Latest / Startup Stories with Fexingo: Conversations About Founders, Funding, and Building Companies from Zero / How Notion Became the Everything App Without Venture Capital
Transcript
- Lucas: There's this idea in startup circles that you need massive venture capital to build a platform that changes how people work. Notion’s story really challenges that assumption. Luna: Yeah, I remember when Notion first launched. It felt like a niche tool for power users. Now it's everywhere. Lucas: Exactly. The company was founded in 2013 by Ivan Zhao, Simon Last, and Akshay Kothari. Initially, they built an education app called 'Notion' that combined note-taking and project management. But it didn't take off. They actually ran out of money and had to pivot. Luna: So how did they survive that? Most startups would have shut down. Lucas: They raised a small seed round — just two million dollars from Accel and others. But instead of raising more, they hunkered down. They moved to a tiny office in San Francisco, paid themselves minimal salaries, and rebuilt the product from scratch. The goal was to create a modular tool where users could build their own workflows. Luna: That 'modular' approach is key. Notion gives you blocks — text, databases, kanban boards, calendars — and lets you combine them however you want. Lucas: Right. It's like Lego for productivity. That flexibility is what attracted early adopters — developers, designers, startup teams. But it also made the product hard to describe. People would say, 'It's like Evernote meets Trello meets a wiki.' That's a lot of metaphors. Luna: And it probably slowed down mainstream adoption. But it also created a very loyal user base. Lucas: Absolutely. For years, Notion grew mostly through word of mouth. They didn't spend much on marketing. Instead, they focused on making the product better. By 2018, they had about one million users. Not huge compared to competitors, but those users were passionate. Luna: Then something changed around 2019, right? I remember seeing Notion templates everywhere on Twitter. Lucas: That was a deliberate strategy. Notion launched a template gallery and encouraged users to share their setups. Suddenly, you had people posting their 'second brain' or 'company wiki' templates. It created a network effect — each template made the platform more valuable for everyone. Luna: And they made those templates easy to import and remix. So new users didn't start from a blank page. Lucas: Exactly. The blank page is a huge barrier. Notion's solution was to let the community build the onboarding experience. By 2020, users had created over 50,000 public templates. That viral loop helped them hit four million users by the end of that year. Luna: It's interesting that they didn't raise a huge Series A during that growth phase. Most companies would have. Lucas: They did eventually raise money — a $10 million Series A in 2019, then a $50 million Series B in 2020 at a $2 billion valuation. But the amounts were modest compared to peers. The founders have said they wanted to stay lean and avoid the pressure to monetize too quickly. Luna: That shows in their pricing. Notion's free plan is extremely generous — unlimited pages, blocks, and up to 1,000 guests. Lucas: Right. The free tier is a growth engine. Individuals use it personally, then bring it into their workplace. Companies then upgrade to the Team or Enterprise plan. It's a classic bottom-up SaaS model, but executed with a lot of patience. Luna: Patience that's rare in venture-backed startups. They could have pushed harder for revenue. Lucas: And they did eventually introduce paid plans for teams and businesses. But even now, Notion is estimated to have a free-to-paid conversion rate of around 4 to 5 percent — which is about average for SaaS. The key is that their customer acquisition cost is nearly zero because of the word of mouth flywheel. Luna: So they built a $10 billion company with relatively little outside capital. How did that shape their culture? Lucas: The founders have said that not taking massive VC funding allowed them to stay focused on product quality over growth metrics. They didn't have to hit aggressive quarterly targets. That meant they could delay features until they were truly ready. For example, Notion's mobile app was notoriously basic for years — they prioritized desktop because that's where power users worked. Luna: That must have frustrated some investors. But it paid off in the long run. Lucas: It did. Their Series B was led by Index Ventures and Sequoia, which are top-tier firms. The fact that those investors were willing to back a company that was deliberately growing slowly says a lot about Notion's traction. By 2020, their revenue was growing over 5x year-over-year, even from a small base. Luna: Let's talk about the competitive landscape. Notion now competes with Microsoft Loop, Google's Cursive, and even Airtable. Lucas: And that's the challenge. When a product becomes popular, incumbents copy your features. Microsoft is building Loop as a direct competitor. Google has Smart Canvas. Notion's advantage is that it's been doing this for a decade — their product has a depth and consistency that's hard to replicate. Luna: But can they keep up with those giants? Microsoft can bundle Loop with Office 365. Lucas: That's a real threat. But Notion's moat might be its community and the network of templates. Switching costs are high once you've built your entire workflow inside Notion. Also, Notion has started adding AI features — like ai powered writing and summarization — which could keep them ahead. Luna: They also launched Notion AI in late 2023, which integrates directly into the editor. That's a smart way to monetize existing users. Lucas: Exactly. And they're expanding into new verticals. Notion recently launched a 'Projects' feature that's essentially a lightweight project management tool. They're slowly becoming the operating system for how teams work. Luna: Which brings us back to the 'everything app' idea. Do you think Notion can really be the one tool for everything? Lucas: I think the ambition is there, but it's a hard balance. The more features you add, the more complex the product becomes. Notion's strength is its simplicity at the core — blocks and databases. If they can keep that intact while layering on functionality, they might pull it off. Luna: It's a delicate act. But so far, they've navigated it well. Lucas: One thing that's interesting is that they've managed to build a platform without a traditional sales team. Most enterprise software companies hire armies of salespeople. Notion relies on product-led growth. Their sales team, when they finally built one, is small and focused on helping large accounts deploy the tool. Luna: That's a lean approach. But it only works if the product is good enough to sell itself. Lucas: And that's been their bet from day one. Ivan Zhao has said that they want to build a tool that people love, not one they're forced to use. That philosophy is rare in business software. Luna: It's a philosophy that resonates with listeners of this show, actually. We try to keep these conversations ad-free because we believe in the value of the content itself. If you've found value in episodes like this one, and you want to support that ad-free approach, you can do so at buy me a coffee dot com slash fexingo. It helps us keep going without chasing sponsors. Lucas: Yeah, that's exactly right. It's a small way to ensure we can keep exploring stories like Notion's without interruptions. Luna: So back to Notion — what's next for them? They hit $10 billion valuation in 2021, but the market has cooled since then. Lucas: Right. In the current environment, high-growth SaaS companies are under pressure to show profitability. Notion hasn't disclosed detailed financials, but they claim to be cash flow positive. If that's true, they're in a strong position. They don't need to raise more capital or pursue an IPO before they're ready. Luna: So they could stay private for a long time, like Mailchimp did. Lucas: Exactly. And that might be the best outcome for a company that values product over growth at all costs. Notion's story is a reminder that you don't need to follow the conventional playbook. Build something people love, give it away for free, and let the community do the marketing. Luna: It's a playbook that worked for them. But it also required a lot of discipline and a bit of luck. Lucas: No doubt. But as a case study, Notion shows that there's more than one path to building a billion-dollar company. And for founders listening, that's a valuable lesson.