Welcome back to our next edition of bootstrapped heroes series – where apart from celebrating the grit, resilience, and achievements of entrepreneurs who made it big on their own terms, we also learn some great lessons on running a thriving business. In our last edition, we covered the story of Zoho, and this time we have for you the incredible story of Mailchimp – a SaaS business that was bootstrapped for more than 20 years until this year when Intuit acquired it for $12 billion!
In today’s world, where the size of the fund raised is seen as an indicator of success, Mailchimp’s successful exit is a good reminder that raising venture capital is just one of many options for entrepreneurs and it is possible to build a billion-dollar company the bootstrapped way.
Before we dig deep into what entrepreneurs can learn from the success of Mailchimp, let’s have a look at how Mailchimp came into existence.
An idea, side gig, and successful billion-dollar business – The story of Mailchimp
Ben Chestnut, Dan Kurzius, and Mark Armstrong started Mailchimp, an email marketing company, as a side hustle while working on their web designing service business in 2001. It was not until 2007 when they closed their web designing business and went full time with Mailchimp.
Ben and Dan belonged to a humble middle-class family in the US and had their fair share of struggles. While doing his major in industrial design, Ben realized his passion for web designing, and after self-learning coding, he got his first job at Cox Media for designing banner Ads.
Meanwhile, Dan was experimenting with being a DJ and competitive skateboarding, but he could not make ends meet. He started looking for a job and applied for a gig at Cox Media-backed music startup – MP3Radio without realizing that the job was for writing code and not music reviews.
Their meeting was something out of a movie scene. Ben was working as a manager at MP3Radio and interviewed Dan for a position that required coding skills. In desperate need of earning, Dan lied about his coding skills. Only two weeks short of joining, he worked 24X7, learned to code, and became a great programmer.
The corporate job life was running well for them until 2000 when the market turned bearish, and MP3Radio had to shut down its operation and lay off all its employees. Unable to get another job anywhere, Ben and Mark (another colleague from MP3Radio) decided to use their severance pay to start their web designing and marketing company called Rocket Science Group. Dan joined them a year later.
Their web designing business was profitable from the beginning. It was while serving their web designing clients; they realized that everyone needed email marketing. So, they developed an email marketing tool named Wemailer and started sending out emails on behalf of their clients. As the tool was very easy to use and did not require any coding skills, they decided to open it up for customers on a monthly subscription model. It was the birth of the email marketing giant “Mailchimp” as we know it today.
For seven years, they provided web designing services during the day and worked on Mailchimp at night. Finally, in 2007 when they had about 30,000 paid customers on Mailchimp, they decided to shut their web designing business and go all in to build Mailchimp.
What D2C Businesses Can Learn From Mailchimp?
The massive growth of successful businesses is not easy to replicate, but if we look closely at their journey, there are always some key learnings founders can leverage to grow their business.
Here are the five lessons we think are a good takeaway from Mailchimp’s journey:
Lesson 1: Design for your customers
The idea of building MailChimp was born out of their existing customers’ needs. As told by Ben in an interview,” Our clients wanted to send emails to their customers, and we had an old code to do just that.” They built Wemailer (now known as Mailchimp) and started charging their clients on workable hours to send their emails.
Later they opened it for customers and started charging a $20 per month subscription fee. Built on a culture of customer feedback, they started making changes to the software, providing their customers with the ease and flexibility to create beautiful emails. It helped them improve their product, gain customers’ trust and increase revenue. As acknowledged by Ben Chestnut,” We tripled our revenue within a night by solving for our customers.”
Imbibing the ethos of customers first, they later diversified their offerings from Email to a full-fledged marketing tool for small and medium businesses.
Lesson 2: Make money from the very start
Businesses need money to run, and what better way than getting your first paid client as soon as possible. The funds will give you the flexibility to hire employees, build solutions, and market to other clients, ensuring long-term revenue growth.
Ben got their first paid clients before even starting their web designing business. Ben said in an interview, “I’ll never forget the two invoices. I had a $13,000 project and a $35,000 project ready to go before we even started officially.”
Similarly, they kept running the Mailchimp tool alongside their web development service and pivoted full-time only when they had about 30,000 paid customers for Mailchimp. Considering they now have 11 million subscribers, it was not a lot, but it was enough to survive.
Lesson 3: Focus on marketing channel that works for you
Ben Chestnut understood the importance of marketing early on in the business. Not able to spend money on hefty Google Ads (they used to cost per impression and not per click at the time) like their competitors, he ended up using content marketing to rank higher and get leads. He kept a close eye on how the Google algorithm is evolving and even wrote a full PDF about email marketing when Google was indexing and giving higher ranking to PDFs – getting them first of their online customers.
Right from choosing a quirky name and a chimp as their brand mascot to running a billboard campaign across the USA, they did all to create brand recall for their customers.
Lesson 4: Take data-backed business decisions
Mailchimp was growing consistently for years and was earning a steady business since the beginning. Still, it was when their founder decided to offer free subscriptions; they saw unprecedented growth. Their user base skyrocketed from 85000 to 450,000 within a year, and profit increased by 650%.
The shift to go freemium with Mailchimp was a calculated move by Ben Chestnut after studying the market carefully. He started tinkering with Mailchimp’s monthly pricing model and collected data for at least a year. Later based on data analysis and market sentiment (many startups like Dropbox and Evernote were offering free plans to their customers), they rolled out their freemium plan with great success. If they had started blindfolded, the story would have been much different. For new-age startups going the freemium way should be a data-backed conscious decision.
Lesson 5: Trust your instincts, follow your vision, and grow business on your own terms
Mailchimp’s path to success was not the usual Cinderella story of funded startups that we are used to hearing these days. They never raised any external funding and decided to keep themselves bootstrapped for life. Both Ben and Dan had seen their parents running small businesses. Ben saw his mother running a salon from their family kitchen, whereas Ben’s parents ran a small Bakery. They knew that hard work was the only way to make it big.
That’s why when many VC funds approached them for funding, they out rightly rejected every offer. By doing so, not only did they maintain complete control of their company but were also able to make decisions that were instrumental for their success – like restricting their offering to small businesses. As Ben told in an interview,” Large VC funds wanted us to pivot to the enterprise model. They said it is the only way to grow. But it didn’t feel right to us.” Ben and Dan still have complete control of the company and its every decision – a situation that would have been impossible with VCs or IPO.
With more than 1200+ employees, 11 million active users, $700 million revenue, and a $12 billion acquisition deal with Intuit, Mailchimp created history at every step of the way in their bootstrapped journey. Many congratulations to Ben Chestnut and Dave Kruziak for their grand success.
While this is our take on Mailchimp’s journey, we are all ears to hear what you think of their massive growth and what you have learned from their story. Leave your thoughts in the comments below!
PS: If you have any suggestions on which brand should cover in our next Bootstrapped heroes story, let us know in the comments.
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