/ Entrepreneurship

How Lucid Software Plans to Challenge Microsoft and Adobe From Utah

The team at Lucid is ready to do big things with a unique perspective from outside Silicon Valley.

When Lucid Software, the Utah-based startup behind the popular cloud-based diagramming app Lucidchart, announced in late May that it had raised $5 million in a Series A funding round led by Gavin Christensen’s Kickstart Seed Fund, the 4-year-old company boldly declared the influx in cash put it in a strong position to take on Microsoft and Adobe.

“The team at Lucid is ready to do big things with a unique perspective from outside Silicon Valley,” said Christensen at the time. “Lucid is a perfect illustration of the kind of innovation that we are seeing in Utah routinely, with substance over hype, and scrappy teams focused on solving real customer problems with thoughtful products and a keen understanding of the user experience.”

While Lucidchart boasts more than 2 million users and is currently disrupting Microsoft Visio in a very meaningful way, the almost brazen manner in which Lucid called out two multi-billion dollar companies after raising — by comparison — a measly $5 million caught my attention immediately. I had to talk to these folks to see where all of this confidence was coming from.

So, I recently visited Lucid’s current headquarters in Draper to talk to the company’s two co-founders: CEO Karl Sun and CTO Ben Dilts.

One of the first questions I asked was why the company seemed to go out of its way to position itself as a direct competitor to Microsoft and Adobe after closing its recent $5 million round.

“I think I’m past the point in my life of being intimidated by bigger, more powerful people or entities,” said Dilts. “I think that we have the ability to be very nimble and to build interesting new things without having to worry about cannibalizing an existing business. There are some interesting stories in both Microsoft and Adobe’s past of them beginning to build, and even polish and sell, some really innovative software that they eventually squelch because of internal pressures from within the company. And I feel like we can run faster than them, that we have a more highly concentrated group of really incredibly intelligent people working on this set of problems. And frankly we’re gonna win on execution. It’s always in the execution. And I believe that we have the better team.”

A bold statement, to be sure, but it would be a mistake to question Dilts’ sincerity, or his belief in his team’s ability to accomplish big things. Plus, how awesome do Lucid’s employees feel right now after reading that unequivocal, confident endorsement from their CTO and founder? I mean, my goodness, I’m not even a Lucid employee, but listening to Dilts talk about his team made me feel like a member of the Friends of the ABC from Victor Hugo’s classic novel “Les Misérables” being led into battle by the charismatic Enjolras — played by Ben Dilts, in this particular case.

The Story Behind Lucidchart

In 2008, Dilts was the CTO of Zane Benefits, a Park City-based health benefits startup. They were building a complicated product around some new health care legislation that had no real precedent in terms of how it should work.

“We had this massive Visio diagram that we would e-mail around the team members, and among us I think we had maybe two licenses with Visio,” said Dilts. “And so what wound up happening is a bunch of people printing it out and drawing on it with markers and leaving it on other people’s desks and e-mailing 10 MB attachments and people attempting to merge this stuff back in; it was a total disaster. We spent more time fighting the tool than we did actually planning the thing that we were trying to build.

“And even then, Google Docs and Sheets and so forth was becoming pretty popular and I just assumed that someone would have built a tool that would let us work together on diagramming. And I went and looked and at the time, there were a few very half-baked options. Nothing that was close to what we would need to genuinely work in a business setting. And so true to form, I started building it. And so I built this sort of as a night-and-weekends project there. About four months later, I launched a mostly working prototype at the very, very end of 2008, beginning of 2009, launched a mostly working prototype and wrote a handful of bloggers who had previously written about other related companies. And the story got picked up in a couple of bigger publications. We registered thousands of people the first couple of weeks after I launched it. And I realized I had my hands on something good, something that was clearly striking a nerve. And so I wound up investing a lot of my spare time into it.”

Near the end of the summer of 2009, Dilts left Zane Benefits to start working on Lucidchart full-time. He began trying to put together a team and pitching to investors, which is how he ended up meeting Karl Sun. Their relationship began with Dilts asking Sun to write a check.

“I like to tell people, especially when we’re talking to investors, that I’m the first sucker to actually invest in this company,” said Sun.

As a former Google executive, Harvard Law School alumnus, and having graduated with highest honors after earning an M.S. in Technology and Policy and a M.S./B.S. in Electrical Engineering and Computer Science from the prestigious Massachusetts Institute of Technology, it’s safe to say Sun could’ve joined just about any company he wanted when he was first approached by Dilts to be Lucid’s CEO.

“I met Ben, but interestingly, because I had obviously been at Google, I’m familiar with what Google is doing and Google Docs, I was just pretty amazed when I saw Lucidchart,” said Sun. “What Ben had done by himself on nights and weekends — the smoothness and sort of the way the application behaved was just in many ways, just a quantum step above what Google Docs was doing.”

To learn more about Lucid and Dilts, Sun originally agreed to sit on the company’s board as an advisor. He says he came to realize Ben was a great software engineer, an even better person, and someone who thought not only about how to make a great product, but also a great business. At that point, things started to get a little more serious.

“The first money was in the form of some convertible notes and so it was me and Ben’s first paying customer — who was this guy out in Australia, of all places — and then a couple of friends of mine from school who I had showed it to from MIT,” said Sun. “We put in just a few hundred K. And that allowed us to basically persuade Ben to quit his other part-time job and to pay like, a modest, modest part-time salary while I think Ben was still finishing school at the time. And then let us hire our first, other engineer, and together they worked over that summer and really refactored the entire client, the front-end. And we sort of launched Lucidchart in the fall of 2010. We’ve just been trying to grow and build and add to the team since then.”

Bring It On, Microsoft and Adobe

In 2000, Microsoft acquired Visio, Lucidchart’s biggest competitor, for approximately $1.5 billion in stock. In a statement announcing the deal, then Microsoft Vice President Bob Muglia said, “Together, Microsoft and Visio will bring visualization and diagramming software to a broader range of customers while improving the ways knowledge workers can present their ideas.”

While Visio has certainly been successful, Lucid believes it would be hard for Microsoft to argue it succeeded in bringing the product to a “broader range of customers.”

“I think the way Visio has been positioned by Microsoft since they acquired Visio, and also the way it’s been priced, it’s been targeted very much towards a professional, high-end, expensive, technical crowd,” said Sun. “And we have a lot of users and paying customers who come from that cohort, but I think at the same time, what we’re trying to say is this idea of being able to communicate information — especially complex and sophisticated information — graphically and visually is something that a lot of people could benefit from.

“I think there are a lot of people who can benefit from a great application that allows you to communicate visually. So, sort of from that perspective, we’re competing with the non-consumption or the absence of a product that suits those people.”

When you look at Lucid from Dilts and Sun’s perspective it becomes easier to understand why the company publicly stated it was going after Microsoft and Adobe, rather than some random startup no one has ever heard of who is also trying to play in the same space.

“I think that sometimes startups have a sad tendency to pit themselves against each other,” said Sun. “There are a number of smaller companies that are doing things comparable to us or have some overlap with what we’re doing, but my goal is not to steal all of these other tiny little groups of users and collect them all and grow into something small to moderate. That’s not our plan. There is so much more green field in the users who aren’t using anything or are using the currently market dominating tools. And I think that it would be a mistake to say that our biggest competitor is a online wire-framing tool that someone else made. That’s part of a market that we’re interested in and that we’re trying to serve well, but the goal of the business is not to drive all of the other smaller players out of business. It is to grow to be the largest.”

Lucidpress

Lucid recently released its most recent product, Lucidpress, which is a web-based drag and drop publishing app that enables users to create high-quality content for both print and digital. It’s basically a free, online alternative to Adobe’s InDesign.

“We released Lucidpress in sort of a beta form in the fall of last year and then sort of officially took it out of beta just earlier this spring,” said Sun. “The goal is to make an easy-to-use, very intuitive application that lets people create beautiful looking content and that content can be printed.”

Thanks to Lucidchart, the company already has a lot of experience selling a workplace tool. They believe that experience will help them launch Lucidpress the right way.

“Because we know these people, we know how to market to these people and with the experience with the earlier product, we believe that it’s a fantastic target for Lucidpress,” said Dilts.

Why Utah?

Lucid CEO Karl Sun manning the grill at a recent company barbeque.

Neither Dilts nor Sun grew up in the Beehive State, which makes Lucid a fairly unique Utah tech company. Its founders chose to build the company here, even though, with Sun’s connections and background, they could have set up shop anywhere in the world.

“I love Utah as a place, but as a business I feel it has an advantage over some of the other places as well. There’s a great deal of talent here in Utah,” said Dilts. “There’s perhaps a smaller pool of very large employers who are competing in sort of a cut-throat way for the top talent coming out of universities. So for people who want to stay here in Utah, we have a very good track record of attracting the very best. And bringing people to Utah as well. I feel like in our ability to attract talent and to retain talent, I feel that Utah is as good a place as any in that we could have founded our company.”

Sun quickly agreed with that assessment.

“I would add that I’ve had the fortune of going to school with some really bright, talented people and working at Google where I thought the talent pool was just tremendous, and I really feel like the team we’re building here is world-class,” said Sun. “I think they’re as good as anybody I’ve worked with before. And I really feel like it’s interesting that you can build that here, but I do think that Utah has some unique things that attract people. I mean, the quality of life that you can have, you know, pretty good cost of living. I think it’s a good balance of a good place to be, with a great lifestyle, and an extremely talented talent-pool.”

Published 8/18/2014