- Nathan Barry: Bootstrapping a side project to $33 Million ARR
Nathan Barry: Bootstrapping a side project to $33 Million ARR
On December 31, 2012, Nathan Barry announced a Web App Challenge - to build a SaaS from zero to $5,000/mo in 6 months. The rules:
No existing starting idea
Can only spend $5,000 to fund (including outsourcing development of the app)
Can't spend more than 20 hours a week on this project
Today, ConvertKit is one of the leading email marketing platforms redefining how a bootstrap company should run. All of their metrics are completely viewable (including MRR, churn, etc), employees are paid via profit sharing, and the company focuses on profitability and steady growth.
Here's how Nathan turned a failing side project into a $30 Million ARR company 👇
A Failed Side Project
Before starting the Web App Challenge, Nathan quit his job to go full-time in writing and selling books about web design and building products. His info-products were very successful, generating over $80,000 in a few months.
He noticed email marketing was the most robust channel to sell these digital products but faced many pain points with the current solutions like Mailchimp. So, he decided to build an email marketing platform that would make it easier for anyone to grow an audience and sell a digital product
The launch of ConvertKit was pretty successful, they had preorders and grossed over $5,000.
But growth stalled, MRR peaked at only $2,400 after 6 months when the challenge ended, and Nathan decided to continue selling books and courses full-time while working on ConvertKit on the side.
On October 2014, ConvertKit MRR dropped all the way down to $1,200. Expenses were high and Nathan was left with two choices: Move on from his failed side project or commit everything.
Nathan didn't want to quit ConvertKit, he knew the product had potential. His 5-figure monthly product launches and 30,000 subscriber email list were living proof it works!
Motivated to turn things around, Nathan invested $50,000 (most of his savings at this point) to hire a full-time developer and work 100% on ConvertKit. His book sales dropped, leaving thousands of dollars a month on the table, but he didn't care. He was only focused on ConvertKit.
Up until this point, ConvertKit's mission was for "anyone trying to build an audience and sell products online". But this attracted the wrong audience, and most customers were quick to cancel their project.
Instead, Nathan thought "who is this project for". Ideally, someone who builds products and sells them to an audience, like himself. He rephrased ConvertKit's mission to "email marketing for authors" (by authors, he means creators but this was 2014 when nearly no one used the term).
Specifying a target audience allowed Nathan to focus on building the correct features for the niche and better marketing. By March 2015, ConvertKit hit $5k MRR.
The Two Biggest Growth Methods Used
So how did ConvertKit go from $5k MRR to $30k MRR in a year, and then $450k MRR a year later? Nathan didn't scale crazy, he focused on keeping a small team, profitability, and building for creators.
And they didn't acquire users by spending millions on Facebook Ads, instead, ConvertKit's growth came from two things: direct sales and referral program
The Power of Direct Sales
Nathan understood the power of word-of-mouth growth, but in order for that to work, you first need customers. And the best way to get customers is through direct sales. Nathan would actively make a list of bloggers using competitors, such as Mailchimp and AWeber, and reach out to them. (He would find leads using sites like BuiltWith and sort by Alexa/SimilarWeb ranking)
He'd introduce himself, ask what frustrates them about their current email marketing platform, and then offer a 30-minute Skype call to onboard them to ConvertKit.
Getting top creators and bloggers to migrate to ConvertKit was key. Bloggers had strong "referral systems" since people like to copy the same tech stack as their favorite creator. Nathan kept close relationships with the top users and even maintains them to this day.
(Check out this tweet earlier this year trying to get Sahil Bloom to convert to ConvertKit)
People say direct sales isn't a scalable method, but Nathan says otherwise. Eventually, you build a team that implements the exact same sales strategy you used to grow initially, and scale the team. It's why Slack has one of the biggest sales teams in the world!
Nathan did a lot of research on why people choose Mailchimp over AWeber and vice versa. He noticed both platforms had similar features, but a lot of reviews sided with AWeber. This is when he found out AWeber has a 30% commission affiliate program, which made it highly lucrative for content sites to write high-quality reviews and refer AWeber.
As you might have guessed, Nathan quickly implemented the same exact program for ConvertKit. A large majority of their creators quickly began to use the affiliate program, and it was responsible for nearly 1/3 of their acquisition in 2018. Nearly 7 years later, ConvertKit still offers the exact same affiliate program!
Nearly 10 years after his original Web App Challenge, Nathan Barry has built ConvertKit into a $33 Million ARR company. But the journey wasn't easy, it required a lot of direct sales, content marketing, and even financial struggles/worries.
But at the end of the day, ConvertKit is making the world a better place for creators. They're highly transparent, and you can visit all of their stats here
Thanks for reading, and I hope this helped you or you found it interesting! If you want to give some feedback, you can either respond to the poll or reply to this email.
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