From Zero to Acquired by Quizlet: How Coconote Built a $6.7 Million ARR in Two Years

Writing: DeepThink Circle

Everyone says the student market is the hardest to make money. They don’t have money, they’re unwilling to pay, and churn is high. Investors will tell you not to touch this market. Your friends will say this won’t work. But Coconote’s founders, Brett Bauman and Zack Hargett, spent two years proving that all of these conventional beliefs are wrong. They didn’t spend a single dollar on advertising. They built an AI note-taking app to $6.7 million in annual revenue—and it was then acquired by the edtech giant Quizlet. After diving deep into their story, I found it wasn’t luck, but a series of unconventional decisions. These decisions broke our ingrained assumptions about product growth, pricing strategies, and target markets.

Momentum is oxygen

I especially like the line from Sam Altman that Zack quoted in the interview: “Momentum is like oxygen—it’s the lifeblood of startups.” This line sounds simple, but the meaning behind it is profound. Many founders spend months or even a year refining their product, waiting for the perfect moment to launch. They tell themselves, “I need to get every feature right, optimize every process perfectly, and ensure the user experience is flawless.” But Brett and Zack chose the exact opposite path.

When they launched Coconote in April 2023, the product was still very rough. Zack admits candidly that at launch, the “product was barely usable,” and recordings could even be lost. But they made a key decision: start charging from day one. Not charging after the product is perfect. Not charging after user numbers grow and they then think about monetization. Instead, from the very first user they offered a free trial, and payment was required after the trial ended. This decision may look risky, but it’s actually the core reason they were able to grow quickly.

Why do I say that? Because revenue is the most truthful validation metric. You can have a million downloads, but if no one is willing to pay, it means the value you’re creating isn’t enough. You can have high user engagement, but if the conversion rate is zero, then you’ve just built a fun toy. Revenue can’t be faked. When someone really pays real money for your product, that’s the real signal: you did something right.

Zack says he has a “not-so-healthy” habit—constantly refreshing RevenueCat’s revenue charts. His wife even found time to talk to him about it, saying it had become a problem. But I understand why he does it. In the early days of starting up, that constantly rising revenue curve gave them enormous confidence. In 45 days they broke $100,000 in annual revenue, in 4 months they broke $1 million, and in 5 months they broke $2 million. Every milestone made them more confident to invest more resources, hire more content creators, and make bigger bets.

That’s the power of momentum. It’s not just psychological encouragement—it’s real cash flow. They could pour the money earned this month into next month’s growth, creating a self-reinforcing flywheel. And because they maintained about a 50% EBITDA margin, this flywheel is sustainable. They didn’t need to burn money to grow. They didn’t have to worry about cash flow breaking. They could focus on doing the right things.

Content creators vs. influencers

When it comes to social media marketing, I’ve found that most people get the direction wrong. They look for big-name influencers with hundreds of thousands of followers, and are willing to pay high prices to have them promote a product. But Zack and Brett’s approach was completely different—and that’s the key to their explosive growth without an advertising budget.

In the interview, Zack was very clear about the distinction between “content creators” and “influencers.” He said that if you reach out to a creator and find that their email uses a domain from some agency, then it’s already too late. The existence of these agencies is to eliminate the kind of outsized returns you’re trying to generate. They charge high commissions, push creators’ prices far beyond their actual value, and turn what should be flexible collaborations into rigid business transactions.

Instead, they looked for creators whose profiles used Gmail addresses, who had around 5,000 to 10,000 followers, but whose content quality was very high. Why doesn’t follower count matter? Because in the era of algorithm-driven recommendations, TikTok and Instagram’s distribution mechanism has shifted from a follower graph to an interest graph. Whether your video goes viral depends on the quality of the content itself, not how many followers you have. Zack verified this in his previous startup: their very first TikTok video had zero followers, yet it got 80 million views and generated 150,000 registrations within 48 hours.

This insight is crucial. Traditional influencer marketing thinking is: find influential people, and borrow their audience. But in the algorithm era, the right thinking is: find people who can create great content, and let the algorithm help you find the audience. The difference between the two is huge. The former pays for someone else’s audience. The latter pays for high-quality content, and then lets the platform distribute it for free to the most relevant people.

At their peak, their content team was only 10–12 people. Now it’s stable at around 25, and they’re mostly part-time contract workers. But this small team created hundreds of millions of video views. One core creator alone contributed hundreds of millions of views. What does that tell you? It shows that you don’t need a huge marketing team. You need to find the right people, give them enough freedom, and make sure they understand what kind of content truly converts.

Zack talks one-on-one with each creator every week, telling them which videos led to actual conversions and which videos had high view counts but poor conversion performance. He used a brilliant analogy: if you package your product as a novelty toy, people will treat it like a toy and won’t want to pay for it. But if you package it as a solution to a problem, people will take it seriously and be willing to pay for value.

They had a video that got 41 million views and 4.5 million likes, but the conversion rate was extremely low. Why? Because that video showcased a feature called “PDF to Brain,” which turns long PDFs into “brain-corrupted” content—paired with Minecraft parkour background videos. It was interesting, and it spread like a virus, but it was still a toy. People would like it, share it, and comment on it—but they wouldn’t pay for it. The videos that truly generated revenue were the ones showing how Coconote helps students relax while listening in class, ensures they don’t miss any important details, and allows efficient review before exams.

The art of pricing

I think the pricing decisions Brett and Zack made are possibly the most counterintuitive part of the entire story. They targeted the student market, which is widely recognized as one of the hardest groups to monetize. Students have limited budgets, are sensitive to price, and have high churn. Conventional wisdom would tell you that if you’re selling to students, your price shouldn’t exceed $50 per year—ideally around $30.

But when Coconote launched, the price was $99.99 per year and $19.99 per month. That’s already premium pricing for a student app. But they didn’t stop there. In early testing, they raised the annual fee to $129, and found that both the number of users and revenue increased at the same time. This goes against traditional price elasticity theory—but it did happen in practice.

Why would that be? I think one sentence Brett said gets to the core: “We want to be seen as a premium product, because we also want to be seen as reliable.” Behind this is deep psychology. When a student decides to stop taking handwritten notes and relies entirely on an app to record classroom content, they’re taking a huge risk. What if the recordings are lost? What if the app crashes? What if they can’t review efficiently before exams?

That kind of trust is priceless. And a higher price precisely communicates a signal of reliability. If an app costs only $29, a student might think: “It’s so cheap—can it really be trusted?” But at $129, it makes people think: “This price means they’re serious. It means they have resources invested in product quality. It also means they won’t easily shut down.”

Even more interesting is that about 80% of users chose the annual plan. What does that mean? It means users recognize long-term value. They aren’t just trying it out and leaving. They genuinely plan to integrate Coconote into their learning workflow. This sense of commitment is gold for a subscription product.

There’s another dimension in the student market that’s often overlooked. Zack mentioned that they found many users aren’t traditional 18–22-year-old college students. There are lots of lifelong learners, professionals pursuing further education while working, and people preparing for all kinds of qualification exams. These groups are far less price-sensitive than full-time students. So when you position your product as a “learning tool” rather than a “student tool,” your market expands—and your pricing flexibility opens up.

Another clever strategy was marketing to parents. In the early days, many of their viral video scripts were like “My mom changed my life” or “My mom bought me this app.” Imagine this scenario: a college freshman and her mother are participating in new student orientation activities on campus. Someone comes over to pitch a tool that improves grades, ensures you won’t miss key classroom points, and helps you study—costing $129. Who would you ask for the money? Obviously, it would be the mom. And for a parent who spends tens of thousands of dollars a year on their child’s education, $129 is almost nothing.

This kind of insight into who the decision-makers really are is extremely critical. Many app developers fall into a common mistake: they assume the users are the payers. But in many situations, those are separate. In enterprise software, the boss pays for employees to use it. In children’s apps, parents pay for their kids to play. In learning apps, parents may also pay for students. Understanding who actually pulls out the money can help you redefine your marketing strategy and your value proposition.

The secret of the growth flywheel

Let’s look at how Coconote built this growth flywheel. They didn’t use complex growth hacking techniques. They didn’t have viral-sharing mechanisms, and they didn’t run a referral rewards program. Their growth model is actually very simple: create high-quality content → content spreads virally → users download → a smooth onboarding flow → quick trial activation → high conversion rate → reinvest revenue into content creation.

Each step in this loop was carefully optimized. In the onboarding flow, they made a counterintuitive decision: place the login flow after the paywall. The traditional approach is that when users open the app, they have to register right away—but that leads to a 10% drop-off. Why? Because before users experience any value, you’re asking them for their personal information. It feels like you’re being asked to pay before you even see the menu in a restaurant.

The benefit of postponing login until after the paywall is that users can experience the product’s value first, decide whether to subscribe, and then only if they choose to do so do they need to create an account. And in the iOS and Android ecosystem, users are already logged in with their Apple ID or Google account, so payment can be completed through those accounts—there’s no need to create an account inside your app. This change may seem very technical, but its impact on conversion is real.

Another key optimization was the length of the onboarding flow. They tested increasing the onboarding flow from a few screens to 15 screens, and found that the trial activation rate increased by 16%. This sounds counterintuitive, because people generally believe that shorter is always better. But in reality, a good onboarding flow isn’t about being as short as possible—it’s about finding a balance between the user’s effort and the delivery of value. When you take time to show social proof, explain how the product works, and let users personalize settings, you’re increasing users’ psychological investment. That investment translates into stronger commitment and lower churn.

In retention, they also found some interesting patterns. Students are highly seasonal users. Every year in May–June, many users cancel because there’s no classes during summer break. But they didn’t simply accept this churn. Instead, they introduced a pause feature that lets users pause for 3 months rather than completely canceling the subscription. This feature worked extremely well because it met users’ real needs while keeping users in an automatic renewal state.

Even more interesting is their trial extension strategy. When users try to cancel during the free trial period, most apps offer discounts. Coconote found that offering an additional 7 days of trial was far more effective than offering a 30% discount. Why? I think it has to do with how users perceive product value. If users want to cancel during the trial, it’s probably because they haven’t experienced the value of the product fully yet—not because the price is too high. Giving them more time allows them to use the product in more scenarios, which may help them discover value they previously didn’t notice. Discounting sends a signal that the product isn’t worth the original price. Once you set the expectation of a price drop, users will wait for the next promotion instead of buying at full price.

The cumulative impact of these optimizations is astonishing. Although they didn’t disclose exact conversion rate data, based on their growth from 45 days to $100K ARR, and from 4 months to $1M ARR, their funnel efficiency must have been very high. And the key is that this growth is organic and sustainable—it doesn’t rely on paid ads or other channels that require continuous burning of money.

Don’t optimize too early

In the interviews, Brett and Zack mentioned a principle I think is very important but often overlooked: don’t optimize too early. This principle is common in software engineering, but it applies just as well in startups.

Many founders start worrying about the cost structure before the product has been validated. AI app founders are especially prone to this trap because LLM API calls cost money. They spend a lot of time optimizing prompt length, caching strategies, and model selection, trying to minimize the cost of every call. But in the early stages, this kind of optimization is often a waste of time.

In the early days, Coconote basically didn’t focus much on costs at all. Their logic was simple: if costs become a problem, it means we’ve been successful enough—that’s a good problem. And as the scale grows, costs naturally come down. LLM pricing keeps decreasing, and the costs of today’s features might be cut in half a year from now. So why start optimizing costs before there’s product-market fit?

Interestingly, they found that the cost of audio transcription was actually higher than LLM calls. What does that show? It shows that the assumptions you write on paper can be completely different from what happens in real operations. If they had spent months optimizing LLM costs before launch and then discovered the real cost bottleneck was elsewhere, wouldn’t those months have been wasted?

The same principle applies to paid advertising. They tried running ads and even worked with some agencies, but the results were never satisfactory. They couldn’t achieve profitability on the first purchase. But Zack was very candid that this might be because neither of them had truly invested enough time to dive deep into understanding this channel. Paid ads aren’t something you can do half-heartedly. You either go all in—invest enough time and budget to learn and optimize—or you focus on other channels that are a better fit for you.

They chose the latter: focus on UGC and organic growth. This decision was correct, because this is where their strengths are. Zack has experience and intuition in content marketing, and Brett can iterate on product features quickly. Putting your limited time and energy into your strengths is far more effective than trying to patch every weakness.

This “don’t optimize too early” way of thinking was also reflected in their acquisition process. Many founders start planning their exit strategy very early, consider valuation, and reach out to investment banks. But when Quizlet first contacted Brett and Zack, they almost rejected the conversation because they felt the company was only a few months old and discussing an acquisition was too early. Fortunately, they still took the call. But even throughout the following year of negotiations, their primary focus remained on growth, rather than preparing for an acquisition.

This focus was key to their success. If, early on, the possibility of being acquired distracted them, they might not have grown as quickly, and there might not have been a final acquisition. Instead, it was because they stayed focused on building the business well that the acquisition became an inevitable outcome.

The considerations behind the acquisition

As for the acquisition decision-making process, what I find most interesting is how they balanced short-term benefits with a long-term perspective. When Coconote was acquired, it was already a profitable company, with positive cash flow every month and strong growth momentum. From a purely financial standpoint, they could have continued operating independently and possibly created even greater value over the next few years.

But they chose to be acquired by Quizlet. Why? Zack mentioned an important factor: the time horizon. As a self-sustaining startup, they had to maintain 50% profit margins to keep cash flow healthy. That meant they couldn’t make investments with long payback cycles, and they couldn’t sacrifice today’s profitability for earnings three years from now. They had to maintain financial discipline—every decision needed to consider its impact on cash flow.

After joining Quizlet, that constraint was lifted. They could think further ahead: how to serve more students with Coconote, how to lower prices so more people could afford it, and how to invest in features that wouldn’t generate revenue in the short term but were important in the long run. This shift in time horizon enabled them to truly pursue the product’s mission, rather than being limited by cash flow constraints.

There was also a layer of mission alignment. Coconote’s mission is “to empower learners,” and Quizlet is also a company dedicated to helping learners. Even though the wording isn’t exactly the same, the spirit is consistent. That alignment of values meant the acquisition wasn’t just a financial transaction—it was a strategic combination that could genuinely create synergies.

I especially admire how they handled confidentiality with their team. During a negotiation that lasted for a full year, only Brett and Zack knew about it; even their wives didn’t know the specifics. It wasn’t because they didn’t trust their team. It was because they wanted to protect the team. M&A deals can still fall apart in the last week. If the team knew too early, it would only bring everyone unnecessary anxiety and distraction.

Zack calls it “a leader’s responsibility to protect others.” I think this perspective is vital. Many people treat transparency as a virtue, believing the team should know everything. But transparency isn’t the end goal—it’s a means. The real purpose is to help the team focus on the most important things and make decisions based on clear information. If certain information would only create noise rather than signals, keeping it confidential for the time being is actually more responsible.

When the deal finally closed, they told the team on the day the transaction was completed. Zack was driving from North Carolina to Connecticut, sick with the flu, and he felt terrible. After the bank transfer went through, he parked in a Taco Bell parking lot and told his wife. She cried. They celebrated this life milestone at Taco Bell.

This detail really impressed me. It wasn’t in a fancy restaurant, and it wasn’t with champagne. It was in the parking lot of a fast-food place. This is the real face of entrepreneurship. There’s not much glamour—just running around, persisting under pressure, and moving forward amid uncertainty.

What I learned from this story

Looking back on Coconote’s whole story, I feel the most important thing isn’t the specific strategies or tactics, but a way of thinking: question conventional wisdom, think from first principles, and quickly validate hypotheses.

Conventional wisdom says student markets don’t make money, but they ask: why not? If we provide real value, why wouldn’t students pay? Conventional wisdom says to find big influencers for promotion, but they ask: in the algorithm era, does follower count still matter? Isn’t content quality more critical? Conventional wisdom says to perfect the product before launch, but they ask: how can we validate market demand the fastest?

This way of thinking allowed them to make decisions that looked risky, but were actually deeply considered. The $129 annual fee wasn’t picked on a whim—it was based on a deep understanding of user psychology and value perception. Hiring content creators instead of influencers wasn’t about saving money—it was because they understood how social media distribution mechanisms had fundamentally changed. Charging from day one wasn’t about rushing—it was because they knew revenue is the best indicator for validating value.

Another important lesson is the power of focus. Brett and Zack didn’t try to do everything. They didn’t build a sales team, didn’t run massive ad campaigns, and didn’t attend countless meetings and pitch events. They focused on doing two things extremely well: building a great product and creating excellent content. This focus allowed them to achieve excellence in those two areas rather than being mediocre across ten.

I also appreciate their reflection on health. Zack said that during the startup process, he ignored his own health issues because all his energy went into the “kids.” This is something many founders go through. But he also realized that this kind of overexertion isn’t sustainable. After joining Quizlet, he finally had time to focus on his health. It reminds us that entrepreneurship isn’t a sprint—it’s a marathon. Keeping your mind and body healthy helps you go farther.

Finally, what I want to say is that Coconote’s success isn’t an unreplicable miracle. Even though timing and luck played roles, the core is execution. Many of the things they did are things others can do. The key is having the courage to question conventional wisdom, the patience to wait for validation, and the focus to do the most important things well.

The AI era has given us unprecedented tools and opportunities. Products like Coconote couldn’t have existed five years ago, because speech recognition and natural language processing weren’t good enough. But technology is only a tool. What truly creates value is a deep understanding of user needs, carefully designed growth strategy, and continuous refinement of product experience.

From zero to $6.7 million ARR, from two people to being acquired by an industry giant, Brett and Zack spent two years doing what many companies take ten years to accomplish. It isn’t because they’re smarter than others by some margin—it’s because they did the right things and made the right decisions at the right moments. And those decisions are often the ones that look the most unconventional.