Bootstrapped to $6.7M ARR and an Exit to Quizlet in 2 Years – Brett Bauman & Zack Hargett, Coconote

David Barnard:

Welcome to the Sub Club Podcast, a show dedicated to the best practices for building and growing app businesses. We sit down with the entrepreneurs, investors, and builders behind the most successful apps in the world to learn from their successes and failures. Sub Club is brought to you by RevenueCat. Thousands of the world's best apps trust RevenueCat to power in-app purchases, manage customers, and grow revenue across iOS, Android, and the web. You can learn more at RevenueCat.com. Let's get into the show.

Hello, I'm your host, David Barnard, and with me today, RevenueCat CEO, Jacob Eiting. Our guests today are Brett Bauman and Zack Hargett, co-founders of Coconote, an AI-powered note-taking app that was recently acquired by Quizlet. On the podcast, we talk with Zack and Brett about hitting a million dollars in ARR in four months with no pay ads. Why trial extensions beat discounts for saving cancellations and why you should be hiring content creators, not influencers.

Zack, thanks so much for joining us on the podcast today.

Zack Hargett:

You got it, David. Thanks for having me.

David Barnard:

And Brett, nice to have you as well.

Brett Bauman:

Happy to be here.

David Barnard:

Jacob, back on the pod.

Jacob Eiting:

With a four-person pod, my commentation budget is cut in half, so you may not hear that much from me, but who wants to hear from me anyway? These guys got the story to tell.

David Barnard:

They have a great story. Always fun to have you on for the Keller commentary, and feel free to interrupt and interject to get the Keller commentary going.

I'm going to kind of spoil the ending, but I think this is going to be in the title anyway. Brett and Zack, you founded Coconote not too long ago, what? About two years ago and got it to 6.7 million in ARR and then just sold to Quizlet. So quite a story for a bootstrapped app to go so quickly to that much ARR and then to sell to such a big storied company in the subscription app space. So I wanted to kick it off just with the story of when exactly was it and how did Coconote come together?

Zack Hargett:

I think we'd take it back to 2022. I had just shut down my last startup, which raised venture capital. We were a consumer product studio. We were building for high school students and college students. So I really thought most often of my little sister, Emma, my stepsister, Emma, who was in high school and then going into college right around then.

So it was 2022. I was tinkering around with a Chrome extension, which summarized blog posts and YouTube videos because, frankly, I didn't want to watch an hour long YouTube video. I really just wanted the two, three sentence summary. And same thing with blog posts. I came across a lot of blog posts that I wanted to read, but I didn't want to spend 30 minutes reading it. I just wanted the summary to see if I wanted to dig deeper. And then Brett and I started tinkering on a way to replace Siri with back then GPT-4 in 2023.

Jacob Eiting:

That's what I was going to ask. And so those summarizations, those were the first using LLMs to do summaries, which was very, very novel in '22, right?

Zack Hargett:

Exactly.

Jacob Eiting:

Or 2023. Yeah.

Zack Hargett:

Yeah. Yeah. And back then, I believe it was still GPT-3 or some version of GPT-3 point something.

Jacob Eiting:

Which worked, but it's nothing like what we have today, right?

Zack Hargett:

Exactly. Yes, for sure. And Brett and I started tinkering and I think we realized the power of voice. We were thinking about summarization from the Chrome extension that I was kind of hacking on. And then we saw the success of some note-takers that were more business-focused, but we didn't think people were really taking it seriously. And so something that comes to my mind is a great Charlie Munger quote, which is simple idea is taken seriously. We kind of came to this simple idea that this could be great for college students, and we committed about two years ago.

David Barnard:

So how did the two of you meet? I know you were both at Loom, but you didn't overlap. So how did y'all meet and how did you decide to build that together?

Brett Bauman:

Yeah. So Zack was there before I was, and we basically just worked with the same people. And I was on the mobile team. Zack did all kinds of things at Loom being there earlier than me and helped to get the mobile team started. But Zack, I feel like it was at the offsite one time in LA. Zack was still coming to offsites even though he didn't work there anymore for some reason. And some of our mutual friends were just like, "You guys should meet." And we did. And that's kind of how it started. Yeah.

David Barnard:

That's pretty cool. Jacob, is there an unofficial policy? If I ever leave RevenueCat, do I get invited, or I just get the boot? How does that work? I don't think I would get the invite.

Jacob Eiting:

Nobody leaves RevenueCat. That's the thing. I didn't know you guys were Loom alums. Obviously, massive fans, still daily active. That's such a great, interesting product. And it makes a lot of sense on how that sets you up for this project. It's like summarization, note-taking, info collection. And I think so much what works great about Loom is recording a video, you can do it with QuickTime Player, right? So it's in some ways not that complicated, but Loom makes an amazing product out of it. And it's mostly the dressing and the interfacing and the delivery. So seems like there's a real parallel here between Coconote and Loom.

Brett Bauman:

I think not a lot of people pick up on that, but it is kind of Loom on easy mode a little bit, recording audio and uploading it and summarizing it and all that.

Zack Hargett:

I just wanted to say my favorite part of that night. Absolutely, I think it was at Élephante, Brett, in Santa Monica, and I was living a couple blocks away. I won't say who to protect the innocent, but someone looked at Brett, looked at me and was like, "You two should meet and I'm not going to be part of this. I'm going to walk away, because I shouldn't know about what you guys talk about."

Jacob Eiting:

That's why ex-employees are not invited to offsites.

Zack Hargett:

And so I think the universe, if you put out startup vibes and I don't know, the universe has a way of making things work out.

David Barnard:

Was it like you two just really hit it off? These kind of founder stories are so fascinating to me. How did two people get together to build these things? Did you hit it off and then like, "Hey, let's just build something together?" Because it sounds like you started building before you actually built Coconote.

Jacob Eiting:

I might interject and just say, obviously, choosing co-founders is a super fraught thing and there's probably as many failures, probably way more failure. Most startup early stage started failures are because of co-founder mismatch. They sometimes get labeled other things, but most of the time it's like co-founders just weren't the right combo. But if you haven't worked with somebody directly, I would say both coming through the same alma maters as the same organization certainly is the next best thing, because you at least know you've passed through a similar cultural filter.

And also, this is under-appreciated probably is that you have a shared social network too. So you have outside of the financial alignment that you have starting a company, you kind of have an incentive not to screw the other person, because you have similar friends, right? So you don't want to mess up. There's more in it than just the time. There's a lot more connection, but it's super hard. I mean, I don't want to take over the podcast, but I think this is one of the hardest problems you can get right in starting a company.

Zack Hargett:

I think there's kind of an obvious complementary skillset. So Brett's background is making apps. My background is making apps, but I'm not especially technical. And so me having a design and product background, which is what I did at Loom, and then as a first time founder realizing that if you build it, they will not come. You have to level up marketing. And so I had to get relatively decent at marketing in my first startup. And then Brett, with an engineering background, but does so much more than just engineering, I think there was a very obvious skillset match.

And then the last thing I'll say there, I'd be curious to hear what Brett has to say about this. I was mostly bugging Brett like, "Hey, I have this idea. I'd love to execute on this." And it's him being like, "Well, maybe. I don't know. We'll see." And then eventually I bugged them to do one and then the next, and then we were just kind of hacking and iterating. And thankfully he said yes.

David Barnard:

So you met, you hit it off, you've figured out you wanted to build something together, you started tinkering with the Siri thing, but then tell us the story of when you realized Coconote was what you were going to build and how you got that to launch.

Zack Hargett:

So, yeah, like I had mentioned, I'd been building a lot for Emma, which is this archetype that I had in my head with my little sister. She was entering college as a first year civil engineering major. She still is a civil engineer. So we were thinking about this. We were thinking a lot about how can we summarize things, help people learn. It's kind of a mishmash of things. And then we arrived at Coconote. There were some apps, not iOS apps, but actually web apps that were out there on the market doing a similar thing, but they weren't taking it seriously. And so we just decided to execute on it.

I would say one of the things that we did really, really well in hindsight is get momentum as soon as possible. So we had a free trial from day one, but we were in effect charging from day one. And this is where this will play out over the course of two years, David, Jacob. My fascination with checking the RevenueCat chart led to my wife to have basically an intervention. Like, "Zack, I think you have a problem. You check this thing way too often." And it started from basically day one, because we were trying to get momentum as quickly as possible. One way to look at momentum would be something on mix panels, so like usage and retention and very important metrics, but there's nothing quite like the dopamine high of realizing you're creating something valuable to the world and people are returning it.

Jacob Eiting:

I think you captured some of it, right?

Zack Hargett:

Exactly.

Jacob Eiting:

It's hard to debate something that is being done there. You can have a lot of useless mix panel events, right? I've always thought about this. I don't intentionally in some ways don't want to create fidget spinners for app founders, like some sort of just addiction. But I also think that like, hey, starting and building a thing is intense and it takes a ridiculous amount of focus. I think much of the detriment of the loved ones in your life, like checking that thing frequently is not the worst thing in the world. You have to stare at it every day. Was it on the mobile app? Because the mobile app I think came out halfway probably through-

Zack Hargett:

I was checking mobile web. I always had full app. Yeah.

Jacob Eiting:

Oh, web. Okay, OG. Yeah. The mobile app we release is we really weaponized the push notification addiction for people, so anyway.

David Barnard:

The widget even. Yeah.

Jacob Eiting:

Yeah. Yeah.

David Barnard:

My [inaudible 00:10:45] home screen.

Jacob Eiting:

So is this my official Surgeon General's warning to like, you can adjust your notification settings. You don't have to get a notification and check your thing every single time, but if you want to get acquired by Quizlet, maybe you do. I don't know.

David Barnard:

How long were y'all working on it before the April 2024 launch?

Brett Bauman:

Not super long. We really wanted to scope it down and launch something quickly and basic. And I would say we achieved that and it sort of worked when we launched, but that was fine. There's a lot about it, honestly, that looks the same today as it did back then, which is cool, but there was plenty of audio recordings getting lost and things like that.

Jacob Eiting:

I guess it kind of feels like this is one of those cases where new fundamental technology breakthrough. This wouldn't have been an app you could have built two years prior, right?

Brett Bauman:

Totally. Yeah.

Jacob Eiting:

And so you guys, there's a huge first movers advantage to getting this. And this would've been very early. I remember around this time looking for casual note-taking apps. There were some of them, I forget, they've all cycled in and out already for the business context. And I was like, "Man, it'd be nice if I could just set this on the table when I'm meeting with somebody in person." But yeah, how much of the product improvement did you guys just kind of get for free as the models progressed over those two years? Was it substantial? Did the product just get better and cheaper to operate every two months as the model shipped? Or was it a lot of product development, fixing and harness building?

Brett Bauman:

Definitely both. I mean, adding new features, building things as new capabilities come out.

Jacob Eiting:

Oh, adapting to new functionality?

Brett Bauman:

Yeah. Yeah, that's something we still do today, and that could be building a podcast that you can create. So you're kind of going from audio to text to a summary, and then back to audio again in a shorter form.

Jacob Eiting:

It'd be weird to just listen to your lecture again, right? Maybe. I don't know. That's funny that there was demand for that.

Brett Bauman:

Yeah, I think it gives people some safety knowing that they can listen to it again and kind of zone out, or if they want to replay something.

Jacob Eiting:

Oh, interesting. In the moment, people are relaxed more. So your app is provided. Even when their recording is happening, you're providing value because they just have the peace of mind that this is recorded, I can reference it later, all of those things. That's, I guess, obvious when you say it, but you think of app value being delivered when an app is used. And I guess the app is being used at that point, but not in a consumptive way. It's doing its job passively, which is cool.

Brett Bauman:

Right, right. They're recording it to really come back later and use what they're getting right now. And it's something we discovered from feedback when things would go wrong and realize how much trust they're giving us and then like-

Jacob Eiting:

Oh, yeah, that's a bad moment.

Brett Bauman:

... losing it. Yeah.

Jacob Eiting:

Losing a recording. Ouch.

Zack Hargett:

One of the best things that we did, we just asked our customers, "How would you describe Coconote?" And a great majority of them, it was shocking how consistent this was. They used Coconote to never miss a key detail, and that is exactly what we put in the first App Store preview screen. And so I think one of the cool things that we did with Coconote that I'd never done in the past is listen to how your customers describe your product and then say that back to them. There are parallels here with even presidential campaigns or government position campaigns where you're listening to what resonates with your voter base and then you're saying it back to them, and I think that's in part what a good marketer does.

David Barnard:

That's fascinating. I was just thinking, I actually had a version of this in the '90s by having this amazing study group. And what I did, I didn't take notes. Two girls that I would take every class with who were in my same degree plan would take meticulous notes and then we'd have study groups together where I was like chill, listening, getting the bigger concepts. They were taking notes. I was more relaxed. And then our study sessions were incredible. So you basically productize what I lucked into.

Jacob Eiting:

The classic group project hanger on monetized. That's a good point though. You know what I mean? I mean, okay, we talk about technology as deflationary, right? And this is weird because you didn't pay to be part of a study group, right? But you were lucky to have that. You had to put energy to put that together. It's difficult to find the right people and all that stuff.

David Barnard:

And I was bringing that up to the point Brett was saying about being able to be relaxed during the session and really listen has value, and it was valuable. I wasn't just the hanger on. There was value to them for me to bring in context that they missed because they were frantically taking notes.

Jacob Eiting:

More brains are better than one, whether they run on a GPU or not.

David Barnard:

Yeah. Yeah. So that's what's so cool. And for those who aren't fully familiar with the product, you record lectures in high school, college, and then it generates notes, flashcards, quizzes, podcasts, games, mind maps. It generates all this other content. And that's kind of what we were doing in this study group in the '90s was like-

Jacob Eiting:

With immense human effort, right? Which goes back to the deflationary point, right? This technology just free money. It's free real estate, right? It's not free, obviously, but very, very cheap compared to the alternative.

David Barnard:

In those early days, what were the key insights and product unlocks that took you ... Because it sounds like you got some initial launch traction, but what were those stepping stone moments that really kept taking it to that next level?

Brett Bauman:

Well, there's something that I look for in consumer apps and trying to understand why they've been so successful. And I look at ones like Ladder or AllTrails or Strava, and I think that they all associate with a person's identity, and then it's something that they repeat frequently, whether it's running or weightlifting. And to us, we felt like we were capturing a student's identity and going to class and recording is something you do daily or a few times a week. And that was a big thing for us, is trying to find something that not just brings value, but you do it in an often and repeated way.

Jacob Eiting:

And you build up also just this corpus over time, right? Especially if subsequent classes, like physics 1, 2, 3, you can now go back and reference physics 2. You get all this lock-in, which is really powerful in terms of retention and things like that.

Brett Bauman:

Totally.

David Barnard:

Let's dive into growth. How did you promote the launch and what did traction look like out of the gate?

Zack Hargett:

Yeah. So on the growth marketing side, as I mentioned before, we wanted to get traction. There's a great quote by, I think Sam Altman, which is momentum is like oxygen for a startup. So you want to get as much momentum as soon as possible. And I know in some way I'm stating the obvious, but there are very clear trade-offs.

In some cases, you delay a launch. In some cases, you want to perfect certain flows or perfect this and that. Maybe you delay your launch because of hiring, whatever. I think the thing that we got really, really right from the start is we wanted to get as much momentum as possible, as quickly as possible, because momentum is like oxygen. You just feed off of that momentum and it lets you put more and more energy and more and more cash if you need to into the company to keep it growing.

So in the early days, it was very obvious that we were going to use social media to grow. I think we live in this really interesting time where it does not matter, generally speaking, how many followers you have. On short form video, it just matters if you make great content. And so we were trying everything in the beginning. I have some interesting stories. I don't know if I should share them, but maybe we can circle back to those early days. I mean, it is like a true grind and it feels good to be part of that game, but we were trying everything we could.

And then I would say we worked with easily 30 content creators of various types in the early days, I would say in the first two months. And really, three of them ended up making a huge difference. One of them in particular ran the main Coconote.app account and generated hundreds of millions of views. And I think I can speak for Brett on this. We're very lucky to have worked with him and started working with him very early on because he was a key part of our growth.

Jacob Eiting:

I know you guys don't want to say it, but that was Mr. Beast.

Zack Hargett:

Jimmy, if you're listening, we'd love to work with you.

Jacob Eiting:

So I was going to ask the model there. Were you two ever dancing on a TikTok? Did you try any first party stuff yourself, or did you go straight to like, "Hey, we're just going to identify creators and have them run." And that's in itself a process, right? You're trying different creators and seeing who's good. How did you do it?

Zack Hargett:

I think Brett danced on TikTok a couple of times and then we got banned. And so then we had to figure out what else to do.

Jacob Eiting:

It was that good?

Zack Hargett:

Yeah. Yeah. So we were not dancing on TikTok, but we were definitely talking to a lot of creators and studying what's working in the market. Plenty of learnings, I'd say, on the growth side. I don't know if this is exactly relevant, but some timeline there. Within 45 days, we had crossed 100,000 ARR. Within four months, we crossed a million. And then within five months, we had crossed two million. And so we just had more and more capital, more and more confidence to reinvest into the company to keep growing and keep working with creators.

Jacob Eiting:

Did you guys ... I mean, this gets into cashflow questions, but being bootstrapped, I think it's very interesting, but did you at all infuse cash in at all? Or I guess maybe by the way of not taking any money out for yourselves or anything like that. It's a flywheel, but there's a minimum buy-in to get scale for these. How did you manage that?

Brett Bauman:

Yeah, it's a bit of both of what you said, both of adding some in. And it's really slow in the beginning on Apple. The delay of when you get paid.

Jacob Eiting:

It's so long?

Brett Bauman:

Yeah.

Jacob Eiting:

RevenueCat.com/payouts. I don't know if we have that set up yet, but we're working on a product there.

Brett Bauman:

It's really slow in the beginning, especially if you then tried to recognize your revenue on an accrual basis and things like that, which we had to learn and it-

Jacob Eiting:

It's a good way to descend into madness is what that is.

Brett Bauman:

Yeah. So we put in a bit both in the beginning to get things going. And then we really don't have even today much of a free tier. You can use it a little bit before you start a free trial, but that helped as well.

Jacob Eiting:

Did cogs of the LLM calls and all that stuff, was that material for you guys where you had to consider it, or was there enough of a spread it didn't really matter?

Brett Bauman:

Not really. I think in the beginning, we didn't pay much attention to it. Always felt like it'd be a good problem to have if we end up having that problem. And then as we grew, there's startup plans you can get on in the first year, free credits, things like that. And then as we rolled off of those, we did make some decisions to be more cost-efficient, but it was overall totally fine.

Jacob Eiting:

Yeah. You have to figure in the giving away tokens at the beginning of an experience as just part of your CAC kind of, right? It's like you have to give that away. I think too many people ... Again, it's like, yeah, maybe Zack having gone through a venture backed, you kind of had the model of capital equals growth. Because I see sometimes with bootstrap, David's bootstrapped a lot of things. But because the dip in below the zero is into your personal money, there tends to be a real hesitance, right? And that it is almost easier to ...

I mean, it's why a lot of people always venture. I don't think it's a bad reason to, is it's easier to spend somebody else's money. It really is, right? And there's good and bad things about that. The good things being is you're a little bit credited protected or whatever and all those. But from the bootstrapper side, I think sometimes people are hesitant.

And not even in like, "I'm going to spend 100k my own money." That's a big swing. But even like, "Oh, I can't even ship a product with negative gross margins or even risk my gross margins because, oh my God, what's going to happen?" And I think that can make you make some really suboptimal decisions if you're too concerned about it with it too early.

Almost everything gets cheaper at scale, right? As you get bigger, one, you figure out how to make it cheaper, models are deflationary, or models are getting cheaper. So even today's functionality will just be half the cost in a year. When the time comes ... Yeah, it's a flip side in computer science, they always say, "No premature optimization." That's totally true in companies too, don't optimize at the beginning.

So that's really interesting. So you guys had very low COGS, maybe higher than an app that didn't have any AI backing, but not something that was a concern. And then you just started the flywheel with a little bit of your own cash to get it going. And then was it just like pull out, reinvest, pull out, reinvest cycle all the way up? Was it fairly smooth, or how did the scaling go?

Brett Bauman:

Yeah, I would say so. We were able to just continue working out of the app store revenue, Stripe as well. We have an Android app now. And one interesting thing is that the audio transcription costs are actually more than the LLM generally, and so that's one that might be surprising. But even there, the local models are getting really good. And I think that if we were starting from scratch, we could probably use those.

Jacob Eiting:

Yeah. I mean, I guess it's like you need good transcription quality, not perfect maybe, right? Especially if the LLM is probably, it's going to know the professor didn't say fish or something like that is going to do a pretty good job of fixing that, I would imagine.

Zack Hargett:

Jacob, one thing to add on to this in terms of the finances is that we were very mindful of the financial structure from basically day one. We knew we'd have to invest some upfront and it was around 10,000 maybe each that we had to invest upfront to get things off the ground. But pretty much every month from inception to the acquisition, we were around 50% EBITDA margins. And so we really tried to be lean.

And then to your point around raising or reinvesting, there are absolutely trade-offs. One of the reasons why I think we're so excited to now be under Quizlet is that we can think longer term. We can make longer term decisions without this make belief, 50% EBITDA.

Jacob Eiting:

In the mouth, right?

Zack Hargett:

Yeah, exactly. And so I think your ability to think long-term is definitely influenced by your capital structure, your capital situation. And so I'm very happy to have had that. And then on the other side of it, it is really nice to have the cash flow. So that financial discipline I think led us to have cashflow throughout, which was nice.

David Barnard:

Let's go back to process though, because I think a lot of folks will be interested. So you each put in around 10k. How did you reach out to those first creators? Were you just finding people on TikTok and then DM'ing them? And were those early ones paid? Did you do any kind of referral? How did you get that flywheel going? Because so many people listening to this podcast are trying to figure that out.

Zack Hargett:

It was an absolute grind in the beginning, because you're just trying to find the channel that works and then you just want to ... Exploit may not be the right word, but you want to double down and you really want to spam more or less that channel until you reach the limit.

We were reaching out all the above, David. So we were reaching out to creators through if they had an email in their bio. Funny observation here. If you reach out to a content creator, I have my opinions on influencers that we can circle back to, but if you reach out to a content creator and their email is, it's @sunsetagency.com or something, any agency sounding, you're too late. Those agencies exist to eliminate the alpha that you are trying to create. So they are almost always going to take more than they give in terms of the value that they provide to the company. There are always exceptions, 100%. But generally speaking, that's been my observation.

Jacob Eiting:

There's probably a lot of mid-tier creators too who were like, "Here, oh, I have an agency," and they get it and it's actually value destructive for them.

Zack Hargett:

Totally. Yeah, absolutely. If they have a Gmail in their bio and they have 5k, 10k followers, good engagement, that's great. That's a really nice sweet spot. And these numbers are very flexible. But we know whenever social media switched over from a follower graph to an interest graph and with a for you page and algorithmic distribution, the number of followers you have matters less and less. The quality of the content you create matters a ton.

So at Scout, my last startup, the Product Studio, our first TikTok got eight million views. We'd never posted to the account before, but we got eight million views. It drove 150,000 signups over a two-day period. I think at that time, this was 2021, if we were an app, not a website, I think we would've been number one in the App Store. And so I learned the value of great content posted on TikTok at that time. And so we knew that, that would be the case. It was just a matter of how do we get there.

David Barnard:

So that's what you meant about content creator. And I noticed you chose your words very carefully there. Content creator, not influencer. So the strategy wasn't to find an influencer, how to an audience. The strategy was find a content creator who produces great content.

Zack Hargett:

100%. Yeah. Couldn't have said it better myself.

David Barnard:

One of the struggles with UGC and this playbook is generating content that converts versus generating content that just gets a bunch of views. And then depending on how you're paying the creators, if you're paying on a view basis, they can really rack up the bill doing just funny TikToks that get attention, but then don't convert. How did you address that both financially and then also in kind of learning what did convert and kind of incentivizing that kind of content?

Zack Hargett:

Yeah. A couple of things come to mind. One is being hands-on with the content creation team. So today, our content team is about 25 people, 25 part-time creators that are all contractors. Throughout the lifespan of Coconote pre-acquisition, we were between 5 and 10. Maybe at the very most, we had 12 content creators. And so we kept a very small team.

I worked with everyone closely. I met with everyone one-to-one. I would say some of our competitors and some people or some founders that are building out similar creator programs, approach it very, very differently. So we always had the mentality, great quote by Brian Chesky, who I look up to very much as a design background CEO. He says, "We want to build the Navy SEALs, not the Navy." And we had that approach with our team overall and especially on the content team.

So get to know every single one of the creators, make sure you spend time with them, make sure you're enabling them with what creative actually works and letting them know what converts. And it's not a perfect science, but when you have a video getting 20, 30 million views, you know what impact it has because you know exactly when it's going viral and then you can measure on those couple days that it's going viral, what impact did it have down funnel.

And so I think it's just a matter of spending time with the content team, making sure they know what converts, what doesn't convert. And at the end of the day, what we found is that if you frame your product as a novel toy, people are going to treat it like a toy. They do not want to pay for that thing. They are, for better, for worse, I think people are very entitled that if something's digital, it should be free, which is probably subsidized by a lot of the venture stuff built in the last 10, 15 years. But if you frame it as a solution to a problem, then people are much more willing to pay. It attracts a higher willingness to pay customer.

David Barnard:

I know you have a few stories related to that. There's one video that got 41 million views, four and a half million likes, massively viral video, but that didn't convert. I mean, I would imagine you had quite a few of those. Any lessons of why that one didn't convert specifically?

Zack Hargett:

I think it goes to framing your product as a novel toy and not a solution to a problem. So we were experimenting with something called pdftobrainrot.com, which we've since sunset. And we kind of thought, Brett put it in a really nice way, it would be kind of like a Trojan horse. And so you can picture this as, "Hey, I have this really long PDF and I don't want to read it, or there's this really long video or lecture recording, whatever it may be. And I want to consume it in a way that is more familiar to me." And so we put a voiceover with a background kind of Minecraft parkour video. It was one of several things that you could put in the background.

And true brain rot, it gets roasted online, but people absolutely loved it. But one of the things that we learned is that, that is a toy and it's not something that people are going to pay for. So I think it has a place and a product suite, but it's definitely not the thing that's going to move the needle in terms of revenue traction.

Jacob Eiting:

Do you have this in Coconote at all? Can I brain rot my PDFs just like bespoke, nice, tasteful brain rot? Do you know what I mean? Like a nature video side by side or something like this?

Brett Bauman:

It's not there right now, but I think we just need to tidy up some of the product and we can bring it back.

Jacob Eiting:

I mean, this is off-topic, but has anybody done any research on this? Because it just took off, this thing of split screening all these videos. I mean, I used to work with a bunch of animators and stuff, and they would always have a video up on this side. And the thesis I always had is you had something engaging your verbal center, listening to something or watching something so that your drawing center ... Yeah, I don't know if this is real or not, neurology, but this is almost the inverse, where it's like have something engaging your visual center, your visual distraction, whatever, so that your verbal center can listen and actually take in the content.

We've slapped this brain rot label on it, which it's funny, but there's probably actually some, at least a research worthy neurological benefit to it potentially. If the people like it and there you go, you're putting actual content in there. So what's the harm? What's the harm?

Zack Hargett:

I do think there's something there, Jacob. I'll plug one of our drops, one of our products and a feature is speedreadit.com. We saw a demo on Twitter, X, and it was a way to read, I would say significantly faster than you can if you're just reading a document or a PDF.

Jacob Eiting:

I forget what the method's called, where the word stays centered and it slides across?

Zack Hargett:

Exactly. And to your point, Jacob, one of the things that they do in the demo is they play classical music in the background. And so we kind of made our own, I think using ElevenLabs and it's something that occupies some part of the brain. And you're right, absolutely it'd be amazing to have more scientific research on this. But the intuition and the observed experience with this is very much, if some parts of your brain are satisfied or occupied, then you're much more likely to be able to concentrate on something else, maybe the words that are in front of you, so we do a lot of experiments like that.

Jacob Eiting:

It's funny. Yeah. The labeling of it is brain rot is like maybe a disservice, right?

Zack Hargett:

True.

David Barnard:

But it is interesting that those didn't convert well. You learned those kind of lessons around what didn't convert. Any takeaways from what did? I mean, you've shared the high level, but more specifically, were you better demonstrating the product in the video? Were there better hooks? What were the things that convert? Because I mean, that's what's so tough right now with UGC is to actually produce those converting videos and hooks.

Zack Hargett:

Yeah. I think at a high level, you want to make sure that your product is seen as a solution to an existing problem. Or as Brett mentioned, it resonates deeply at an identity level. So I am fit, therefore I'm going to use Ladder as an example, or I'm a runner, so I'm going to use Runna or Strava. And so you want content that is more identity focused, building brand affinity within a certain audience or market and/or shows your product as a solution to a problem. And those broadly speaking are what we see the best conversion with.

David Barnard:

So much of what you did was UGC and trying to go viral, but did you take any of those videos and turn them into paid? And did you do any paid as you grew?

Brett Bauman:

We tried and we don't do it anymore. I think that it's something that I would like to try again, but under our model, what would've been success for us was being first purchase profitable on the ads and we weren't able to get there. I think that looking back, it could be part of the market that you're advertising towards, but it also could be that, I don't know, Zack, I'm curious what you think of this, but I feel like neither of us took a ton of ownership there to really spend more than half our time or more than half our time on it. And so we kind of just slowly didn't get anywhere. And if we did it again, I feel like we could figure it out.

Jacob Eiting:

You kind of need, I mean, maybe not a full-time person, but I mean, you should always be doing growth and product all the same time. And so you can split that up. Maybe each of you is doing half growth, half product, or one person doing product, one person doing growth or engineering and product, however you want to split it.

But I always felt I have very similar experience for performance marketing. It's like, Zack, if you didn't do the creator marketing, you probably could have dedicated the time and got deep on it and all that stuff. But I think that's why, I don't know how much this is true now, but people shipping an Indie app and then the first thing they do is like, "Okay, I just have Facebook ads and whatever." And it's like you might not ...

One, the spends you got to do to get the good data, the attention it's going to take, it's like that should not be the first tool you grab for. I think UGC, that channel is much more controllable and much more probably if you find it much more efficient. I don't know, this might be true broadly for all growth channels. There's very few growth channels that you can half-assed if you want them to work. You got to try. Everybody's trying, right? So if you're not trying, you're not going to be able to break through.

Zack Hargett:

Yep. And I would say if you're just starting out and you don't know where your customers hang out online, that's bad news. Why would you start running ads that indicates some lack of fundamental knowledge that you should have as a founder? If you don't know where your customers are hanging out online, that's bad news.

To Brett's question, it was certainly underexplored. I think it's hard. We worked with some very good and solid people, but it's hard outsourcing some things to an agency, because I think the incentives, generally speaking of an agency, I heard someone put it this way, is like, they will do enough to keep you happy, but they're never going to be as invested. And so I think aligning incentives in some really sharp way around performance marketing is a good idea.

One thing that surprised me is we always thought you could just pour fuel on the fire. So those videos that are getting 30 million views, let's assume they convert well. Well, let's just run ads behind it. Why would it not work just as well? Surprisingly, that wasn't really our experience, that when we worked with an outside agency to do clips, so we would have basically B-roll and raw videos that were unedited from the same content team that was posting, and then we would upload that into a Google Drive and share that with a clip agency. They would chop it up and kind of make something specific to performance marketing that those, as a creative, that cohort outperformed our more organic approach. I found that really interesting because I always assume you could just pour fuel on the fire. With that said, we still really weren't able to get ads to work, and it's something that I think we can invest in the future.

David Barnard:

Targeting students, I imagine, made that especially hard. I'm honestly surprised at the whole story of Coconote in that college students and high school students are famously hard to monetize. So let's dig into how did you get kids to pay for your app and what was the price and did you experiment with pricing?

Brett Bauman:

Yeah, great question. Definitely did a lot of experimentation. I think we've tried to always have something running. Even at launch, we were testing should there be a free trial or not? The college student archetype, I would say, didn't really get to us. We didn't want that to limit us from charging a lot of money. We wanted to be a premium product and be seen as a premium product.

I think that Zack and I kind of just are product builders who feel like we want to put something out that has a lot of craft and charge for it is part of it. Probably also not knowing what our costs would be was also part of it. So we put the app out charging $99 per year and $19.99 per month.

I think around 80% of people subscribe to the annual tier, so we push that pretty hard. And I think part of the price too is we want to be seen as premium so that we also are seen as reliable. I kind of talked about it a little bit earlier, but there's a huge amount of trust you have to gain to get someone to stop writing their notes and instead trust that you will take care of it, because they're going to have to take an exam on it either way. And I think that the premium feeling helps with that to believe that we're not going to lose their recording.

Jacob Eiting:

Yeah. I mean, I don't know, David, you probably have a better sense, but just in terms of the utilities for students, not that, that's full what you guys are, but that's a high price point. I think if the ones in my head I can think of off the top, it's like third of that maybe for an annual, right? 50 would be high, which I don't know. If it works, it works.

It's also nice that in terms of not having ... It's being so levered on ad spend. It usually allows you to go cheaper, but I don't know. I mean, you're a bootstrap company, it's better to have fewer, higher paying customers. It really is. Maybe this was mentioned, but there was no freemium, right? So after a week, can I keep using it in any way, or am I done?

Brett Bauman:

Yeah, you hit on a few good things there. You can make one note for free without starting a trial and that's it.

Jacob Eiting:

Basically a hard paywall, not quite, but essentially a hard paywall.

Brett Bauman:

Yeah. I mean, one of our early experiments, we launched at 19.99, but one of our earlier tests was raising it to 129, and we saw the magical more users and more revenues at the same time. And so that's where we've been for most of it. But I do think we are one of the more expensive options on the market. And to some of the reliability stuff, you can go into the cheaper options and start recording audio and get a phone call and lose your recording. Apple does not make it super easy to do this in a reliable way. It's really not like a meeting note taker on Zoom where you probably have perfect Wi-Fi and your computer is taking care of it.

Jacob Eiting:

Well, it's session-based. You're actively engaged in it. It's like PC mostly. I mean, Zoom on the phone doesn't work very well. It does suffer from those things. If you get a phone call or something, it'll kick you out and cancel your video and things like that.

Brett Bauman:

Yep.

Jacob Eiting:

Yeah. That's tricky. I did AV session, audio, whatever. The Apple APIs for this are not a dream having known for personal experience. So getting those right, somebody's going to roast me because I probably used the wrong framework name. It's probably changed five times. But obviously, optimizing your price testing, there's some of that, but most of your pricing authority just comes from having a really good product.

It's just having something that people will pay for and scarcity, right? Is there a comparable alternative? And if the answer is no, you have a lot of ... And really great products are hard to make. So if it's a rare thing, if you made a really great product, it's a rare thing, you can charge a lot for it because it's just not anywhere.

I think we've seen this in AI tools generally. Two years ago, there was only one model that was really, really good and they had a lot of pricing authority and now there's other comparable models, right? And we've talked about the prices are going down, right? It's very classic economic supply demand, which is interesting too, because did you see ... I'm sure somebody caught onto your guys' game and was like, "Oh, we're going to make no-no notes or something." Right? Somebody trying to fast follow you?

Brett Bauman:

There's got to be hundreds. There's Coconoter with an R at the end. There's one that's just a different fruit instead of a coconut. There's all kinds of clones out there. I'm sure it impacts us, but they are kind of just mosquitoes in a way. They're not taking themselves seriously.

Jacob Eiting:

I'm sure it impacts you, but it may not be net negative, right? It may be such that those are lead gen or ... I do this all the time. Come in, I have a need. I try the premium app. It's like a hundred and whatever. I'm like, "Ugh, I just want to try it." And then I go to the second tier and I'm like, "This sucks." I'm going to go back and try the good one. It's not always directly competitive.

That's only true in markets of a true commodity, right? And apps, I don't even think there's any exceptions. Apps are not true commodities, right? They can get close, but there's always some difference. And to some degree, commodities are not true commodities, unless they pass through some very normal, very strong regulation process.

So, yeah, I think just generally, it probably helps more than hurt would be my guess because they're also spending on ads probably, right? And those users are going to see that they're going to search Coconoter and they're going to see you number two and they're going to be like, "Wait, this one looks less sketchy."

David Barnard:

I wonder if some of that pricing power also just came from positioning and positioning it as a tool for students. We've talked about this a lot on a podcast. Ladder in the health and fitness industry, they're charging $130 a year in an industry where it's $130 a month to go to a nice gym and $130 an hour for a trainer.

And for college students, I mean, paying $40, $50, $100,000 a year to go to school, and then this is $130 a year. I did see one of your ads was like, "My friend's mom got her this app, Coconote." Did you kind of position it of bug your parents to help pay for this, or was there any of that, that you did find successful?

Zack Hargett:

Yeah, especially in the early days, a good portion of our videos that are going viral on our Instagram were around, "My mom just changed my life." And so we did spend a good portion of the early dates.

Jacob Eiting:

That's for other moms. So that's not for the student, right? You have a student video that's like, "My mom changed my life." And then you see other mom being like, "Oh, I want to change my Pookam's life, right?"

Zack Hargett:

That was very much the thinking. I mean, I used to say this to our creators all the time, I said, "Imagine you're on campus at student orientation and you see a daughter and her mom, and the daughter's just starting college and her mom's there with her." And I said, "Hey, I would like you to go offer a note-taker, something that's going to help improve your grades and make sure you never miss a detail in lecture, et cetera, help you study, be a personalized study coach, et cetera." And it's $130 to do it. Who are you going to ask? I think the obvious answer is you're going to ask the mom. And so early on, we were very keen on marketing to moms. I think we've since taken a step back. And by the way, these are not mutually exclusive. There's a big overlap.

Jacob Eiting:

It's finding who the buyer and the most intent is, right? And you can have good marketing to whoever might be in need, right? I wonder how many app developers get stuck down the route of like, "Oh, I have to advertise to the primary user of the product." And that may or may not be the decision maker in a purchase.

Zack Hargett:

David, to your broader question around monetization, just two quick things to add on that are a little bit higher level. One, great majority of our customers are lifelong learners. And so they may be "non-traditional" students. Brett and I have talked to a lot of our customers that are not in the "traditional" 18 to 22 or 23-year-old college student age. They could be studying for something that's not at an accredited university. They could be at a university, but outside of that age range, any number of derivatives there. Always amazing to talk to customers that are just making it happen.

Second thing is that I'm very glad, again, it's not very tactical, but I'm very glad we ignored traditional conventional wisdom. I have a lot of smart friends that if I would've gone to with the idea for Coconote, they would've said, "Zack, no one's going to buy this. You're targeting college students." And I'm so glad we did not do that. I think in the early days of an idea, you can almost imagine it like a seed and you want to shelter it from a lot of harm so that it can at least sprout, because in hindsight it's like, "Oh, this was amazing. Congrats." But only with the benefit of hindsight do those smart people say that. Whenever it starts out, they will always gravitate towards the reason it will not work. And I think a much better framework is what happens if it does work? What impact can we have on our customers? What economic value can we create, et cetera? So I'm very glad we did that.

David Barnard:

Yeah. I mean, that's exactly why I asked the question and what I would have thought externally, just having heard from so many ... I mean, it's like my app, a weather app, like college students are not going to pay for weather app. And so a lot of the conventional wisdom around what people will and won't pay for is formed based on totally different products. And so when you come to the market with a unique value prop with a brand new product that's enabled by AI in a way that you could never create this product before, it's like you've unlocked demand for that in a way that nobody else had and can charge a premium for it. So, yeah, it's really cool.

Brett Bauman:

One thing on there is we are aware that it's expensive and that there are students at the end of the day and we want Coconote to be available to as many students as possible. And it kind of goes back to what Zack was saying earlier around being able to think longer term under Quizlet and stay tuned on that. But I think that we'll be able to get Coconote into more people's hands in the future.

David Barnard:

That's awesome. One of the keys in converting folks who saw this UGC video is nailing the onboarding. What were some of the lessons you learned in getting people in and convincing them of the value and eventually getting them to start that free trial?

Brett Bauman:

Yeah. I think that there's kind of like a meta at this point for consumer apps of have a long onboarding and then hit them with a hard paywall or basically get someone to start a trial within the first session, honestly, if not 24 hours. And we have always had a decent onboarding, but we hadn't spent a ton of time optimizing it.

And we ran a test trying to basically double the length. I think our onboarding is 15 screens or something. I remember when we started talking to Quizlet team, that's something that they commented on. I mean, it really works. It really works to get people a bit more invested into what they're doing and feel like it's more personalized, show them some social proof, and it increased our trial start by 16%, which we already felt like it was pretty good. And so to continue to raise it was awesome. And it's one of those things that continues to compound.

What's funny is as an engineer, whenever you start a new product, you kind of build the login screen first and because you kind of need it to start playing around with things. And then it ends up staying there throughout the rest of the product. But one of the nice things about being ... There's not always a lot of nice things about being in Apple and Google's walls, but one of the nice things is you actually don't really need to create an account to make a purchase because you're already signed into your Apple or Google account. So I think the biggest win that we had was moving login to after the paywall, basically at the end of onboarding.

Jacob Eiting:

It's very interesting. There's some, I think RevenueCat.com makes this pretty easy, but that is tricky, right? Being able to take a payment before you have an identity marker, being able to associate those, there's a bunch of plumbing we do to make that possible. And that introduces a lot of complexity now, which is there, no matter where you put it, is that the Apple purchase state and the account state are not the same thing, which isn't the case when you control the entire purchase payments flow like you would if you were doing Stripe on the web or something like this. It is a big advantage, right? Users don't have to think about it, you're not pulling out a credit card. It's like they know it's secure.

Brett Bauman:

Yeah. They've kind of already done the double tap to pay at that point, so they'll double tap to sign in. I think we were seeing 10% drop off by having login being the very first screen.

Jacob Eiting:

Were you capturing any contact details before that?

Brett Bauman:

No, this is just like you download the app and open it and now you're forced to create an account.

David Barnard:

Well, once people do start that free trial and as a hard paywall, keeping them and having them convert is that next big key, what were the unlocks there for helping people convert and any stats around your trial start and trial conversion rates that you want to share?

Brett Bauman:

I feel like web and e-commerce have had a really big lead when it comes to this stuff, like the real optimizations and the benefits of being outside of Apple's walls. It's more of like the Wild West of what you can do. We wanted to try some cancellation flows there on our website and there's like this standard asking questions about why they're canceling, things like that. And we were able to retain 25% of people from canceling, which we felt like was pretty big.

And to do that, we tried three things. One of them is your standard discount offers. You get 30% off if you stay or something like that. Another one is pausing. So because we have students as our users, they come May or June, they don't want to keep paying over the summer. And so we thought we could try pausing for three months.

And then the last one was trial extensions. And this is one that I haven't seen that much, but basically if you're on a free trial and you go to cancel, then we basically say, "Do you just need more time?" And offer them seven more days. And that was the most successful one by far, and it really keeps people on that auto-renew. And I think it's so hard to get them back onto auto-renew once they leave, but that was a big win for us. And I think there's a way to actually do this on Apple and Google now too, and so I'm going to be exploring that.

David Barnard:

Apple does now have, it's in limited beta right now and you have to ask for it and get approved and everything like that, but it's a retention offers in App Store settings when they're actually outside of your app trying to cancel. You can now show a screen and offer a discount and things like that.

I actually don't know off the top of my head what all you can do. I think it's only a discount. I don't think you can add additional trial. Are y'all doing any of that inside the app as well? Do you have inside settings where people go to look for cancellation inside the app, or is that only on the web that you're seeing those wins and doing that?

Brett Bauman:

It's only on the web. It's also in the app if you subscribe through Stripe, and then we can just show it in a web view. But, yeah, that's the one that I still want to bring to mobile.

David Barnard:

Yeah, it's harder to do with Apple payments, but worth trying. Well, as we wrap up, I did want to actually talk through the acquisition. How did that start? What was the process? Did they reach out to you? You reached out to them? Did you talk to a banker about selling a broker? What was the process?

Zack Hargett:

Quizlet actually reached out, I would say we were only a few months old and we were talking with Quizlet. I remember when Brett first brought it to me, he was like, "Hey, someone reached out. Should we take this call?" And I said, "I'd rather not just say we're heads down building." We'd been around for a couple months, what could possibly come of that? And I think Brett literally slept on it and he came back and said, "I'd really like to take the call. Let's just see what's going on."

Jacob Eiting:

I don't know. Some people know what they want to do with the company when they start it, some people don't. Was this pre-discussed at all? Did you be like, "Hey, we want to build this and sell this? Hey, we just want to see this." Did you have those discussions, or was it more open-ended?

Zack Hargett:

I would say we had a healthy outlook and we didn't have our blinders on. We had conversations with a handful of companies. Eventually, when we kind of committed to going down this path, it was taking up a good bit of time. And that's the one thing that I would say to other founders, if you're getting inbound and you're really weighing the options here of acquisition, I would say make sure you keep your eye on the ball, because the moment you take your eye off the ball, that will reflect negatively in the ongoing conversations. We'll say that.

And so the moment we kind of said, "Hey, we're going to take this seriously, but we want to keep our energy focused on building and growing the product." We worked with an investment bank. We worked with a partner named Chris Park at Accretive Partners, and they were really great to work with, and then they kind of led the process from there. So we actually got back in touch with Quizlet through the investment banker.

So we built a relationship with Quizlet and we really loved ... I think there's a lot of mission overlap for what it's worth. Something that we haven't covered is that Coconote's mission is to give learners superpowers, and that is not the explicit mission of Quizlet, but I would say in spirit, it is very, very similar. Learners can be of all ages.

For me, one of the things that I love about our mission statement is that we acknowledge on the superpowers front, it is intentionally vague. The foundational LLM or AI model providers are doing amazing work and we have no right to compete with them. And so we want to recognize that and our job is to basically tailor the foundational work that's being done, the amazing foundational work, turn it into a superpower for learners. And so while that isn't the explicit mission of Quizlet, it's very much in spirit, I would say. The mission in some way, shape or form of Quizlet. And so we were able to think much longer term. A lot of things kind of overlapped and thankfully the deal closed in December of last year.

Jacob Eiting:

Yeah. I mean, and I have to imagine just having mission alignment. Also, I mean, I speak as a Quizlet user and a watcher for a long time, it's a great company, they have good brand, they have good products, right? It makes it a lot easier to kind of swallow the idea of your baby going someplace else. And obviously, the integration work, which I'm sure you're doing now and all of that stuff is like, it's not just a dollar. In very rare cases, it's a dollars and a signature and it's over. There's a partnership that will take many years as this plays out. But from, okay, we're going to do this or we're seriously thinking about it till close the deal. How long did that last for you guys?

Brett Bauman:

It was kind of running in the background throughout the year, throughout last year.

Jacob Eiting:

Oh, wow.

Brett Bauman:

And there's different phases.

Jacob Eiting:

There's the talking phase, then there's the Netflixing phase, right? Yeah.

Brett Bauman:

Yeah. Yeah. There's that, but also with the banker, the banker's preparing things on their end and stuff like that where we're not really actively doing anything and they're just getting ready to reach out to people. So it felt like a long time, to be honest.

Jacob Eiting:

That's a long time. I think your whole company's two years and change, right? So it's half of it.

Brett Bauman:

Yeah, yeah. Chris was kind of our third co-founder a little bit.

Jacob Eiting:

That's great. Tell me if I'm cutting too deep, but did you keep it between the two of you or did the rest of the team know? Or how did you manage that for that period of time?

Brett Bauman:

Yeah, we kept it between us. It felt like the kind of thing where we ourselves were not banking on anything happening. We didn't want to feel like it was in the bag or anything like that, and so we wouldn't want to share it.

Jacob Eiting:

Yeah, it can be a real distraction. It's just literally you start counting your money or whatever. Especially if you don't know what the deal's going to be shaped like, right? You just start imagining and whatever. I mean, even sure for you guys, even if you managed it well, probably took a lot of mental fortitude to keep it compartmentalized and keep leading the business. And so you managed to keep growing through that whole period that you were very happy with?

Brett Bauman:

Yeah, totally.

Zack Hargett:

I don't think we have the metrics pulled up, but revenue grew quite a bit, I would say roughly doubled throughout that time. Jacob, I think you may appreciate this. My wife didn't even know, much less the folks on the team.

Jacob Eiting:

Wow, that's a commitment.

Zack Hargett:

Yeah, it is.

Jacob Eiting:

I would never be able to hold that line.

Zack Hargett:

And so she knew we were talking with Quizlet, but she had no knowledge of where the process stood.

Jacob Eiting:

I think that's smart. Because you're not letting it leak out a part of your mind, right? You're just being keeping it compartmentalized and be like, "Hey, this is just this little thing. I'm not going to treat it like a thing until it's real." Right?

David Barnard:

And getting a spouse overly excited and it's hard enough as an individual not letting it distract you of like, "Oh, the money's coming and what am I going to do with the money?" Or like, "Oh, it's going to be such a relief." I mean, there's so many emotions tied into it. And then with another person, then all their emotions get tied into it. Any baggage they have about money and security and everything else like that, it's a very emotional thing.

Jacob Eiting:

Okay, Zack, did they find out after close? There was some point that you told them that this deal was going to happen, right?

Brett Bauman:

Yeah. They still don't know.

Jacob Eiting:

Yeah. Have you told them, are they going to find out on the pod from the pod?

Zack Hargett:

Yeah. Well, I wouldn't send her a Sub Club Pod. I'm kidding.

Jacob Eiting:

It's not really your back.

Zack Hargett:

The story is pretty funny. We were driving from North Carolina, so it was right before the holidays. And we were driving from North Carolina where I'm from originally. So we were visiting my family up to Connecticut to see my wife's family and I was day one of the flu, so I felt terrible. It was one of the worst drives of my life. So, yeah, Brett and I were talking and we were kind of waiting for things to really close, i.e., the wire. And so, yeah, when it happened, I pulled over into a Taco Bell parking lot and I told my wife and we celebrated with Taco Bell. She cried by the way.

Jacob Eiting:

And that was the first moment she had heard of it?

Zack Hargett:

She was familiar, but she wasn't familiar with where things stood. So she knew something was going on. She knew we flew out to San Francisco and met with the Quizlet team.

Jacob Eiting:

A lot of people listening to this podcast, I'd say everybody has a life outside of Sub Club Podcast and their silly little apps. You know what I mean? And how those integrate and these things, the spouses and the people around us, they influence this stuff and how we interact with them really matters and your psychology bleeds into their psychology and back and forth.

Zack Hargett:

Totally.

Jacob Eiting:

I think it doesn't get talked about much. Not many people have been through this.

Zack Hargett:

Early on, I started reaching out to founders, CEOs to talk about M&A process and how they handled it, how they thought about it. People that have been through it successfully, whatever. And one of the best pieces of advice I got is I think a great leader shelters other people. And so people on the team, our engineers, content creators, they didn't know about it until the day of close. It's not that we were withholding information because we didn't want them to know, it's that we wanted to shield them.

Jacob Eiting:

Nothing happened yet. And these things fall apart in the last week very often.

Zack Hargett:

Totally. Signal-to-noise. And I think it's the same thing with my wife that it was just a signal-to-noise. I wanted to shelter her from that. But I think the way she reacted, it was very much like The Founder, if you guys have seen that.

Jacob Eiting:

The McDonald's movie.

Zack Hargett:

Exactly. Clearly, Coconote's not McDonald's, but I think there are similar emotions from going through it, from failing time and time again, and to finally having something that a lot of people dream of and to be partnered with a company like Quizlet. It's a really fantastic moment to share.

Jacob Eiting:

How has your life been different mentally as founders, stuff like pre and post, maybe in ways you expected and maybe in ways you didn't?

Zack Hargett:

On my side, I think I focus on my health more. I'm not a parent yet, and hopefully that is in my future for my wife and I, but I assume parents have a similar mentality where you take care of your baby, you take care of your child, more so before you take care of yourself.

You can go without and your baby is the one that you want to see flourish. And I guess it's probably the best analogy that Coconote was my baby, our baby. Not to be weird, Brett, but it's something that you care so deeply about that you make sacrifices with yourself. And unfortunately, I had some weird health things come up in the last couple years and I more or less ignored them, but I think I've been able to focus on them more.

Jacob Eiting:

Called a tech debt in the software world.

Zack Hargett:

There we go.

Jacob Eiting:

You took a little debt on health debt. It's a real thing. I mean, especially if you know there's some sort of liquidity event or even not. Some sort of event, some sort of thing that's like one way door, those trade-offs make sense. I think the similar calculation for people who are holding for a long time, that's also important.

If you didn't sell, if you wasn't going to change the operating model and how you guys are operating, at some point you would have to address that, whether or not the company sold or not. So it just kind of changes the timing on these things, which I guess kind of fits into, Zack, the point you were making earlier about just how it allows you to change your outlook.

Being sort of attached to a larger organization, I'm sure there's obviously synergies between the products and those very interesting collaborations to go on, but also just being attached to a larger resource pool lets you be a little more ambitious, lets you be a little more like long term and stuff like that, which I think that's the bull case for selling to a well-lined company, right? You are actually hoping to have a net market positive merger so that both parties are actually worth more after it, and those are some of the reasons why.

Zack Hargett:

If there is a wave of M&A with AI native apps, very few founders will be able to talk about the deal terms, be it they're not comfortable or I would say more likely because they don't want the corp dev's team or whatever the acquirer doesn't want that information out there.

Jacob Eiting:

There's lots of reasons for both parties to not talk about it. It's very understandable. I still think it's great that you guys have been sharing with us and other founders too and things like this because, yeah, I mean, Zack, you kind of hit on it. As a founder, you can go out and find those stories and if you know and you can network, but it's I don't think talked about enough.

It's also such a niche topic. There's probably a couple thousand people for whom will go through this experience at any given period into the shape that you guys have gone through. But I mean, obviously, like many people listen to this podcast aspire to do that. And it's one path and I think there won't be another story quite like Coconote, but there will be others that are similar. And so it's good to get these written down and out there.

David Barnard:

Yeah. Thank you so much for sharing. I think these are a great place to wrap up. What a great story. And thank you both for being so open to share.

Jacob Eiting:

And congrats. Did I say congrats at the beginning? Congrats. What a coup.

David Barnard:

Congratulations.

Jacob Eiting:

Congrats to both, to Quizlet as well. I'm sure they're listening. What a get. Good for them. Good for you guys.

David Barnard:

Anything else you all wanted to share as we're wrapping up? I know being part of Quizlet now, you've probably have some more people you're wanting to hire and the things you're wanting to do with the app. Anything you wanted to shout out there?

Brett Bauman:

Yeah, yeah, sure. I mean, first, thank you guys so much for having us on. We're huge fans of everything that you guys do. Zack and I are part of Quizlet and Quizlet is hiring across product design, engineering, all of that. I specifically think that I'm hoping I can find an iOS engineer out of this podcast.

Jacob Eiting:

Oh, this is a great audience for that.

Brett Bauman:

Yeah.

Jacob Eiting:

You should meet my friend Kodex. Very good at it. Yeah.

Brett Bauman:

Yeah. So I'm continuing to work on the Coconote engineering team, but also the subscription growth in general at Quizlet. And so if anyone is interested in coming and building paywalls for Quizlet, we're one of the biggest freemium consumer apps out there. We can run experiments that add a million dollars of revenue per year, and it's a lot of fun and we're looking for iOS engineers.

David Barnard:

Well, congrats again, and thanks so much for joining us. This was a lot of fun. Appreciate y'all.

Zack Hargett:

Thank you guys.

Brett Bauman:

Thank you.

David Barnard:

Thanks so much for listening. If you have a minute, please leave a review in your favorite podcast player. You can also stop by chat.subclub.com to join our private community.