Mailchimp Story

In 2000, Ben Chestnut started a web design agency called the Rocket Science Group. He teamed up with Dan Kurzius and a tech guy named Mark Armstrong.

They got $13k and $32k projects before even obtaining a business license.

Their initial focus was selling to tech companies, but the tech bubble burst and they pivoted to airline and travel companies, which worked until 9/11, and then pivoted to real estate companies.

While doing work for the clients, they started noticing one thing. Each client always asked for email marketing.

They would use whatever software the customers had, but they hated the available software.

In 2001, they decided to build their own in-house email software for their clients as a side project called Mailchimp.

It let them build email lists and campaigns efficiently.

Earlier they were doing all the marketing on their own for their customers but it became very tiresome for them.

Then they decided to build it self-serve, allowing customers to log in, use it and pay using a credit card.

Customers now had direct access to Mailchimp, which turned Mailchimp from an internal tool into a product that could scale, becoming one of the first SaaS companies.

Jump to 2005, they had sort of forgotten about Mailchimp.

The agency billable hours game was becoming hard for the founders. It wasn't scaling and they were thinking about winding down the business.

One night, Ben happened to hear Rober Kiyosaki where he was talking about passive income and recurring revenue on a TV show.

Ben started reading books and exploring other things.

The founders made a spreadsheet for the first time and drew a separate revenue chart of the Agency and Mailchimp.

They noticed Mailchimp's revenue was growing, while the agency's revenue was flat or declining.

After seeing the charts, it was evident that the agency was not growing. They decided to leave it but it was not easy for them.

It took them all of 2005 to convince themselves from going to go from $25,000, $50,000 website gigs to $25 Mailchimp accounts.

In 2006, they shut down the agency and found new agencies for their clients.

In 2007, they started as a software company and went on full-time to Mailchimp.

They were crystal clear with 3 things since the beginning:

a) No external funding

b) Earn money from day 1

c) Focus on small businesses

In 2008, Mark Armstrong was bought out.

Mailchimp was making money, but the problem was that other competitors had caught up and exceeded them in terms of features, causing Mailchimp's customers to switch to its competitors.

To stop the user churn, Ben put a toll-free number on the website and asked customers to call in with their most-requested features.

They listed all the features on the whiteboard. Since Mark left the company, the problem was, “How were they going to get this done?”

Eventually, they hired a rock-star engineer who started to fulfil all the customers’ demands one by one.

Building features was one thing but conveying them to users was another.

To convey their features to users, Ben stumbled upon a way of getting the word out by blogging and tweeting about them. They got retweets and comments and more sales.

The team ended up getting a lot of feedback from customers who loved the new features.

The major breakthrough came in 2009 when they shifted to the freemium model, allowing small businesses to try the services, make them happy, and then ask for the money.

This led to growing the user base from 85,000 to 450,000 within a year.?

The number of paying customers increased by more than 150% and profits by 650%, with annual recurring revenue of just over $2 million.

By 2012, Mailchimp reached 2 million users and just under 8 million users at the end of 2014.

By June 2014, it was sending over 10 billion emails per month.

In 2016, it was ranked No. 7 on the Forbes Cloud 100 list.?

In 2017, it was named one of Fast Company's Most Innovative Companies of 2017.

Things were going well, but the company had a constant fear of emails getting extinct.

This was a serious issue as the whole business existed on the email services.

How did they address this issue?

In 2019, Mailchimp shifted from mail distribution to offering a full marketing platform aimed at smaller organisations.

This shift allowed users to record and track customer leads, build landing pages and websites, and run ad retargeting advertisements on FB and Insta.

In Sep 2021, Intuit acquired Mailchimp for $12bn. At the time of acquisition, Mailchimp had 2.4 million monthly active users, and 800,000 paid customers.

The deal includes $300mn in employee bonuses and an additional $200mn worth of restricted stock units being issued by Intuit to Mailchimp employees.?

Ben and Dan hold 50% equity each, the remaining $11.7bn split between them, the duo was worth $5bn each after tax.

One of the major challenges Mailchimp faced was the risk of being overshadowed by larger, more powerful companies because it had taken the unconventional route of refusing VC funding.

How did they tackle this?

The company's secret weapon against large companies was its deep knowledge of how small businesses operate.?

Only with this knowledge was Mailchimp able to beat giant companies and establish itself as a favourite of small businesses.