Is Mailchimp the Greatest Bootstrapped SaaS Ever?

0:00In 2001, two guys built an email tool as a side project. They had no login screen and customers physically mailed them checks. That's it. It was an accident. Wow. It was an accident and so and so I told you we Forrest Gumped our way into this thing. 20 years later, that accident sold for $12 billion, the largest bootstrapped exit in history. I'm Rob Walling and this is SaaS Legends. Today, I'm telling the story of Mailchimp and what you can learn from two founders who Forrest Gumped their way into building one of the most valuable software companies

0:33ever created. To understand how Mailchimp became a $12 billion company, you have to understand the moment in time that it was born into. It was the year 2000. The dot com bubble has just burst. pets.com is gone. Webvan, gone. Trillions of dollars in market value have evaporated overnight. Venture capitalists have retreated to their caves. And in Atlanta, Georgia, two guys in their late 20s are just trying to keep their small web design business alive. Ben Chestnut and Dan Kurzius weren't trying to change the

1:05world, they were trying to make payroll. We were laid off from a dot com just like everyone else and we sort of took our severance checks and we started our own company and said, you know, we're going to bootstrap it. Screw all this VC craziness. Money's going to come from our paying customers. Money is going to come from our paying customers. That's the scrappy defiant energy they brought to building Mailchimp and they kept that energy for

1:28the next 20 years. We were building websites for a lot of clients and what we noticed was everybody was asking us to 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 stuff. And it was just miserable for us. We hated using I mean, it was billable hours we got paid for it, but it was just miserable interfaces and

1:54everything. So, they had a problem. Their clients needed help with email. The existing tools were awful, and they were billing hours to do work that they hated. Here's where the story takes a turn that I love, because the solution was already sitting in a folder on their hard drive. A few years earlier, Ben and Dan had tried to start a different company, an e-greetings website, digital greeting

2:14cards. Why e-greetings? 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." They did not do that. The e-greeting site flopped, but they kept the code. The spare parts from the e-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-paste content

2:37and hit send. The foundation of a $12 billion company came from salvaged code from a failed side project that nobody used. There's a lesson here for every founder watching. Your past failures aren't waste. They just might be inventory. So, Mailchimp had paying customers. It was making money. But, you need to understand how janky this operation was

3:00in the early days. It was not subscription from the start. I mean, you had to have the URL. We would give it to a client, they would just You wouldn't even log in, you'd just go and use the interface. Scary, actually. No login screen. You just went to a URL and started using it in 2001.

3:18And they weren't charging subscriptions. Their clients would just mail them checks. 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 cuz I was going there so much, and I just said, "Is there any way that we can just charge by 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

3:43guess, SaaS. SaaS. Software as a service. The business model that would define an entire era of technology. Ben and Dan stumbled into it because they didn't want to drive to the bank. They didn't even know what to call what they were building. The term SaaS didn't exist yet. The closest thing was ASP, application service provider, which was confusing because Microsoft had a web development platform called ASP. For years, Mailchimp remained a side project. The real business was still the design agency. Ben described it as building a good, profitable, solid company. Something that paid for lunch

4:21while they focused on client work. Nine years. The thing that would eventually sell for $12 billion was, for almost a decade, something they worked on in their spare time. I want you to sit with that. Then in 2007, something shifts. Ben and Dan finally decide to get serious about Mailchimp. They start looking at the

4:42numbers, like really looking at them. They realize this side project is becoming a real business, and it's time to choose. So, they wind down the design agency and go all in on Mailchimp. They start thinking about pricing, about growth, about how to actually build this thing into something bigger. And here's where cloud economics come into play. Their server costs weren't rising as fast as they projected. They were actually saving money, money they'd budgeted to spend. So, they asked themselves, "What if we gave that savings back to our customers? What if we made Mailchimp free?" They didn't

5:13even know there was a word for this. They just thought, "Let's make it free." But, here's the thing. The decision to actually launch freemium it was an accident. I should probably not tell you all this, but really, we didn't want to do freemium. 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

5:41would get you. I would charge you for that. Um so, there was really no freemium intention. So, that was the plan. Free to collect emails, paid to send them. Simple, logical, but there was one problem. 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 by the due date that I gave which was December. 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

6:12a certain amount of time." And I was like, "Well, we're running out of time. Do it." That's it. It was an accident. The freemium model, the idea that you give something away for free to get people in the door, then convert them to paying customers later, this would become one of the defining strategies of modern software. Dropbox did it. Spotify

6:30did it. Slack did it. Zoom did it. Mailchimp did it by accident because a programmer couldn't hit a deadline. But here's the thing, Ben didn't even know what to call it. 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

6:57called 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's introducing Mailchimp's premium plan." He named one of the most important pricing decisions in software history based on reading the back cover of a

7:18book he's never finished. September 1st, 2009, they launched what Ben called their power to the people campaign. You could send up to 3,000 emails a month for free. And then he got invited to speak about it. And I went to this thing called the freemium summit, and you know, I sat down next to this guy named Drew Houston, some little startup called Dropbox, and dude named Mikkel from Zendesk was there, and what's the elephant Evernote? Yes. So yeah, there were all these guys talking

7:46about freemium. And I I had to make up some stuff that I had to be like I didn't read the book. And the results? At that same summit, just 7 months after launching freemium, Ben shared the numbers. The stupendous thing to me I didn't really realize until I made this slide was it took us 9 years to get to 85,000

8:03users organically. And then 7 months to get to 290,000 users with freemium. So it's a testament to freemium I think, but also to having sort of an installed base of loyal users giving you a little bit of momentum. What was radical and ahead of its time in 2009 is obvious now. That's often how it works with genuine innovation. It looks inevitable in retrospect. But in 2009, giving away your core product for free felt insane. And Ben and Dan did it because they ran out of time to do

8:35anything else. By the mid-2010s, Mailchimp had become one of the most successful software companies in the world. Hundreds of millions in revenue, millions of users, and still no outside investors. How did they scale without the resources that venture-backed competitors had? Relentless focus. While their competitors were chasing enterprise deals, big contracts, long sales cycles, customer success teams, Mailchimp stayed focused on small customers. And Ben had a framework for explaining this to every

9:04new employee. Yeah, I used to tell all new employees I used to draw this this diagram on a sticky note. It was two mountains. 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

9:19mid-market. Mid-market is Death Valley. You have basically clients who have the ambitions of a large business and the budget of a small business. Death Valley. I've seen so many companies wander into that trap. They start serving small businesses, things are going well, and they think if we just moved up market a bit, we could charge more. So, they hire sales people, they add customer success managers, they build enterprise features, and suddenly they're stuck in the middle and often not charging enough for the effort that

9:47it takes to sell to larger customers. Ben saw that trap early and refused to walk into it. And I want to make a note that these days going up market is often the right choice. But back in 2009 to 2014 or 15, there were still a significant number of SMBs that were looking for email marketing, and Mailchimp was an early product that people flocked to. It was a huge horizontal market, and they were able to take advantage of that at that point in

10:11time. So, we focused really on just the bare-bones 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, [clears throat] service. So, it was all about self-serve for us when we were serving those small businesses. Self-serve, no hand-holding, build the product so well that people can figure it out on their own. And here's the thing about serving really small businesses. Your sales cycles look

10:39completely different. And these are people who would sign up for an account, a free account, run it for like 10 months, shut their business down, go get a job, 2 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, 3-4 year sales pipeline. You don't make money with customer success for that

11:01kind of clientele. A 3-4 year sales pipeline. Most investors would lose their minds hearing that. But Ben and Dan didn't have investors to answer to. They could take the long view. They could wait for that first-time entrepreneur to fail, get a job, learn some lessons, and come back. That patience is a competitive advantage that's almost impossible to replicate if

11:21you've raised venture capital. Now, this is the part of the story where in most Silicon Valley narratives, the venture capitalists show up. The company's growing fast, it's profitable, it's the perfect time to raise $100 million, hire aggressively, and shoot for an IPO. That's the playbook. And especially back in the 2010s, that's what you were supposed to do. Ben and Dan didn't do that. For two decades, from 2001 to 2021, they never took a dollar of outside investment. And it wasn't

11:49because nobody asked. When we started it was during the dot-com bust, nobody was getting money. I mean, all the VCs had gone bust. Uh and so, many years passed before the economy again and VCs started knocking. But by then it was too late. I mean, Mailchimp was already making tens of millions of dollars. We were on the

12:08verge 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. The company was already profitable, already growing. What would more money actually do? But there was another

12:26reason, something deeper than the math. 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 is They really just wanted me to be the next IPO. 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. I didn't want to be a copycat. I didn't want to be a copycat and I didn't want to take

12:56orders from some nerdy MBA VC to become a copycat. That's like the worst hell, you know? Year after year, Ben and Dan said no to VCs, no to private equity, no to anyone who wanted to tell them how to run their company. And year after year, the offers got bigger. 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 and I'll put it in the safe and I'll tell my wife if I die, you know, call these guys. I mean, so it's good to

13:24keep those connections. There's a side of Mailchimp story that doesn't get talked about as much. A battle that Ben fought every single day for 20 years. I I used to say death, taxes, and spam. Like if if there's a way to exploit your system, they will find it. Spam, the dark side of email marketing. From the moment Mailchimp started growing, spammers tried to use it to send garbage to millions of inboxes. And if they succeeded, if Mailchimp got a reputation as a platform that spammers

13:54used, the whole business would collapse. Internet service providers would block their emails, legitimate customers would leave. The entire company depended on staying one step ahead of the bad actors. And when they launched freemium, the problem exploded. At the freemium summit, Ben was blunt about what happened. Abuse-related issues more than tripled, their abuse desk staff had to grow 200%, legal costs jumped 245% just dealing with people gaming the system. But here's what Ben said that really stuck

14:22with me. This is actually inevitable. You are going to have a really horrible abuse-related event if you're successful. It's just going to happen. Everyone's going to have your Google China. It might not be that big, but you're going to have something really embarrassing and traumatizing. It happened to us just a few months into

14:38our business. Everyone's going to have their Google China. In 2010, that was the reference point when Google had that massive security breach in China. His point was, if you build something successful, bad actors will come for you. It's not a matter of if, but when. So they built something to fight it. They called it project omnivore. They took every email ever sent from their servers, 10 years of data, and analyzed which ones had been reported for abuse, which got too many unsubscribes, and which had too many bounces. Then they used machine learning to find patterns to predict which users would become spammers before they sent the first email. This was 2009, maybe

15:152010, before machine learning was a buzzword, before everyone was talking about AI. Ben and Dan were using predictive analytics to protect their platform because they knew freemium would be worthless if spammers destroyed their reputation. But, the threats kept evolving. When I sat down with Ben at MicroConf, he told me about the lengths that they went to. I mean, I had Kevin Mitnick constantly penetrating Mailchimp. I caught him in our company elevator one day trying to

15:39hack our elevator. [laughter] I mean, 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 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. The son of a

16:00Really? Yes. animal, which we maintain is cheating. For 20 years, when everyone saw the cute chimp logo and the clever marketing campaigns, Ben and Dan were fighting a war behind the scenes. A war that never ended. That's the unsexy reality of building something that lasts. It's all the work that no one ever sees. By 2020, Mailchimp was reportedly doing around $800 million in annual revenue, over 1,000 employees, one of the great success stories in tech. And Ben

16:30Chestnut was starting to feel different. It's It's much deeper than that. I mean, I had been warned 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 work on my cane and still running Mailchimp. My mentors told me, "One day you're going to find out that

17:01the 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

17:18that it's a little suspicious advice. The pandemic was the final catalyst. Running a thousand person company through COVID, the stress of it, the weight, and those business cards in the safe started to seem less like insurance and more like an option. On September 13th, 2021, Intuit announced it was acquiring Mailchimp for approximately 12 billion dollars. It was the largest acquisition in Intuit's history. And because Ben and Dan had never taken outside investment, there were no venture capitalists to pay off, no preferred shareholders waiting for their cut. Just two founders who had bet on

17:49themselves for 20 years and won. So, what can we take away from this? If you're building something on your own or considering building something, what can we actually take away from Ben and Dan's story? First, your side project might be the thing. Mailchimp was an afterthought for nine years. Ben and Dan kept treating the design agency as the real business. Sometimes the thing that's paying for lunch while you focus on your

18:15real work turns out to be the big play. Pay attention to what's working even if it's not what you planned. Second, constraints can create breakthroughs. Freemium happened because a programmer couldn't ship on time. The lack of VC funding forced them to stay profitable from day one. You can't plan for constraints to create breakthroughs, but you can choose not to optimize them away. Sometimes the limitation is the gift. Third, pick your mountain. Now, one mountain that Mailchimp picked was to do small business instead of enterprise and not try to do both. Ben drew that diagram on a sticky note for every new employee. And that specific strategy may or may not work today, but

18:53the idea is that Ben and Dan had really strong opinions about how they wanted to grow the business and the direction that they wanted to take it. And that allowed them to say no to opportunities that would have put them into a death valley. So, for you, my advice is to find your mountain. There are certain things about your vision of the product or the market

19:12that you need to decide on and stick to. And you don't need to do this in the first day or week of your product, but once you're launched and serving customers, knowing what you're really out to do and what you stand for can be so helpful to say no to all the other opportunities that come along. Fourth, abuse is inevitable. Prepare for it. Ben told the Freemium Summit audience in 2010, you were going to have a really horrible abuse-related event if you're successful. They built Omnivore before they needed it. They hired Kevin Mitnick to try to break in. They treated security and abuse prevention as core to

19:44the business, not an afterthought. If you're building something people will use, bad actors will find you. Start thinking about it now. Fifth, no one has all the answers. 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.

20:04Like I came with my notepad right there. I I was I was like, "Oh, They don't know either." [laughter] Nobody has all the answers. Not the VCs, not the executives at the top, not the founders who seem like they have everything figured out. There are definitely people who have more experience and more answers than others, but those folks are also making some things up as they go. The difference is whether you keep going. And finally, your business is not you and you are not

20:30your business. Ben thought he'd run Mailchimp forever, but somewhere along the way he learned that his identity wasn't intertwined with the company he built. That separation, that freedom, is what allowed him and Dan to walk away on their own terms with $12 billion and no regrets. Near the end of our conversation, someone asked Ben, "If you could go back 23 years and give yourself

20:51one piece of advice, what would it be?" I mean, look at me. Things turned out okay. Uh I would I'd probably keep my mouth shut. [laughter] Don't want to screw it up. Don't F with anything. Just keep going. Just keep going. Mailchimp story isn't about being the smartest or the fastest. It's about showing up every day for 20 years, making decisions that felt right, and having the courage to ignore the

21:16playbook everyone else was following. Ben Chestnut and Dan Kurzius built the largest bootstrapped exit in history, not by being geniuses, but by, in Ben's words, Forrest Gumping their way through two decades of challenges. If you're in the early days of your company right now, feeling like you're just stumbling through, take heart. So were they. I'm Rob Walling, and this has been SaaS Legends. If you want to see the full conversation I had with Ben at MicroConf 2024, including his thoughts on AI, on building a creative culture, check out the full interview from MicroConf in Atlanta over here. And if you're building something of your own, hit

21:50subscribe. I'll see you next time.