How Ben Chestnut Bootstrapped Mailchimp to a $12 Billion Exit

after bootstrapping for 21 years Ben Chestnut sold MailChimp to into it for an astonishing $12 billion making MailChimp by far the most successful bootstrapped SAS ever since 2012 I've emailed Ben approximately once a year to see if I could get him to speak at microcom and it finally happened Ben joined me on the microcom stage in Atlanta for a wide- ranging often hilarious conversation about building and selling MailChimp we talked about how he in his own words Forest gped into SAS how he accidentally launched fremium how they scaled from zero to 1,200 employees his decision to sell how he would approach opportunities in AI today and so much more and if you stick around till the end you'll hear the counterintuitive advice he'd give to his younger self I hope you enjoy this as much as I did let's get into it hey before you get started can I just say I walked in late I caught the last few slides of Asia's presentation this is cheating you should all be ashamed of yourself that it took me like 10 years to figure that out like pouring through all my data it took a long time to get just to amass that much data learn how to parse it and then look at it and then make those cohort charts this is not right shame on you and then this Austin guy making a 100 thou oh come on it took me like three years to get there I will take that as one of the best compliments of microcom ever not right it's what 2002 2001 MailChimp starts to come together talk to us a l you know I don't want to spend the whole talk talking about the early days but I know that there's a story there of there was no SAS no one that acronym didn't exist so how did you and your co-founder who were running I believe was it it is a design agency stumble into building an email service provider email marketing platform yeah I mean it's it's probably a story a few people have heard before I've told it so many times but it was it was definitely stumbling into it we've sort of forest gped our way into business we were a consulting company building websites this was uh 2000ish you know right after the dot bust and um you know we we were we were building websites for a lot of clients and what we noticed was everybody was asking us to uh help them with their email newsletters and they were asking us to log in to their email email newsletter clients which were all kind of bulky and Bloated software you know CD ROMs you installed on your server and that sort of and it was just miserable for us we hated using I mean it was bable hours we got paid for it but it was just miserable interfaces and everything and we just thought we could do better well just so happened like a few years prior we had built this failed business it was an EG greetings website and the only reason we built that was you know we saw a press release that said Blue Mountain greetings was acquired by excite for $600 million so we were like well let's do that you know so we built an e- greetings website it did okay it didn't really it didn't make us rich at all but the spare parts from the - greetings website we found that code again and we repurposed it and built our own email newsletter tool just to make it easier for me basically to copy copy paste content and it hit send uh and then you know our clients loved it and we kept using it more and more and they would send us checks and the checks were like 50 bucks 25 bucks and I'd have this big pile of them and I'd go to the bank and I'd run out of deposit slips because I was going there so much and I just said is there any way we can just charge my credit card so I wouldn't have to drive to the bank so much and we put a credit card interface on it so that our clients can just use it directly and that was I guess SAS was it subscription from the start or was it a one time it wasn't subscription it was not subscription from the start I mean you had to have the URL we would give it to a client and they would just you wouldn't even log in you would just go and use the interface scary actually yeah and so did you see how did it evolve into like having a login screen it being subscription did you were other players doing that or did did it just feel like a natural step it it did not feel natural at all back then I mean SAS really the term wasn't even coin it was application service provider asp asp which Microsoft had something called ASP at this it was very confusing and it was very confusing explaining the customers what an asp was and I don't know who who came up with that term SAS or the cloud I I heard it was Ben Horowitz but I don't know but anyways uh it was not natural at all I mean we kept stumbling into this it's you know actually blogs like um your blog back in the early days and Jason freed I mean I was constantly reading those and we were all sort of making it up as we went along and and and stumbling into it and I'm good friends with ML over at zenes too uh and so we were all just learning as we went figuring it out so let's Flash Forward 20 years or so and you sell for12 billion to into it in 2021 A lot happened in between well I know we we'll cover every bit of it in the next 26 minutes um but I have to imagine in that 20 years there were offers to acquire you pretty much constantly so what changed that in 21 it's like let's do this I'm finally ready to sell this company in some ways the pandemic was pretty damn stressful on a lot of CEOs that's that's sort of the quick quick answer but really um it's much deeper than that I mean I had been warned in in some of my earlier years in my early 30s I don't know maybe late 20s you know I had a lot of mentors and some of them said hey you know Ben this business it's your business you just started it it means everything to you it defines you it's your whole life and that was absolutely true and I I never thought I'd sell I thought I'd be 100 years old you know coming into to work on my cane and still running mail gy but these my mentors told me one day you're going to find out that the business is not really you it doesn't Define you it's a tool it's a nice thing that enriches your life uh you should be proud of it but it doesn't it doesn't Define you so one day you know if you're ever ready to sell it could you please sell it to me that was somebody you know so it's a little suspicious advice um but later on you know in when I got into my 40s you know I had two kids they're you know getting into their teenage years and you know your this is morbid a little bit but your friends and family starts to pass away and you start to look at life a little bit differently to be honest with you and you know you realize then hey this business they were right it's it's a wonderful thing I'm so proud of it I always will be um but it it's not me that's it like like that will happen yeah that was cuz MailChimp was always one of the examples I would say everyone sells but of course there are some exceptions like MailChimp base camp I don't remember I even I used to use like bare metrics as that example because I didn't think Josh was going to sell slowly one by one all those companies said from base camp have sold so um when I heard the news I was super happy for you because I knew that you were 20 years two decades into this journey and that if you decided to sell that it was your decision that you weren't forced to sell that it wasn't some desperation move and that I believe the purchase price came out immediately I was like well that's it you're in the record books now you know if Guinness had the most bootst biggest bootstrap exit it's it's the two of you yeah now you were completely bootstrapped right is that right so similar question it made the math really easy well I bet yeah but what you had to have had funding offers from 2001 all the way to 2021 I'm sure there were just constant we want to get we want to fund you but so why say why say know over and over and over to that cuz I'm sure at some point it would have made it easier in the early days yeah time it was timing I mean when we started it was during the Doom bust nobody was getting money I mean all the VCS had gone bust uh and so many years passed before the economy came back again and VC started knocking but by then it was too late I mean MailChimp was already making tens of millions of dollars we were on the verge of making hundreds of millions and I could just see just over the horizon hitting a billion and so you know when they came knocking it was nice it was good for my ego but it was I was like I I couldn't figure out what I would spend the money on um I was already making enough of it that was the that was really the most matter OFA reason the other one was that what I noticed every time they came knocking they would really just give me someone else's Playbook they would say take our money and then you can do what Constant Contact did this they really just wanted me to be the next IPO and it's understandable that's that's their job is to get exit for their LPS so and I'm an LP now for so I get it now but but their job is to really get an exit out of you and so I I kind of as an entrepreneur I'm sure you all can relate I wanted to build my own thing my way you know this was my baby I was going to do it you know Bruce Lee style this is the way my way and so that was my that was one of the reasons I couldn't quite articulate back then but I it was sort of like a lack of respect that they had for the things I was creating I didn't want to be a copycat I didn't want to be a copycat and I didn't want to take orders from some nerdy MBA VC to become a copycat that's like the worst hell you know no I anyways I I just that's the main reason and but I'll say you know the older and older I got you know the more like bigger private Equity firms started knocking and then I was kind of like you know give me your business card I would put it in the safe and I would tell my wife if I die you know call these guys like so it's good to keep those connections you know build them over time so you didn't raise Venture but as you just said you're an LP now so you're on the other side you're an investor you should all take VC now and exit that was has and and do an IPO and run the constant cont right yes absolutely has so has your thinking changed on venture over the years or since the exit it really hasn't like I I have a you know I have to invest my money I it's a lot to you know the term I learned is mobilize you have to mobilize the money and there only so many banks you can put it in in real estate Investments it's all kind of slow and so you put in private equity and I just you know I have a family office that manages that I don't really take any active role I don't I don't invest directly I don't really I don't I don't know where the money goes well except for the check you're going to write to the next Tiny Seed fund of course sure we'll talk about that yeah so no I I it's not like I'm an active investor now that's out there uh mentoring or doing anything like that it's just kind of like a it's almost like the way you think about maybe like a money market account like just just an asset class you're Diversified across a bunch of stuff yeah um so I want to talk premium because yeah I believe sorry I started a competitor to MailChimp by the way did you even notice did did the word drip ever come up ever put it out there m I was like a rounding era I was like a n did did it ever come up in your office anyone ever don't meet your Heroes and he was a hero of mine in the early days and the bastard started a competing product when they say it's Lonely at the Top you know this is what they mean like everyone you know competes against you and tries to kill you what you'll notice is all the marketing that I did that we did for drip we did disparage some competitors I always thought infusion soft was a pretty poor product there were some other ones that were poorly built we never disparaged mail ch or HubSpot because I always had a lot of respect both for you and dark mesh but way also for the product yeah there was never and when I say dispar I would point out flaws right I would say there this product is not very good or this this is how we're we're better it always felt like you guys were authentic to yourself and to your customers and you cared the most about about them but one of the things that I've always described I'm curious if you agree with this one of the reasons I think that MailChimp won aside from being early and executing was that you figured out premium and no other email marketing platform has done that to the extent that you did now it am I right that it was 9 years after you launched that's right is that right that you that you then launched premium so we're talking 2009 2010 maybe y y so why did it take that long and was it a scary move when you made it hm it it took that long because milant was nothing but a side project meant to pay for our lunch our other real business was meant to be the real business right so it was like 2007 that we actually started focusing on MailChimp looking at the pricing and everything and I should probably not tell you all this but really we didn't want to do Freeman we wanted to charge the hell out of people we what we wanted to do was like make it free to sign up for the email collection part of MailChimp like you can embed a sign up form on your website or your blog but then if you wanted to send emails to your customers that's when I would get you I would charge you for that um so there was really no premium intention there but what it the new programmer that we hired was looking through all of our old Frankenstein code and he said there's no way in hell I can get this done uh by the due date that I gave which was December something something so um you know we had to hit the Christmas rush so so he said here's what I can do for you I can I can instead of making two products I'll make it one but we can make it free for a certain amount of time and I was like well we're running out of time do it that's it it was an accident ow it was an accident and so and so I told you we Forest gped our way into this thing so so you know we said okay we'll call it the free plan or something that was our creative name for it and I wrote a blog post and I saved the draft and the weekend passed and on Monday morning I came in and somebody put a book on my desk and it was a book by Chris Anderson from Wired Magazine it was called freemium and I didn't read it I still haven't read it but I read the back cover and the summary described it and I was like that's what we're doing so I I just said MailChimp introducing mail chimp's Premium plan and then when I launched that it's not like that Chang the world for me a guy named Charles Hudson who was running a conference called me and said hey will you come speak at my premium Summit and I was like oh that book premium and I went to this thing called the premium Summit and you know I sat down next to this guy named Drew H some little starup called Dropbox and dude named mckel from zenes was there and uh what's the elephant ever know yes so yeah there were all these guys talking about freemium and I I had to make up some stuff I I didn't read the book but you have to you you have to I spoke about the abuse of freemum which I knew a lot about cuz spammers but don't you didn't want to play the kind of the Hollywood Silicon Valley story where every entrepreneur knows where they remember we work and so and Facebook from day one I knew where I was headed you just told it like it was you mean you mean just now when I said we stumbled into it yeah yes yeah well I mean I've been I've been a micropreneur I've been a startup entrepreneur and I know that a lot of it is just like stabbing in the dark really really fast though and so like I mean if you get up and you just hear people acting like they know it all I mean it's it's a lie we're all winging it we're all winging it I mean I get invited to some pretty damn good conferences these days with like top Executives from huge companies they're winging it like I came with my notepad right they are I was I was like oh they don't know either so I love it all right so how would you do you have thoughts on fremium then I mean having run it for what 11 years 12 years at you know there's early stage bootstrappers in here doing 10K a month doing 100K doing 300K a month whatever it is how do you think about that for other other companies it was Radical when we started um and uh cuz SAS was new Freeman was new SAS fremium and for small business was all radical so it was a silver bullet for us I mean we tripled in the next year and we kept tripling for a long time after that now I think it's kind of table Stakes you know I don't I don't know that it's the Silver Bullet anymore but I mean even my kids every app they download is premium everyone expects it so uh I if if you're not doing it you you should be considering it for sure especially if your brand is like a chimpanzee like no one trusts that at first like if you're new you you know no one's going to trust your brand so freemium isum is it you got to do it you heard it here first so there's a there's a lot of um especially Venture funded companies Silicon Valley CEOs they uh not so much these days but it used to be the Playbook of they go 0o to one and then at a certain point they get exited out or adult supervision gets brought in you obviously didn't need to do that because you didn't have investors but how does one go from managing a small design agency to you know you stumble in you build a SASS and I believe when you exited you had somewhere around between a, and 1200 employees how did you how did you learn to run a company of that size having not I I don't think you had any experience with that before it got big Force gum yeah um I you know what I learned later on is like the thing you're good at that's probably going to be the thing your company sucks at you can't because you can't you don't scale it because you're you still got your hands in I was good at design creativity and branding and that team after you know 10 years in I noticed that that team wasn't scaling like the rest like support customer service operations I sucked at that so I always hired the best people I could find for that and that side of my business had scaled and was very very efficient so I I I think because because I didn't have experience it kept my mind very open to always hire oper operational people I always call them that those operational people over there and my passion was not just creativity but fostering a creative culture that's that's the thing that I focused on the most and so uh yeah we we got to 12200 people I think mostly because I wasn't the one actively managing them all I always had great Coos MH yeah makes a huge difference yeah did you I'm going to mix it up a little bit um it's my understanding that you obviously MailChimp had customer support but that you never had a customer success team meaning folks who help folks get onboarded and and do Hands-On White Glove stuff and you know what we know today as customer success was that an intentional decision and do you feel like did you ever tap out the market of where you thought you know we should add customer success because we could grow faster or get bigger yeah I mean I think for us what we learned the hard way was we we were serving small businesses and um yeah I used to tell all new employees I used to draw this this diagram on a sticky note it was two mountains and I was say you can in in in our business you have small business mountain or Enterprise Mountain if you want to be king of the mountain pick one of those two and in the middle I drew Death Valley I said that was midmarket midmarket is Death Valley you have basically clients who have the Ambitions of a large business business and the budget of a small business and a lot of those managers that are running you know being running the marketing in those mid mid-size companies they're not exactly your cream of the crop with a lot of experience in marketing they don't know how important marketing is as an investment uh and so you know they're they're very picky choosy customers they're high maintenance and so we focus really on just the barebone smallest of the small customers and you will just lose your shirt if you have success customer success managers trying to help them give them any kind of you know service so it was all about selfs serve for us when we were serving those small businesses I mean these were people who would sign up for an account a free account run it for like 10 months shut down shut their business down go get a job two years later figure out oh that's how you run a business start up a new business Revitalize that old MailChimp account and then pay us money like that's like a you know 3 four year sales pipeline you don't make money with customer success for that kind of clientele then we served Enterprise for sure but we chose to serve them through the API like if you're an Enterprise you have an engineer read our API docs build it yourself uh we'll give you a volume discount and that was the way that we chose to do it we experimented with customer success it it it's also a cultural thing we could not quite get that culture into our business if you look at like HubSpot like they they've got that nailed but it's a very different culture at their company versus ours all right AI you you and Dan your co-founder were Pioneers obviously with SAS with uh freemium other areas AI seems to have kind of been a wave after after you sold you know so it hasn't been something necessarily I think you've had to tackle yourself but do you have any thoughts for entrepreneurs in the room of this new frontier like how if if you were starting today or or you know getting it going today how would you think about approaching opportunities in AI specifically related to SAS by the way we were using AI um before I sold we were we kind of we rolled into it there's a really good article out there I forget who wrote it but it was about how apple rolls into technology I I would find that if I were you it was daring Fireball was the blog okay and he talked about how Apple just rolls into new innovation that's how we did it but the the mentality that we always had because we serve small businesses they want cool stuff but they didn't they don't have the money to to buy it so we could never be on the bleeding edge of Technology selling that we kind of had to wait till technology got cheap and commoditized we would take it we would know that it was cheap and commoditized when it was available through an API somewhere so we would get the API and then we would put it into a beautiful easy to ous interface that was kind of our stick we had a Cool brand and we always made everything very easy and fun to use kind of like the Apple model almost except cheap um so we would take that um we could never really sell AI to our small business customers you know we we we believed in sort of like taking it and using it internally so we would always have our Engineers tinkering with new things like like AI or whatever the new technology might be use it for internal purposes for us it was always like combating spam having the most reputable IP range um and then wait you wait for the technology to get cheap enough to offer to small businesses and then once once it's ready since the engineers have been tinkering with it inside inhouse we would then be able to pounce and roll into that new technology so it's sort of like a pickaxes and shovels mentality you know we would rather sell the tools instead of like getting rich from the gold rush just sell the tools the pickaxes and shovels to the miners instead that's that's what we always had to do with with uh serving small businesses and entrepreneurs was it omnivore that had the AI in it that's right we call it yes we we came up with that name omnivore yeah it was just I mean it was it was we had so much data in our system and this was before you could really even parse it so they I mean they call that problem big data and so we figured out big data we were using uh graphic processing cards you know now everybody's using that for Bitcoin apparently but we we got those things and we were parsing the data and then they called what what do you do with that well they called that data science we rolled into data science and then we had so much data that we could do so much with it was so easy to roll into AI plug into that and you know MailChimp will write your emails for you it'll write your subject lines it'll it'll take graphics for you and design them uh it it it did really really amazing stuff and now into it's taking it to the next level y so I am going to ask Ben one more question but I wanted to save time for maybe one or two audience questions so if you have a burning question this might be your only chance to ask Ben he doesn't do a ton of public appearances and I really do appreciate only for the people who try to kill me only for the people only for the people who no joke I started emailing him probably around 2012 and I would say hey Ben uh I'm Rob Walling and I run he's like oh yeah read your blog and I was like really and then do you want to come speak at micr he be like I'm busy and but every year it was very respectful and it got to the point where he said oh hey Rob is it microcon o clock already like it was just a recurring thing so I believe I've emailed him more than any other potential guest and it's great to finally get out here with him yeah so my last question for you before we turn it over to an audience question or two is what one topic if came up at a dinner party would you not be able to stop talking about I think it would be I just wanted to break in here for a minute and say if you're enjoying this talk and you want to get the rest of the talks from past microc confs you should join us in microm connect if you sign up at the Gold level you'll not only get to join our thriving highly vetted community of bootstrapped and mostly bootstrap Founders but you'll also get access to our Video Vault in our Video Vault you'll have access to all of our previous conference talks and you'll be among the first to see the rest of the talks from Atlanta once they release least learn more and apply today at microf.com connect what one topic if it came up at a dinner party would you not be able to stop talking about I think it would be creativity creativity and uh creative cultures I mean I that was the one thing you know that if it if anything is said about me in MailChimp it would be the one thing that I would hope would be said is all I care about was creating a company that had the most creative and Innovative culture I mean I I was fascinated I read every single book I could about about companies staying creative and Innovative for I felt like stagnation was a cancer that was creeping up on me every day and it was my job to just fend it off for as long as I possibly could and I did everything in my power inside of my company to keep it as creative as possible for as long as possible and I'm I look back and I think I did a pretty darn good job of that I think you did too got to enjoy what you do every day all right any questions question is during your 10 years of working on the company was there any one problem that was so interesting or fascinating that you still remember to this day I mean I mean other than the the big problem I just talked about of like maintaining a creative and Innovative culture which is a big gnarly problem uh I I think technical problems maybe might be what you're you're I would say abuse I I used to say death taxes and spam like if if there's a way to exploit your system they will find it um and so that kept me up uh all night every night until the very end was like people ready to abuse our system and we found all kinds of ways to learn from them uh hire our own uh spammers to attack us white hack it yeah we had white hats I mean I had Kevin mittnik constantly penetrating uh MailChimp I caught him in our company elevator one day trying to hack our elevator that guy that guy was a nut he was a beast at that stuff yeah um and he never he never got in actually he got he he uh he never penetrated uh and he he had to stop he we were the only client that he never penetrated during the project and he got in though because the invoice he sent had a virus son of a really yes animal which we maintain is cheating animal but he so anyways I think the problem of abuse it's not just but just hackers in general I everyone should should be worried about that I see I always thought it got easier because you know for context like I sold drip and we were at 10 people and doing a few million a year but um the we didn't have anyone full-time at the time so it was me and my co-founder just trying to figure out how to do deliverability and trying to keep spammers out and then when we got acquired they had a bunch of venture funding and so we did we hired a full-time person but I still got pulled in once a week into something and I kept thinking once I I get to MailChimp size I'm not going to have to worry about this at all I'm going to be insulated but apparently that's not the case it just gets worse it just got worse and worse and worse I think I'm probably around where you were when you started so if you could go back 23 years and give yourself one piece of advice that you think would be most impactful what would it be most impact I mean look at me things turned out okay uh I I probably keep my mouth shut don't want to screw it up don't f with anything just keep going ladies and gentlemen Ben Chestnut thank you all thanks for having thanks man great [Music]

Channel: MicroConf

Views: 14,268

Keywords: MicroConf, Saas, Mailchimp, Ben chestnut, intuit buys mailchimp, ben chestnut interview, ben chestnut mailchimp, biggest bootstrap company, bootstrapped unicorns, bootstrapped exits, MicroConf US 2024, MicroConf Atlanta, ben chestnut saas founder, mailchimp saas, saas exit, saas exit strategy, freemium saas, freemium success stories, Billion dollar exit, Mail Chimp, Co Founder MailChimp, Mailchimp Founder, Rob Walling

Id: jUyRLWSjarA

Length: 29min 28sec (1768 seconds)

Published: Sun May 12 2024