Unheard Roots of Mailchimp 📈 (PT.2)

It’s already been two weeks since our last issue… ⏳

Welcome back to Unheard Roots!

I spent two full weeks (didn’t publish last week) doing as much research as possible to write this issue on Mailchimp.

My goal was to understand how two regular guys - Ben Chestnut and Dan Kurzius - bootstrapped their side project into a $12,000,000,000 SAAS giant.

Here is what I found 🧵

Getting laid off 📉

Ben kickstarted his journey when he graduated from college as an industrial designer and got a job at a dot com company.

It’s at that dot com company Ben met / hired a “programmer” called Dan Kurzius.

The story goes Ben was promoted to a design manager at this dot com company and needed to hire a programmer for his team.

Dan Kurzius applied to be the job not knowing how to code (the guy was a DJ at the time) and managed to trick Ben to thinking he could code.

Unfortunately, after working for a year or two the Dot Com Bubble Crisis led to both being laid off.

First leap into entrepreneurship 🧳

Being laid off for both was a blessing in disguise.

Ben had grown up with an immigrant Thai mother that ran a hair salon out of their kitchen and a father in the military that always dreamed of starting his own business.

While Dan grew up with a dad that tried and failed to build a successful bakery business before dying from a heart attack.

The obvious entrepreneurial upbringing of Ben Chestnut and Dan Kurzius led them to consider starting a business together.

This was their one chance to make the leap their parents never took to build a big business.

So in 2001 Rocket Science Group was founded out of Atlanta, Georgia.

Ben had discovered his hidden talent of digital design during his college years so web design was the service they started offering.

Growing the agency 📈

Just like all early stage businesses, Ben & Dan got their first agency clients by knocking on businesses doors and pitching to people at events.

After securing their first few clients, the rest of their client base came mostly from word of mouth.

This agency is where Mailchimp was created as a side project.

Clients started asking Ben & Dan to help them with their email marketing.

The websites built by the duo were being used to collect emails from customers so the businesses could keep selling to them through email.

This is where the duo stumbled on an opportunity - the internet barely had any email marketing tools and the few that existed were incredibly hard to use.

To satisfy their clients, Ben & Dan created a simple tool on the side to help their clients collect & send emails to the visitors of their websites.

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The simple tool 🔨

That simple tool was the first version of Mailchimp.

From 2001~2005 the duo barely paid attention to the tool. It was just a nice amenity on the side for their clients.

Originally the client would pay for the tool then someone from the agency would use it for them to send emails.

But it got to a point where clients kept handing checks to use the tool and taking the checks to the bank became a hassle.

So Ben & Dan enabled self-serve so clients could login, pay, and use it themselves.

This tool was revolutionary in terms of both design and function - considering this was the early 2000s where software was hard to use and barely worked.

But the duo didn’t realize this up until late 2005.

Burn out… 💔

It was now late 2005 and the agency was exhausting both Ben and Dan.

They desperately needed to find something that wouldn’t be as much of a hustle.

The “aha” moment came from an episode of the Oprah show.

One night Ben was coding / working on a website late at night when his wife, who was a night shift nurse, came home and turned on Oprah.

That particular episode of Oprah had a guest called Robert Kiyosaki.

For those of you that don’t know - Robert Kiyosaki is one of those finance gurus who talks a lot about passive income, real estate, etc.

During the Oprah episode Bens wife was watching, Robert Kiyosaki started talking about reoccurring / passive revenue as he usually did.

That is when Ben stopped working to listen - thinking the man on the TV might have an antidote to their problem with the agency.

The Billion Dollar Pivot 💸

Knowing Mailchimp was making some money on the side and it was reoccurring revenue, Ben and Dan started contemplating a potential pivot.

What the duo discovered with the graphs confirmed their intuition.

And just like that Mailchimp was now their main focus.

Refusing Investors 💻

Despite knowing the pivot was the right thing to do - It still took some time to go all in on building a SAAS business.

Why? Because the duo and their small team would need to go from taking on $25,000 web design gigs to $25 monthly subscriptions.

2006 is when Mailchimp officially became their only focus.

Bootstrapping (funding the business themselves) originally wasn’t much of a choice since Georgia didn’t have a startup scene - most investors were only interested in investing in companies in major cities like San Fransisco.

However, a similar company called ConstantContact had their IPO a year later in 2007 and that sent investors from all parts of the country begging to invest in Mailchimp.

Despite having probably hundreds of offers - Ben knew taking on investors would mean giving up control of where the company goes.

Ben wanted to focus on serving small businesses while investors insisted enterprise was the direction to take Mailchimp.

Investors wanted to be the number #2 of the enterprise mountain, Ben wanted to be the king of the small business mountain.

Luckily Ben & Dan had some capital from the agency and it was becoming cheaper to run SAAS with inventions like the cloud and managed hosting.

So they refused investors and got to building Mailchimp.

Building & Growing 🚀

Now Ben & Dan had a reoccurring revenue business in their hands and a plan to help every small business they could with email marketing.

However, there was one big problem. Mailchimp had been neglected for too long and even though it was an innovation in 2001, it was no longer on par with the new alternatives in the market.

In order to catch up to the market, Ben put a phone number on the Mailchimp website and allowed customers to call at any time to request features.

For the next couple of years, all the growing Mailchimp team did was get calls about feature / improvement requests → Build the features / make the improvements.

As for marketing, Ben wrote blog articles about how the new features helped small businesses with email marketing then tweeted about the blog to get traffic to it.

Pioneering the freemium model was another growth unlock for Mailchimp.

It came from failed project and ended up helping Mailchimp get to the next level in revenue.

Freemium 📪

As Mailchimp grew, the team decided they wanted to make the email list building feature free and the feature to send emails paid.

While trying to split the code the head engineer of Mailchimp realized it would be too difficult to split the platform in half and suggested they made it free up till some point.

Essentially you could build an email list and send them emails up till a certain point where you would then need to pay (i.e your list passed a certain size, etc).

There are two types of growth - channel led growth where you use organic (Social Media, Blog, etc) or inorganic (Paid ads) channels to get customers.

Or product led growth where certain features of the product allows it to grow / achieve virality (i.e an email app adds it logo to the end of each email to raise its brand awareness).

The freemium model was an example of product led growth where a feature of the product led to it growing faster.

Although Ben and his team got lucky by stumbling onto this model - there was a history of 5 years being spent in trial and error looking for an exact silver bullet like freemium.

Getting Acquired 💳

Although the journey sounds smooth when recalled - you can see it really wasn’t when you listen to Ben Chestnut.

A lot of things didn’t work along the way but after 17 years of battling it out, Ben Chestnut and Dan Kurzius finally sold the business the Intuit for $12,000,000,000.

There were lots of acquisition offers for Mailchimp before the 12 billion dollar Intuit offer but all of those were turned down.

Ben was stubborn about not selling the business - Intuit was the last company Ben decided to listen to.

And they were the ones that succeeded in convincing Ben and Dan.

During the period of the acquisition, Mailchimp was doing over a billion dollars in annual reoccurring revenue.

There are so many useful lessons from their journey I couldn’t find a way to add to the story, so I’ve listed all the lessons below.

Lessons from Mailchimp 📚

1. Use the 3 Cs for building your marketing strategy

The first thing Ben did for marketing Mailchimp was choosing a communication style.

This is a part of the three C process Ben Chestnut has for marketing a product.

Ben knew his strong point was writing - he knew he would perform better in a channel that required him to write rather than produce something visual.

Blogging served as that thing for Ben.

The next C is the channel.

That channel for Mailchimp was Twitter, Twitter was new at the time and it was easier to build an audience / get attention on it.

Novelty is a big part of choosing a marketing channel for Ben Chestnut.

Right now that could be short form content or long form Twitter posts, both of which allow easier access to attention / aren’t as crowded as other traditional channels.

The third C is Cadence, which is essentially the flow you can achieve with the communication style and channel.

2. Adjust your view on stress / view it as the norm

If you’re a founder, you’re likely under massive amounts of stress and pressure.

One thing that helped Ben deal with the stress of being a founder was having a father that was a stoic and a mother that was a buddhist.

Ben grew up being told stress is normal by his father and saw his father remain unfazed even when under high amounts of stress.

Ben was taught it was okay to feel stressed and chaotic internally but important to have a calm demeanor towards the outside world for good leadership.

He learned that the best leaders (his dad was the head of a platoon) remained stoic towards the outside even when they felt lots of stress internally.

That mindset undoubtedly made him a good fit for being the CEO of a billion dollar company.

And his stoic view on stress being the norm and the habit of keeping a calm demeanor towards the outside world can certainly be learned by anyone.

This is an extremely important lesson as most people are taught stress is a bad thing and something to run away from.

One could argue, Ben became such a high performer because he ran towards stress and embraced it by seeing it as the norm.

3. Set goals → Focus on habits

The idea is when you set a large long-term goal, focus on the daily habits / rituals / behaviors that need to be adjusted to achieve the goal.

For example, Ben took the habit approach when he got into fitness.

The first 15 years of running Mailchimp Ben had gained lots of weight. After having his first baby he realized he was overweight and he needed to loose weight.

In fact, he couldn’t even run a mile. That is how overweight / out of shape he was. So, he started by looking at the daily habits that prevented him from being fit.

Some of those bad habits were going to bed later because he was watching TV late at night.

So he unplugged the TV and stopped watching TV all together. Plus he started going to bed earlier.

After taking out bad habits one by one, Ben managed to run his first mile then second mile then third mile, etc.

To Ben the essence of high-performance is looking at the roots of whats causing you to not be high performance then tackling those.

4. Hire the most talented people you can and give them full autonomy

5.Don’t get distracted by vanity metrics and alternative forms of validation

Sometimes business owners get distracted with false ideas of what validation and business success look like.

In the very early days of Mailchimp Ben tried to get publicity but got laughed at and dismissed.

Eventually he realized the only validation he actually needed was a paying customer.

6. Don’t obsesses over strategy, just talk to customers and use their response to guide your execution

7. Don’t let your CAC pass your LTV

8. Have a simplistic view of metrics

Instead of measuring lots of fancy metrics, Ben Chestnut would look at the bank statement from the start of the month and the end of the month to see if the balance had gone up or down.

If it had gone up, he was happy, If it didn’t he tried to change it the next month.

9. Find blue oceans

Find groups of people or areas in your market that are underserved and serve those people.

When Mailchimp got started, every SAAS company in the market focused on enterprise.

Ben & Dan chose to serve small businesses since no one was paying attention to that segment of the market and that decision paid off.

10. Quirkiness goes viral

Mailchimp, especially in the early days, was known for doing weird and quirky things to set themselves apart.

Another really creative thing Mailchimp did was when a user upgraded to a paid plan they sent a custom gift / custom t-shirt to the user for graduating from free to paid.

People then started taking photos with these gifts and posting them online.

They even started sending gifts for pets.

All of these creative stunts ended up getting Mailchimp a lot of exposure since users both shared them on social media plus articles covered Mailchimp.

11. Constantly remind yourself of who you’re building for

Mailchimp would create these profiles / personas of their customers and hang them on their walls in the early days to remind themselves of who they were building for.

12. If something works, double down. Don’t chase more novelty.

One of the mistakes Ben made in the early days was not doubling down on marketing strategies that worked and chasing new strategies instead.

One day while meeting with one of his mentors, Ben asked how Mailchimp could hit a growth curve and achieve lots of momentum.

The mentor asked what had worked so far.

Ben said blogging about new features then tweeting.

The mentor suggested Ben try blogging then tweeting again.

After the second try Ben noticed they got lots of paying customers once again.

So he invested all of his time into writing blog posts then tweeting about them. He learned to double down when something worked instead of chasing after a new strategy.