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The Abandoned Side Project That Quietly Turned Into a $700m/year Revenue Busines...

 1 year ago
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The Abandoned Side Project That Quietly Turned Into a $700m/year Revenue Business

The 20-year journey of Ben Chestnut, founder of MailChimp

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Ben Chestnut was 26 when he was laid off and started a web design agency. Original image by Wikimedia Commons

“I had a month’s heads-up about the whole thing. So I had time to kind of plan my life.”

After getting laid off in 2000, Ben Chestnut resorted to the trade he knew best — designing websites. Over the years, he’d built “about 2 thousand” banner ads for his former employer, Cox newspapers. He knew exactly how to design clickable things online.

“And I thought… Well, this is our chance to start a company. My business partner and I went out and got clients. We went knocking on doors, down the hall from our office. And we got paying projects. We got a $13,000 project and a $32,000 project. Before even getting a business licence.”

Unfortunately, running a web design agency proved to be less about your prowess in design and more about how flawless you sounded over the phone. Agencies often attract the most whimsical business, where clients’ opinions replace real KPIs and a soothing voice can be more important than a moving product. Naturally, a group of introverted, caring designers called the Rocket Science Group didn’t thrive in an environment that rewarded appearances over substance.

Five years passed, and the hamster wheel of unfulfilling client work was about done soothing Ben into a self-employed existence of a stagnating agency owner. The revenues were locked into a stubborn plateau and the team was exhausted by a potent mix of uncertainty and punishing workload. The very meaning of this masochistic lifestyle was put into question.

The question prompted Ben and his team to review the core logic — and the foreseeable future — of their business. A spreadsheet was opened, listing detailed revenues from all of the agency’s projects. It was one of the lines on that spreadsheet that produced the only answer Ben needed to hear. Turns out, one of their internal side-projects was quietly generating more money than all of the agency’s consulting projects, combined.

Quotes and facts takenfromthesefivesources.

A chimp is born

At the Rocket Science Group, the creative minds were growing weary of implementing the same feature into their clients’ websites over and over again: an email-list-building tool. The work billed was repetitive and ripe for creative automation. To lose the burden, the team coded a one-size-fits-all, self-serve solution, and charged clients $0.01 per email sent.

“Instead of ignoring the problem, Ben and Dan identified this as an opportunity to help their clients solve the problem. They got code from a failed digital greeting card product they had made and tweaked it to launch MailChimp to their web agency client base in 2001.” (source)

The word spread, slowly. Old clients who no longer worked with the Rocket Science Group were still using the email tool. Small business owners who never were the agency’s clients started contacting with requests. While Ben was zeroed in on putting meat on the table for the agency, his email tool quietly grew its own little following.

The amounts were still negligible. When you’re chasing $30,000 web design projects, a few $50 invoices don’t warrant significant attention. Ironically, it was the increasingly inefficient task of issuing these small invoices that prompted Ben to introduce a monthly subscription model and build a credit card feature for MailChimp — effectively giving birth to one of the first software-as-a-service products ever created.

How does an internally used background tool turn into a $4.2 billion, industry-spawning behemoth with zero investment? In short, by using every guerrilla tactic in the book:

  1. The semi-viral freemium model is the biggest culprit in the Chimp’s success story, and it propelled its growth from 100,000 users to 1m users in just one year. It was novel at the time to give users free access to the entirety of your platform. The explosive success of the freemium model was two-fold: for one, every ‘free’ email sent contained a MailChimp logo in the footnotes, creating a semi-viral loop of organic referrals; since the users had to pay only once they reached a certain number of emails on their list, getting your first paid MailChimp plan acted as a rite of passage you had to ‘earn’ your way to.
  2. Niche social platforms. The company’s adage in the early days was Code, Blog, Tweet, Repeat — simply because this marketing strategy worked. Twitter was a lot less crowded in 2007, and MailChimp was getting real exposure on the network. Similarly, they purchased ads to be played at the beginning of every new episode of a crime podcast called Serial. The podcast is now a hit — having been the first one to hit 5m downloads in the history of podcasts — but buying ads on it was a hipster thing to do back in the day. Hence, cheap.
  3. Designer marketing campaigns. In 2014, an announcer on one of the podcast ads accidentally mispronounced MailChimp as MailKimp. The ad was streamed to one million users — but, in character, the company decided to turn the comical mistake into an entire marketing campaign. Soon, entire brands for MailShrimp, FailChips, VeilHymn and a bunch of other Bumblesnuff-Crimpysnitch-esque spinoffs were launched, accompanied by amazingly creative campaigns. Weird? Kind of. Hilarious? Just watch the VeilHymn artist-interview-parody.
  4. The Chimp! Theories behind branding as a be-all-end-all are often cheesy, but the Chimp certainly worked out for Ben. Back in his days as a web designer, he learned that adding a monkey to any marketing design increased its effectiveness. Over the years, the Chimp had become a champion of the brand, throwing goofy comments at users when they log in, disable-able in the ‘party-pooper’ mode in Settings. Seriously, how many other email platforms can you name?

Ultimately, the Chimp succeeded because it found its way into the hearts of small business owners. Ben’s mom used to run a hairdresser’s salon in their home kitchen, so he knew intimately the kinds of struggles self-employed people run into day-to-day.

He knew that small businesses don’t have separate marketing budgets — buying a new TV for your living room or investing into Facebook ads were all funded by the same pocket. He knew that self-employed people are the end users of his product — which makes them emotional as decision makers.

Ben: “The content that we’re putting out is like… Second chances in life… How do you know when to hold on and when to give up… Those are struggles [small] entrepreneurs are facing all the time. […] We want to help them scale out of the kitchen.”

It sounds corny, but a big part of Ben’s success lies in the fact that he was honest with himself about his own strengths and weaknesses. When Ben’s father bought him a computer, he didn’t teach himself coding — he learned how to draw on a computer program that took 5 floppy disks to run. In fact, he wanted to become a cartoonist as a kid. Is MailChimp an incredible feat of engineering? Perhaps. But its core strength is creativity, and that is, apparently, enough to build a billion-dollar tech company.

Shut up and take our money!

One of the most interesting aspects of Ben’s journey is that he grew MailChip without any external funding, which makes this story somewhat unique as tech companies go.

The main reason why Ben could do it is because MailChimp was a revenue-generating piece of software since day one. Their pricing changed over the years (per email -> monthly subscription -> freemium,) but, unlike products like WhatsApp, it had a very clear revenue model — one that didn’t involve selling your users’ data. Also, it’s crucial to consider that MailChimp was a spinout of the agency Ben used to run, by which it was initially funded.

Ben: “For us, it was an interesting time. It was the early days of SaaS, nobody was really solving problems with SaaS — or for small business. So we had a nice opportunity to go at it alone. And we just always made loads of money, because we were the only people willing to do email — very unsexy business — for small business — which is also very unsexy.”

It’s not like Ben was against taking investor money. But the world was still recovering from the dot-com burst, and VCs weren’t exactly eager to throw money at internet companies. Many were wary of the SaaS freemium model — which was novel at the time. Most investors Ben had met argued that MailChimp should go after enterprises — because that’s where the big bucks are — and not small businesses.

To investors, the math just didn’t check out. Why serve a highly fragmented, emotional, low-budget small business audience when 30% of them will be out of business in 2 years, and 50% of them will fail within the next 5 years? What Ben understood from personal experience was that even when solo-preneurs fail, they keep their email lists alive, and most of them start something new some time down the road. So MailChimp doesn’t necessarily lose a customer, even when they go out of business temporarily.

Of course, once the revenues started to grow, investors lined up behind the MailChimp door. Over the years, Ben had seen dozens of competitors take millions in funding with hopes of outgrowing the company. Each VC-backed competitor could mean that Ben had made a terrible mistake staying self-funded. As of 2020, however, MailChimp still sits comfortably with a 60% share of the email industry.

Ben: “I’ve been in this business for 19 years. So I’ve had waves of competitors taking in money and I’ve gone through those stages of grief where I say ‘oh my God, they’re gonna kill me now.’ The funding gets bigger and bigger… and nothing seems to happen. We just keep our laser focus […] and we’re good.”

Could MailChimp have grown even faster if it had taken VC money? Perhaps. But it’s also likely that the corporate-obsessed investors would have gradually chipped away MailChimp’s culture of creativity and innovation, which made the company special in the first place.

7 interesting facts about Ben Chestnut and MailChimp

  1. For Ben, a blend of cigarette smoke and hair spray is the smell of business. It’s because his mom used to run a hair salon in their kitchen, and that’s how Ben was exposed to entrepreneurship as a kid.
  2. When hiring, Ben is looking for ‘humble educators’ who are ‘so good they invite criticism.’ He wants people who are confident enough in their own abilities that they don’t have a problem having their views challenged or explaining difficult concepts in a simple way. If a person cannot dumb down their message, Ben says, they’re not a good fit for MailChimp.
  3. Ben’s first hire and (supposedly technical) co-founder, Dan Kurzius, lied about knowing how to code on his interview. After he got the job, he put together the prototype for MailChimp using “HTML for Dummies” books. Dan tried so hard he actually produced (or stole) clean, functional code which amazed Ben. Only 10 years later did the co-founder tell Ben about his improvisation.
  4. Ben confirmed he’s rejected a billion-dollar acquisition offer from an unspecified company. In his defense, he says that “a billion dollars isn’t that much more than a few hundred million.”
  5. The low-profile co-founder, Dan Kurzius, does regular anonymous visits to the small businesses that use MailChimp — from yoga studios to warehouses. This way, the company gets invaluable feedback — like the fact that many businesses use MailChimp as a CRM and not an email tool. It does make things a little weird when the biggest critics later learn they’ve been talking to the co-founder at MailChimp events.
  6. One of Ben’s favorite books is Viktor Frankl’s Man’s Search for Meaning. Frankl was a psychiatrist who survived a concentration camp during Holocaust. In the book, he documents how prisoners find meaning and purpose even in the most inhumane conditions.
  7. Ben’s motto is love what you do vs. the traditional do what you love. He says that eventually all passions fade away if you turn them into profession, and the only way to keep your sense of purpose is by learning to appreciate the craft you’re good at.

“Guys, no one’s coming.”

To end things off, I’d just like to leave you with one of my favorite Ben Chestnut quotes:

“When things get tough and dark — which is frequent when you’re an entrepreneur — I remember something that I realized growing up in Upson, Georgia. It’s something that I said to a bunch of friends when we were lost roaming around in the woods. I said ‘guys, no one’s coming.’ [laughs] That doesn’t sound very positive or anything, I’m sorry, but it’s something you have to realize: no one’s coming! It’s up to us! When you’re an entrepreneur, no one’s really gonna come to help you. It’s up to you to figure out what you have to do to get out of the mess. But if you do get out of the mess, you will have a lot of people joining you. […] I say it to myself all the time.”


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