Mailchimp’s Ben Chestnut on bootstrapping a startup to $700M in revenue

The well-known tech startup routine of coming up with an idea, raising money from venture capitalists and other outside investors in increasing rounds as valuations continue to rise, and then eventually going public — or getting acquired — has been around for as long as the myth of Silicon Valley itself. But the evolution of Mailchimp — a notable, bootstrapped outlier out of Atlanta, Ga., that provides email and other marketing services to smaller businesses — tells a very different story of tech startup success.

The company is now closing in on $700 million in annual revenues for 2019, and it seems that it has no intention of letting up, or selling out: No outside funding, no plans for an IPO and no to all the companies that have tried to acquire it (interested parties have included private equity firms as well as big tech players).

As Mailchimp has grown, it has been profitable from day one, a notable contrast not just to many other startups, but those specifically in the area of software-as-a-service for businesses. As a point of comparison, Slack, another provider of communications services to small businesses that is poised to go public, brought in around $130 million last quarter; it is not yet profitable.

This week, Mailchimp is unveiling what is probably its biggest product update since first starting to sell email services almost 20 years ago. It’s launching a new marketing platform that features social media management services, ad retargeting for Instagram and Facebook, domain sales, web development templates; and business intelligence.

There is still a lot of tech left for Mailchimp to tackle, and its model shows that you don’t always need outside funding to do it. The BI foray, as one example, marks an interesting move into artificial intelligence, and tapping the fact that the company is sitting on an intent and interest graph that spans some 4.5 billion people — the aggregation of all the emails that have been sent through Mailchimp’s platform. (Indeed, ‘small business’ for Mailchimp means ‘small number of employees’, but in our digital world, a small business might still be handling millions of customers.)

Adding in those new features will not come free: more pricing tiers, and higher pricing, will take effect from Wednesday for new users. You can read more about that here.

And adding in those new features also comes with another twist: it will catapult Mailchimp into a new arena of competition.

Today, some of the company’s notable competitors are the likes of SendGrid, Intercom and Drip. Tomorrow, that list could expand to include Marketo, Hubspot, InfusionSoft, Hootsuite and many more. While Mailchimp was an early mover and by the company’s own admission was coming into the market at a time when there was very little competition, it will be interesting to see if it can take some of the traction it has picked up to date and bring it to an adjacent — but still entirely new — product segment, and at a higher price, to boot.

I took the opportunity to speak with Mailchimp’s co-founder and CEO, Ben Chestnut — who started the company in Atlanta as a side project with two friends, Mark Armstrong and Dan Kurzius, in the trough of the first dot-com bust — on Mailchimp’s origins and plans for what comes next. The startup’s story is a firm example of how there is definitely more than one route to success in tech.


Ingrid Lunden: You’re launching a new marketing platform today, but I want to walk back a little first. This isn’t your first move away from email. We discovered back in March that you quietly acquired a Canadian e-commerce startup, LemonStand, just as you were parting ways with Shopify. (More on that acquisition here, and the Shopify changes here.)

Ben Chestnut: We wanted to have a tool to help small business marketers do their initial selling. The focus is not multiple products. Just one. We’re not interested in setting up full-blown e-commerce carts. This is about helping companies sell one product in an Instagram ad with a buy button, and we felt that the people at LemonStand could help us with that.

Ingrid: You’re moving away from email but you are still called Mailchimp. Do you think you might rebrand at some point?

Ben: I’m not attached to anything and we almost changed the name when we started the company, because we were getting a lot of questions about the name, including from employees. So I thought, if everyone is asking why not investigate? If it’s really hampering us, I wanted to get ahead of it.

So we hired Interbrand, and they researched and interviewed thousands of people. Half knew us and half didn’t. The exercises were creative and fascinating and it turned out people loved the brand, whether they knew it or not. 

The comments from small businesses were revealing. They were essentially: I don’t know what these guys sell but I’d let them in. Mailchimp sounds friendly and trustworthy, which a lot of small businesses need when starting out. They don’t trust global brands. But for some reason, they felt that with our name they could let us in.

Ingrid: That comment makes it sound like you see yourselves as competing with those global brands, and the big tech companies behind them. You see the company as the anti-big brand?

Ben: I think we’ll complement them. The larger platforms will see us as an add-on. We bring in small businesses as they grow, when they might want a more bespoke solution.

Ingrid: An obvious area you might move into is [sales] CRM. Are you planning to compete against the likes of Salesforce?

Ben: No, no plans for CRM. We’re focused on consumer brands and organizations with fewer than 100 employees. What’s really key is the role digital apps, digital publishing and social media have played in this area. We can have a 10-employee company with a customer base bigger than 1 million. That’s a combination you couldn’t achieve before the growth of online.

Ingrid: Mailchimp’s in an interesting place to mark that growth, given your history. 

Ben: Yes, we stared 18 years ago after my co-founder [Dan] and I were laid off from a dot-com. I got a severance paycheck and we used that to start the business. We built it as a side project, and I think it was actually one of the first SaaS point solutions. We got tired of sending invoices and it came out of that. I would say it was one of the first cloud companies, and at the time, even a monkey could have made money in the cloud. [Note: Chestnut said that sentiment is not where the “chimp” of Mailchimp came from…]

Ingrid: Everyone knows that since that day, you haven’t taken any outside funding, and you’ve rejected acquisition offers. Have you ever been tempted?

Ben: We have never needed the funding because there was just a big need for small businesses to have something like this. Enterprises were already getting email services, but small businesses didn’t. A lot of competitors said small businesses need to be dumbed down and cheap. We agreed on cheap, but not dumbed down. We wanted to empower them.

On acquisitions, I’ve had multi-billion-dollar offers, but it’s not about the money. It’s about being useful, and this is extremely fulfilling to us. The only thing I ever worry about is a succession plan for someone else to take over. PE firms sometimes prey on that fact, too. But I’m a pretty competitive son of a bitch.

Ingrid: So that means you’ve never had a formal valuation, either?

Ben: Some private equity firms have tried to make offers, and they give valuations through rough comps. We will make $700 million this year, give or take, in revenues and are highly profitable.

Ingrid: Do you think the same would hold if you were starting the company today? Is it the product, the people or the timing?

Ben: I think if I were starting now, it’s very crowded, and there are a lot of point solutions giving SMBs today what enterprises already have. If you were starting a point solution today, I think it would be tough and you might need investment to get going. When we started, there were just a handful of SMB solutions. And the price point was right: it wasn’t $2,000; it was $10. We just got the formula right.

Ingrid: And no plans to go public?

Ben: I can think of no greater hell than being a public company. A lot think we are about to go, and we are getting a lot of publicity right now, but we’re not going public damn it! [laughs] We’re just growing and excited about the things we’re launching.

Today, I have two constituents to worry about: customers and employees. That is a delightful and fulfilling problem: I have a sense of being useful. To have a third called investors? No, I can’t do that.

Ingrid: If you’re not going public or trading shares in any shape or form, what do you do to incentivize employees? Options are such a big part of the tech world, although sometimes I wonder if people even fully understand how shaky startup options can be as a way of compensating.

Ben: We see the same thing you’ve observed. Some people don’t quite understand options. They’ve had options dangled and never got them. There are kids, college, houses in balance for some of these people. We try to be very generous in our profit-sharing plan. We also put a value of 25% of our employees’ salary into a 401k.

Ingrid: You’ve always been profitable, and you are a big promoter of paid tiers, right?

Ben: We were always profitable. We didn’t have a free plan until many years after we launched in 2001. We didn’t want to give it away for free. Freemium only started for us in 2009, when we had 300,000 customers. That took us to 1 million, and then doubled the next year, and again after that. 2009 was really the freemium year, though: Dropbox and Evernote both came out with it then, too.

Ingrid: So how many users do you have now?

Ben: I don’t know. It’s in the millions. Maybe 11 million? I’m not counting. Our free tier brings us a big audience and we have our logo in the footer of emails there and that’s a couple of billion impressions per month.

It’s a generous plan where people start paying when they hit 2,000 in the database. Actually, they are quite proud when they hit that and have to pay.

Ingrid: That is genius. You’ve figured out the place in a businesses’ life where paying for a service, rather than getting it free, becomes an achievement, since it means they’re growing. So how do your costs look? Is cloud a drain on your margin?

Ben: We use a little AWS, a little Google Cloud and a lot of on-premise, our own data centers. It’s a hybrid, the future. With 4 billion audience members we need a lot of flexibility and we leverage the cloud for that, and will be doing more as we bring in more AI tools.

Ingrid: How are you using AI tools now?

Ben: Well, we’ve been doing business intelligence for years already. We know a lot about our 4 billion audience members’ interests based on what they buy. That helps with recommendations. If you start with a list of 200 members, you can discern characteristics and recommend a larger list from that.

Ingrid: To close off on the subject of you being a competitive SOB and fending off acquisitions: Where are big players like Google and Facebook and other large tech companies looming in terms of competition against not just Mailchimp but all the other startups and smaller companies tackling the SMB opportunity?

Ben: With small businesses, Google, Facebook, a lot of the big players see the magic and are moving to the space more and more. They need proper credit for what they have done — they have done a lot — but what a small business needs is to use all the platforms in one place.

I have a hard time imagining Google creating a platform that sells Facebook. They are mortal enemies. We are Switzerland, and we don’t upcharge.

There will be other companies trying to build all-in-one tools, but we believe that small businesses want something else. They don’t want a single platform handling all their productivity. They just want help with marketing, with sales and so on.