Notion cofounder Ivan Zhao captivated Silicon Valley buyers and on a regular basis shoppers alike with a modern productiveness app that went so viral its servers crashed. Now, the worthwhile startup’s CEO sees a uncommon opening to interrupt Microsoft and Google’s dominance within the office by going early and aggressive on AI.
By Kenrick Cai, Forbes Workers
Ivan Zhao had began the corporate primarily based on the concept it’s best to be capable to do as a lot with a phrase processor as you may with a clean piece of paper. Josh Kopelman, frequent Midas Lister and cofounder of First Spherical Capital, was so impressed by Zhao’s uncommon pitch, which concerned a prolonged digression into the origins of paper, he wrote the most important verify within the $2 million seed spherical in 2013.
“I bear in mind strolling out and considering, ‘That is completely different from any founder pitch I’ve ever taken,’ ” Kopelman says. “There was no screenshot, no mockup. It was very conceptual, however I felt like I understood on the highest stage what he wished to do.”
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However Kopelman was within the minority. Two years later, individuals didn’t perceive Notion, the software program editor Zhao had constructed, and he hadn’t discovered a compelling method to clarify it. Few noticed a necessity for a instrument to design customized laptop packages. When he noticed First Spherical staff utilizing Notion, it appeared to Zhao that they had been doing it “out of pity,” he recollects.
“The software program wasn’t adequate but,” he admits. “ you may get higher. what higher appears like. However you don’t fairly know find out how to get there.”
In a last-ditch try to avoid wasting the corporate, Zhao and cofounder Simon Final laid off all their staff, sublet their San Francisco workplace and moved to Kyoto, Japan, to chop prices. A $150,000 emergency mortgage from Zhao’s mom gave them sufficient time to reboot with “Notion 1.0.” The software program editor was nonetheless there, however now Notion seemed like a productiveness instrument on the floor—a minimalist twist on Google Docs that additionally allow you to simply make wikis and handle your to-do lists. In August 2016, they launched it on app discovery web site Product Hunt. It was the location’s hottest product of the day, then week, then month. Inside weeks, Notion, which is free however fees energy customers upward of $8 a month, was turning a revenue and had turn out to be considered one of Silicon Valley’s hottest startups.
TICKET MASTER | After becoming a member of as chief working officer in 2018, Akshay Kothari answered help tickets for six months. “Daily, I spotted how little I knew concerning the product. The completely different ways in which individuals used Notion was simply mind-boggling.”
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In October, Zhao and Final returned to San Francisco triumphant. Notion was spreading globally (80% of customers are exterior the U.S.) on phrase of mouth alone. It hit its first million customers in 2019. College students favored it for making to-do lists and taking class notes. Design-minded entrepreneurs used it to switch the normal pitch deck, and artists to indicate off their portfolios. “How I exploit Notion” tutorials flooded YouTube.
Individuals wanted these movies as a result of whereas Notion is highly effective, the customization choices for one thing so simple as a to-do checklist could make it overwhelming. One of the crucial well-liked is a comparatively easy walkthrough of the software program that reveals find out how to get began utilizing it “with out dropping your thoughts.” However it was exactly this stage of customization that made Notion so helpful for work. Workers at DoorDash and Nike adopted it to handle initiatives or share notes. It caught on amongst some groups at McKinsey after a accomplice started utilizing it at residence to prepare his pizza recipes. Scott Belsky, Adobe’s chief product officer, used Notion to prepare all his analysis and write the drafts to his bestselling ebook The Messy Center. “In an exquisite manner, Notion has collapsed the idea of an internet site and a doc,” he says.
In January 2021, a handful of these “how I exploit Notion” movies went so viral on TikTok that the demand for downloads overwhelmed the corporate’s servers and Zhao was compelled to pause all product growth for six months to shore up the again finish. On the time, the app had 20 million customers. Now it’s quick approaching 100 million, Zhao says. By Forbes’ estimate, it made $250 million in income final yr and stays worthwhile.
All through Notion’s viral rise, Zhao managed to retain an unusually excessive diploma of management for a startup of this scale. Not one of the enterprise capitalists who’ve put some $330 million into Notion have a seat on the board. With VCs lining as much as give him cash, Zhao has little motive to present them one. (He lately added his first exterior board member, a monetary auditor, in 2022.) And Notion’s longtime profitability gave him added leverage to lift funds with minimal dilution. Forbes estimates that the 37-year-old nonetheless owns a minimum of 30% of the corporate, price $1.5 billion, primarily based on Notion’s $5 billion valuation on secondary markets. (Akshay Kothari, 37, who joined in 2018, and Final, 30, cofounders in title, seemingly personal much less as a result of they joined the corporate after inception.)
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In Silicon Valley, enterprise capitalists have pushed the valuations of the most well liked AI startups to lofty heights. Amongst them are OpenAI and Anthropic, whose fashions present the bedrock for Notion’s AI product.
Notion’s final massive launch, which launched spreadsheets and databases, was in 2018. Later this yr, the corporate hopes to debut Notion 3.0. Customers obtained a preview when the corporate launched a man-made intelligence bot in November 2023 that may quickly floor something saved inside Notion, a part of the corporate’s aggressive wager on generative AI that earned it a spot on Forbes’ sixth annual AI 50 checklist. Now not do Notion customers want to recollect the place they put a specific piece of knowledge. As an illustration, you may ask the bot, “What are the takeaways from the group conferences final week?” and it’ll pull them out from what it identifies as crucial paperwork. Zhao says the bot is like an extension of his mind: “You may have the liberty to neglect.”
Layer in additional automation—plus January’s launch of a calendar providing and maybe an e-mail shopper, because of a February acquisition—and Zhao’s ambition turns into clearer: to construct Notion into an every little thing app for the workplace which may someday problem the dominance of Microsoft and Google, which collectively management 99% of the $52 billion (2022 gross sales) productiveness suite market, per Gartner. “Our competitor is your complete business,” he proclaims. “Should you’re constructing Legos, are you competing with a toy airplane or toy automobile firm? It’s each.”
“Notion is a manifestation of [Zhao’s] worth system and his urge to create. That’s why he doesn’t wish to promote the corporate. I can’t think about he even needs to go public.”
Enterprise AI software program may very well be a $1 trillion market alternative over the subsequent decade, in keeping with Wedbush analyst Dan Ives. “It’s a yellow brick street of progress forward,” he says, even with out confronting Microsoft and Google head-on. Zhao acknowledges this level, however he has ambitions of constructing one thing simply as lasting. “The enterprise is a problem, but when we simply execute, we’ll get there,” he says.
Though Zhao studied cognitive science on the College of British Columbia (he immigrated to Canada along with his mom from China when he was 17), he additionally thought-about a profession in images and obtained concerned with the native hacking scene, the place he discovered internet growth. When his pals requested him to design portfolio web sites to show their images, he thought they ought to have the ability to present their creativity simply as simply on a pc as they might with a digicam. It gave him the concept for a versatile editor that might allow anybody to simply create a portfolio, a job tracker, a posh database—or anything of their selecting.
After Zhao spent a yr studying the internal workings of Silicon Valley at e-textbook startup Inkling, he started pitching Notion—even earlier than he had a prototype. His readability of imaginative and prescient wowed angel buyers, which included Kopelman, Fb’s product chief Mike Vernal and Kothari, who invested $75,000 from a latest windfall promoting his first startup to LinkedIn. “He’s authentically offbeat,” says Inkling cofounder Matt MacInnis, who wrote Zhao his first verify for $50,000. “He’s obtained a sure style in how issues ought to be.” That included instituting a no-shoe coverage and handpicking all of the furnishings as Notion moved from workplace to workplace in San Francisco’s Mission District. In these early days, monetary constraints meant he purchased low-cost Ikea tabletops and introduced in a rug from residence, however even then he refused to scrimp on seating. His favourite is the Aalto stool, designed in 1933, which could appear to be any garden-variety wood footrest but retails for $400. For Zhao, it exemplifies the simplicity and flexibility he needs Notion to have.
Individuals who know Zhao effectively say his new wealth and Notion’s success have hardly modified him. He nonetheless picks out all of the furnishings for Notion’s workplace—latest additions embody curvy Artek armchairs ($6,000 every) and the De Stijl artwork motion’s angular Pink and Blue Chair (resales for about $3,000)—although he has needed to compromise in some methods: Footwear at the moment are allowed. “Notion is a manifestation of his worth system and his urge to create,” MacInnis says. “That’s why he doesn’t wish to promote the corporate. I can’t think about he even needs to go public.”
He was skeptical about elevating cash, too. Danny Rimer, a accomplice at Index Ventures, remembers first assembly him at a board assembly for Figma, the place Zhao bluntly launched himself by saying, “I’m attempting to know whether or not boards or buyers make sense.” His conclusion? They didn’t. So he stopped taking conferences with buyers. When Rimer’s then-colleague Sarah Cannon appeared at Notion’s workplace unannounced with tickets to a Marcel Duchamp exhibition after studying that the French artist was considered one of Zhao’s favorites, he was a no-show.
“The native kind issue of AI merchandise…will look very completely different from what we’ve at present, and our deep conviction is that builders like Notion are
those who will invent it.”
All of this gave Zhao one thing of an “anti-VC” status. He says it’s not true, however he attributes its roots to Shana Fisher, an early investor, who satisfied him that his time can be higher spent on growth and hiring. “Should you’re affected person, you’ll get the grand slam,” she advised him.
A type of hires was Kothari. Throughout a routine investor replace in 2018, Zhao shocked him with a job provide: chief working officer. Kothari was residing in Bangalore, the place he ran LinkedIn’s 1,000-person India operation and his spouse was overseeing development of their new home, however he was prepared to relocate to California after a number of days of taking part in with Notion’s new 2.0 product. “I used to be truly satisfied by the tip of the week, however I needed to spend a pair months convincing my spouse,” he says. Zhao later gave him the cofounder title in recognition of his efforts launching the gross sales, recruiting and finance groups.
It took the uncertainty of the pandemic to persuade Zhao he ought to elevate rainy-day funds. However he nonetheless known as the photographs: no board seats, low dilution. Index sprang to steer a $50 million funding at a $2 billion valuation in February 2020 inside 36 hours of Zhao beginning fundraising. It was an analogous story in October 2021 when Notion raised $275 million from Coatue and Sequoia. Zhao known as Vernal, who had turn out to be a accomplice at Sequoia, on a Friday morning to supply the illustrious agency first dibs on investing $100 million—if they might determine that day. The $10 billion valuation was “very painful,” admits accomplice Pat Grady, however inside half-hour of reviewing the financials, Sequoia agreed.
“Not me, not one other investor, not anyone is liable for the success of this firm. They’re doing it themselves,” Fisher says. “That’s the artwork of this factor.”
During an October 2022 firm offsite in Cancún, Final acquired an e-mail from pals at OpenAI providing early entry to an AI mannequin referred to as GPT-4. He and Zhao had been so blown away that they skipped the team-bonding occasions and holed up of their resort room for days till they scrapped collectively a bare-bones AI writing assistant. When ChatGPT launched the subsequent month, scary a mad sprint by businesses to combine AI into their choices, Notion was already out to market.
In 2023, the corporate adopted up with a Q&A bot that may retrieve data saved inside Notion. Its AI instruments are constructed largely atop GPT-4, Anthropic’s Claude and some different open-source AI fashions. Now, a yr and a half into the generative AI increase, Notion is in pole place amongst productiveness apps. The corporate fees a further $8 month-to-month for entry to the AI options. Tens of millions have tried it, and thus far the enterprise is faring “higher than our highest hopes,” Zhao says.
However their rivals are among the many largest corporations in tech—Google, which injected dozens of AI options into its work suite, and Microsoft, whose new collaboration app, Loop, appears to be like eerily much like Notion. “I typically inform Ivan, we could compete, however the primary factor we each compete with is the outdated set of instruments,” says Shishir Mehrotra, a veteran of each Google and Microsoft who now runs Coda, one of many myriad smaller productiveness corporations additionally attempting to make a dent within the duopoly.
Nobody is aware of how AI will evolve, however the winners of the subsequent act might need to look past acquainted interfaces like chat. “The native kind issue of AI merchandise has but to be invented,” says Olivier Godement, a product lead at OpenAI who has labored intently with Notion to combine its AI. “It would look very completely different from what we’ve at present, and our deep conviction is that builders like Notion are those who will invent it.”
Zhao has tried to maintain Notion as lean as potential, and its word-of-mouth progress let him keep away from hiring an enormous gross sales group. However these days are over. The corporate now has 650 staff unfold throughout workplaces within the U.S., Eire, India, South Korea and Japan. Prospects are more and more companies, not people, although lots of them are smaller startups. Zhao estimates half of Y Combinator runs on Notion, as do many rising stars on the AI 50, together with Perplexity, Pika and Runway. To get to the subsequent stage, Zhao is constructing out a gross sales group to focus on bigger purchasers the place utilization is commonly restricted to particular person groups, like at McKinsey and OpenAI. The bull case right here for Notion is Atlassian, the $3.9 billion (2023 gross sales) software program agency which turned a piece staple by first attracting small teams of customers inside bigger organizations who beloved utilizing merchandise like Jira. “Notion is type of related,” says Sequoia’s Grady. “If they will make the groups pleased, it’s type of inevitable that they’ll find yourself with the entire thing.”
For Zhao, who needs Notion to be ubiquitous, ending up with the entire thing is the objective. To do this, he must make the software program eminently versatile—an actual every little thing app that may not solely change instruments for work but in addition manage individuals’s lives. That mentioned, he acknowledges his pitch to buyers a decade in the past of absolutely unseating incumbents like Microsoft and Google was a “romantic” notion—however solely to an extent.
“The legal professionals in all probability will use Microsoft Phrase till the tip of time, however they could use Notion for different elements of their workflow,” he says.
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