all remote burning between a $105,100 grand a month as they as they did that last raise. Shahed, thanks

so much for taking

us to the top. Thanks, Nathan.