Why Mailchimp never raised money? The art of bootstrapping
Raising venture capital has become almost a rite of passage for many startups today. From seed funding to Series A and beyond, the infusion of VC money can supercharge growth for young companies. But not every founder chooses this path.
Some eschew outside funding altogether, preferring to bootstrap their business from the ground up. It requires thriftiness and grit, but bootstrapping gives founders full control and flexibility.
The most stunning example is Mailchimp, the email marketing giant that did over $700 million in revenue last year – all without a penny of VC investment.
Scraping By With Consulting
You likely know Mailchimp today for its popular email marketing platform used by millions of small businesses. But it didn’t start out that way. Co-founders Ben Chestnut and Dan Kurzius began in 2000 as a web design consultancy called The Rocket Science Group.
The early days were a hustle. Chestnut and Kurzius took on web design gigs to pay the bills, subleasing office space from a real estate company for $200 a month. With no outside funding, they had to work hard just to make ends meet.
Chestnut recalls eating $1 McDonalds’ cheeseburgers for lunch each day, fantasizing about one day being able to afford the $8 burgers at a local restaurant. Their goals were modest – if Mailchimp could generate enough profit each month to pay for lunch every day, that would be a success.
These humble beginnings shaped Mailchimp’s bootstrapping culture. The founders weren’t dreaming of billion-dollar valuations or IPOs. They wanted to build a lifestyle business that supported their families and gave them creative freedom. VC funding would have pushed them down a path of rapid growth they weren’t interested in.
Pivoting to Software
The turning point came when Chestnut built an email marketing tool for internal use with clients. He realized the software itself could become a standalone SaaS product.
So in 2007, they made the leap, shifting the agency’s focus to Mailchimp and its paid email marketing plans. They stopped taking on new web design clients and began migrating existing ones to other vendors.
This pivot set Mailchimp on the path to growth and profitability. But it wasn’t an easy street from there. Their competitors like Constant Contact and AWeber had a huge head start in features and market share.
Bootstrap life meant Mailchimp had no war chest to draw from. They had to play catch up through old-fashioned hustle and grit. Chestnut worked 16-hour days writing code and blogging about new features. Their mantra was “code, blog, tweet, repeat.”
Slowly but surely, they clawed their way back. Mailchimp went from hundreds of thousands of users to over a million in the first year post-pivot. The freemium model accelerated growth further. Anyone could sign up and send emails to up to 2000 contacts for free.
Turning Down VC Overtures
As Mailchimp took off, venture capitalists came calling. Several firms courted the founders and tried to convince them to take Series A funding.
But Chestnut and Kurzius turned them down every time. They worried about VC pressure steering them toward enterprise services instead of small businesses. And they enjoyed maintaining control of the company’s future.
In hindsight, Chestnut believes many of the VCs didn’t properly understand Mailchimp’s model and market. He recalls them pushing odd suggestions like acquiring servers and merging with competitors. Their advice just didn’t mesh with Mailchimp’s vision and culture.
This experience soured the founders on outside funding. They preferred a slower, more organic growth trajectory on their own terms. As Chestnut tells it, the VCs just weren’t very motivating.
Surfing the Wave of Luck
Bootstrapping meant Mailchimp had to be scrappy and resourceful. But Chestnut believes they also got lucky by riding several technological waves.
When they launched, managed hosting services like Rackspace were maturing. This allowed Mailchimp to scale up without huge infrastructure costs. Then Amazon Web Services arrived in 2006, unlocking cheap, flexible storage and computing capacity.
Timing played a role too. Mailchimp rode the growing wave of social media and direct customer interaction. Their “code, blog, tweet” strategy let them tap into user feedback to drive growth.
Of course, startups make their own luck with quick execution. As new platforms like Twitter arose, Mailchimp jumped on board early. This gave them outsized exposure and growth.
Freemium was another wave they caught perfectly. By offering key features for free, Mailchimp was able to acquire customers rapidly. The free users served as brand ambassadors as well, driving viral growth.
No doubt Mailchimp worked hard to build an amazing product. But its incredible rise likely doesn’t happen without catching multiple technology and business model waves at the perfect moment.
Staying Bootstrapped with Big Revenue
Today Mailchimp is still thriving after 20+ years completely bootstrapped. They employ over 1,200 people and pulled in over $700 million in revenue in 2020.
The company has been profitable for years already, so they weren’t forced to eventually seek outside capital. In fact, Chestnut still describes Mailchimp as a “weird little lifestyle business.”
Mailchimp’s run is remarkable in software. The company is valued at $4.2 billion as of 2016. Chestnut still codes every day and reviews every line of code shipped.
Could Mailchimp have grown even bigger, and faster with VC backing? Perhaps. We’ll never know for sure. But the bootstrapping approach clearly didn’t hold them back from enormous success.
Mailchimp’s story isn’t necessarily a blueprint every startup should follow. Most don’t have the benefit of repeated lucky timing and circumstances. However, it does demonstrate the heights a bootstrap mentality can reach with the right idea, market, and execution.
For founders with flexibility, patience, and discipline, foregoing VC funding is a viable path. You just have to be ready for the inevitable hustle and uncertainty. But you’ll end up with the satisfaction of having bootstrapped your own success story.
