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Good morning! It's Friday, December 1st. Today, we are looking at Mailchimp, a marketing automation and email marketing platform that was acquired by Intuit for $12B!

THE FEATURE

Mailchimp– From Bootstrapped Startup to $12B Valuation

In 2021, software firm Intuit acquired Mailchimp for a staggering $12B! This was off the back of a record $800M in revenue for the company in 2020. 

Since its founders, Ben Chestnut and Dan Kurzius, rejected all outside investment offers, they each held a 50% share of the company. Following the acquisition, they used $300M for employee bonuses and evenly split the remaining $11.7B– talk about a big payout!

So, What’s the Business?

In 2001, web designers Chestnut and Kurzius collaborated to make a design consultancy company called Rocket Science Group. A part of the Rocket Science Group was their email marketing software, Mailchimp, which was created specifically for their clients.

Mailchimp began as a useful tool for Rocket Science Group clients, but it led to Chestnut and Kurzius becoming obsessed with email marketing and ways to automate the process to drive consumer engagement. So, in 2007, the two dissolved the Rocket Science Group and went all-in on Mailchimp.

Today, Mailchimp is the leading email marketing software used by small to mid-sized companies.

The Innovation: 85K to 450K Users in One Year

Mailchimp may have started as a tool for Rocket Science group clients, but an ingenious marketing strategy skyrocketed the company from 85K to 450K users in 2009!

They were able to grow their users by 530% in one year through three tactics: 

#1: Freemium Plan

Freemium models for software programs are pretty standard today, but not back in 2009. Despite being one of the first freemium software programs, they absolutely nailed the execution of it. 

First, the ceiling of the freemium plan was clearly defined to the users–free marketing accounts were capped at 2,000 subscribers and 12k email sends per month. 

However, the real innovation comes from the email automation tools given to freemium users. Most software companies lock advanced tools behind paywalls, but Chestnut and Kurzius knew these tools would lead to explosive growth for freemium users, causing them to cap their 2K subscriber and 12K email send limits. In turn, it pushed them to upgrade their account to continue seeing growth. 

#2: Mailchimp’s Email Integrated Digital Billboard

In addition to using the freemium model to funnel users into a paid subscription, Chestnut and Kuzius used it to expand brand awareness. 

Attached to every email sent out by a freemium user was a digital banner ad for MailChimp that included the brand logo and a link to sign up for the service. Essentially, they turned their freemium users into advertisers, each with their own sales list.  

#3: Monkey Rewards, a 2-Way Referral Program

By upgrading to a premium membership, Mailchimp users could remove the banner ad from their email sends, but not everyone did. That’s because Mailchimp gave “Monkey Rewards” to those who kept the banner. 

For accounts with Monkey Rewards, they received $30 every time someone on their subscriber list signed up for Mailchimp. Plus, the person who signed up received a $30 account balance. 

The Results

In addition to gaining 365K users in a single year, Mailchimp’s profits grew by 650%, and the number of paid clients increased by 150%!

The Playbook

1. Create a freemium model that encourages widespread adoption 

2. Pair content created by freemium users with your business logo to build brand awareness 

3. Incentivize premium models through clear limitations of the freemium model

4. Create a 2-way referral program to incentivize current users to recommend friends

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