
MailChimp’s founders built the company slowly by anticipating customers’ needs - kellegous
http://www.nytimes.com/2016/10/06/technology/mailchimp-and-the-un-silicon-valley-way-to-make-it-as-a-start-up.html
======
echelon
The Atlanta tech scene is blossoming, just like our film industry. We have a
couple of incubators, including a few that are funded/supported by Georgia
Tech. The cost of living here is super cheap, and there are brilliant and
talented people everywhere.

We have satellite offices for tons of major tech companies, so there are
traditional tech jobs too. Earning $200k here while the cost of living is so
low is phenominal.

You can comfortably live in the city with a roommate and pay only $500-600
rent. Just outside the city, you can get a 1200 sqft apartment for $700.

Our music scene is amazing, and the local food is fantastic.

I try to convince my friends in SF to come out here and give Atlanta a look,
but nobody bites. I think this city is an incredible opportunity, especially
for an early stage startup that wants to focus on growth prior to investment.
The talent is here, the city is amazing, and the rent isn't absurd.

~~~
oftenwrong
Is it practical to live in Atlanta without a car?

~~~
michaelcampbell
Not like it would be in NY or London, no. You can do it, and many do, but it's
more work than most would consider "practical".

Uber is pretty good though when you need it.

------
jasode
_> In fact, it’s possible to create a huge tech company without taking venture
capital, and without spending far beyond your means. It’s possible, in other
words, to start a tech company that runs more like a normal business than a
debt-fueled rocket ship careening out of control. _

The author, Farhad Manjoo, is romanticizing a bootstrapped business as "good"
and (via his prosaic examples of restaurants and dog walking) dismissing the
VC-backed businesses as "bad."

It should be obvious that the opposite can be true: a bootstrapped business
can also be dysfunctional and a VC-backed firm can be disciplined with its
money.

Bootstrapping is great strategy especially if you're company that doesn't
benefit from "network effects" such as Mailchimp/Sendgrid. You acquire
customers one at a time and offer a good enough value proposition for them to
subscribe or pay. A lot of SaaS/enterprise companies and lifestyle businesses
can grow that way.

Venture capital is really helpful when you need to deliberately grow
exponentially faster than bootstrapping will allow because you're trying to
build a giant footprint for the network effects. Snapchat is a good example of
this. It wouldn't make sense to try to sell the Snapchat app on App store for
$4.99 each so it can be cashflow positive and pay for programmer salaries. The
first users of their apps were teens in high school and they can't just
purchase an app like that without their parents' permission. If Snapchat
charged money for the app, they _wouldn 't even know_ that teens were the
leading edge of that trend. In that case, you need to wisely use vc funding to
pay the bills while you grow the audience. Hopefully, Snapchat will end up
profitable like Facebook instead of losing money like Twitter.

If you're a "network effects" startup that insists on bootstrapping as the
_only_ funding, you will be beat by the competitors that are willing to live
with $0 revenue for a few years while their equity financing allowed them to
build their user base faster.

~~~
mazeway
But it then bears the question that if the so called "network effect"
companies has any real value (that is to generate profit in the future) or are
manifestations of a bubble?

~~~
chatmasta
It's pretty clear that they have value, or the entire VC industry would not
exist.

At least, enough of them have value to pay for the ones that don't.

This is basic economics.

~~~
icebraining
That means they have value for the VCs (usually in the form of "exits", ie,
selling to other investors), but the question was whether they'll produce
profits (and consequent dividends).

------
taf2
It's called doing something kinda boring, consistently and doing it well. It's
hard to say in software when you really need huge capital if you can start
with the following:

1\. Some financial understanding of how to invoice, pay taxes and write
contracts - the business side

2\. Manage people, setting expectations and holding people accountable, while
empowering them to be successful in there job as clearly defined when hired

3\. Take action to address the immediate. Reds of the customer while always
keeping an eye on the longer term needs - always be available and responsive
to needs of the customer - email, phone, chat

4\. Have a solid foundation in the technical aspects of what you are building
and operating

If you have these 4 things and a product that is a good fit in an emerging
market than raising capital is probably not necessarily needed because you
have the resources and skills to make it happen. I think probably a 5th
requirement is you have enough personal capital to pay for your living
expenses until the business is making enough money. Also avoid hiring until
you can pay for double the salary of the first hire... this way if you are
wrong you have some padding and it's proved you can work through hard times. I
remember thinking before our first hire that this was way too much stress and
it would be so much easier when we have more people. Now at 16 employees, it's
an order of magnitude harder but I'm much more prepared than I was back then.
The children analogy is good I think. When you first have a child you think
this is going to be hard but they grow with you and so it's not so bad it's
even kind of fun

~~~
ttul
It always helps to do all this AND have amazing market timing.

------
ilamont
_“MailChimp’s path was circuitous, and it came without the glory of enormous
funding rounds.”_

It’s time to retire the idea that raising money equals “glory.” It’s not a
measure of business success as much as it is a measure of founders being able
to convince rich people to back them. As we know from the "XX is shutting
down" stories that regularly grace HN, many if not most tales of massive
fundraising success will eventually become business and investment failures.
Yet the TechCrunch/Fortune/BI coverage angles—pushed relentlessly by the
investment community and hired PR people—almost always emphasize the former
over the latter.

~~~
55555
moz.com is a good example of raising bad money. They had an excellent core
product and thus a business worth millions, then raised money to try to take
over the world. It turns out they couldn't take over the world, so now all
they have is the same core product and business they had prior to raising
money, except now they also have dozens of millions of dollars of VC
preference in the event of an acquisition.

I've toyed with the numbers in my head and I can't make them work; I think
they would have been much better off not raising any money.

(I'm just an outside observer.)

~~~
shostack
Not to mention stress that crippled the founder Rand.

------
ohnoesmyscv
Depends on what you mean by 'making it' as a startup - is it the revenue
growth? burn rate? profit growth? Number of users? Number of employees? A SF
office? How well funded you are?

It's hard to grow a business without going the conventional SV route and
getting VC funding. Unless you have a revolutionary product, the bigger
competition will likely stomp over you unless you have resources to grow your
team and product and marketing. Or if you are comfortable with a small market
share but a profitable one.

Not saying it is impossible, but just hard. I know a few SaaS out there like
Roninapp and Reamaze that like Mailchimp are not VC funded and are growing
well and are run by a small but effective team, but the question is would
startups like these benefit from funding and be in a better position with
regards to growth and user base than without vc funding?

More often than not when startups receive funding they move away from
satisfying the customers to making investors happy. As the company starts to
hire, get a nice office, increase spend on things like office perks, ads,
marketing etc while it might contribute to growth it doesnt necessarily work
well for the end user. You go from lean to bloat more often than not. I guess
that depends on how you manage resources but it isnt exactly easy with
investors breathing down your neck

I have a company that is bootstrapped and while there are well funded
competitors out there, i'm perfectly fine with my startup running lean and
being profitable, albeit slowly. At least I am my own boss and I answer to
myself, and that in my world is 'making it'.

~~~
adekok
> Unless you have a revolutionary product, the bigger competition will likely
> stomp over you unless you have resources to grow your team and product and
> marketing. Or if you are comfortable with a small market share but a
> profitable one.

Case in point, me. I started FreeRADIUS in 1999. Started making money in 2007.
Incorporated in 2008. I now have multiple offices, multiple employees, and
good growth. No investment. No debt.

The "bigger competition" in my case are AMdocs (previously Bridgewater),
Cisco, Juniper, Alcatel. I compete by offering a technically superior product,
at a lower price point.

I do zero marketing. Zero sales people. Pretty much zero RFPs. My customers
call me, and ask to buy my product.

I have a small market share by revenue, but a huge market share by
installations. My guess is that the total number of FreeRADIUS installs is 10x
that of all corporate installs combined.

> More often than not when startups receive funding they move away from
> satisfying the customers to making investors happy.

Exactly. My pitch is simple: We make you happy. You need customization? We do
customization. You need to integrate with a 10 year-old system? No problem, we
do that. We're about expertise, and keeping the money in our pockets, instead
of doing gimmicky "enterprise" stuff.

A counterpoint is one of our competitors. Their product relies on an
"enterprise grade" DB. Which means that for every dollar they make on a sale,
the DB company makes ten.

Uh... if that money is available, why leave it on the table? Drop an open
source database in (yes, it _would_ have worked. They need the marketing
label, not the technical capabilities). Give the customer a 50% discount. Your
cut goes from $1 to $6, and the customers price goes from $11 to $6. Everyone
is happy.

Nope. They couldn't make it big, so they got bought. And the new owner flogs
the crap out of the product, "end of life" the product every 2 years, and
forcing expensive upgrades. Which means that their customers call me.

It's all good.

~~~
55555
> I started FreeRADIUS in 1999. Started making money in 2007.

It sounds like you did essentially take venture capital, and you were the
investor.

~~~
adekok
Only in the same way that every hobbyist is an "investor" in their hobby.

Let's not pretend that hobbyist tinkering is the same as VC investment. It's
not, by a long shot.

------
hitekker
I'm curious if there's interesting data, information, or anecdotes about
bootstrapped, well-intentioned, well-executed startups being utterly floored
by VC-funded competitors. Particularly if the "average" or most common reason
behind a bootstrapped failure diverges significantly from the 'common sense'
reason, i.e., "bootstrapped startup couldn't move fast enough/expand quick
enough/hire great talent because bootstrapped startup didn't have the money".

~~~
crdb
In the particular case of MailChimp, their main competitor (AFAIK), Campaign
Monitor, decided to raise VC funding after about a decade of slow grind a la
MailChimp.

They hired a CEO with experience in 5 other VC funded startups (and with
burning cash) and moved into the most amazing penthouse, the last two floors
of a giant tower in the heart of Sydney with a 360 degree view on the harbour
and ocean and city, and a great kitchen with full time chefs, and of course a
marble-covered lift lobby.

In other words we have an A/B test.

~~~
replicatorblog
Constant Contact was another competitor, providing basically the same service,
they recently sold for a billion dollars while MailChimp grew alongside them.
If the market is big enough, it can support multiple companies.

~~~
davewritescode
They target totally different markets. Constant Contact is a superior product
for the less technically literate crowd. The hacker news crowd probably isn't
their target customer. I think live support is their key differentiator.

------
jonstokes
And then somehow they managed to totally disregard their customers' needs and
screw everyone with the Mandrill changeover. Seriously, has everyone forgotten
that fiasco?

[https://news.ycombinator.com/item?id=11170713](https://news.ycombinator.com/item?id=11170713)

I'll never trust them or use them again, after that. No way no how.

~~~
sb8244
My understanding of that is that the term customer shouldn't apply to free
tier heroku spammers. It is a very secretive company about most things related
to way of business, so I can only speculate and from what I heard around town,
but most of the customers there were not good sustainable fits.

I've had extremely negative experiences in their customer support, but also
extremely positive experiences through their community engagement as I'm local
to them.

~~~
dangrossman
Mandrill had over $1,000,000/mo in -paying- customers. We got no more time to
transition off them than the free users did.

Switching e-mail providers is not something you can do overnight if you send
large volumes (large volume does not mean spam: I send purchase receipts,
contact forms, notifications, password resets -- transactional mail not ads).
Even if you have a team of coders that can drop everything to start
integrating alternatives, you need time to warm up your new IP space at a new
provider, or your mail ends up in spam folders.

MailChimp screwed a lot of customers, and customers' customers when they gave
only 60 days notice.

------
nathancahill
Too bad. After the Mandrill/MailChimp price hike, every company I've worked
with is moving off of them as fast as possible, towards Mailgun/Sendgrid.

------
brightball
I don't see why this is a surprise. From my observation, there are typically
two types of startups out there.

1\. Startup with a clear revenue model created by generating tangible value
for businesses.

2\. Startup without a clear revenue model that is doing something interesting
and will probably be acquired if successful.

The first is a successful business like MailChimp that can grow itself from
it's own revenues and doesn't need funding. The second is the type of business
that needs funding because they are essentially investing in building
technology to sell to a larger company OR are building a large pool of users
to sell to a larger company.

------
combatentropy
A similar message is in _Getting Real_ , a free PDF by the makers of Basecamp:
[https://gettingreal.37signals.com/](https://gettingreal.37signals.com/)

------
fideloper
Interestingly in the marketing space (in particular, email-based marketing),
all the tools I gravitate towards have been bootstrapped rather than funded:

Mailchimp, ConvertKit, Drip (altho lead pages bought it, and is actively
funding it's growth), curated.co (I'm not 100% sure on Curated - is that
funded?), Edgar

These types of apps can actively and easily translate into $$ for businesses,
so it's no wonder they can bootstrap rather than take on funds - individuals
and businesses are willing to pay to make money!

~~~
stunod
how has Edgar been for you?

------
sametmax
Then it's not called a start up, but a normal company. How is that a
revelation?

~~~
yitchelle
Isn't "statup" the phrase of the day used to described a nornmal tech company
anyway.

~~~
randall
[http://www.paulgraham.com/growth.html](http://www.paulgraham.com/growth.html)

~~~
Avshalom
Yeah but before that it was "a company in search of a repeatable business
model"

and I believe before that it was mumble-mumble-innovator's-dilemma-mumble

------
wslh
We really need this contrarian view of startup creation. In a way, having a
few millions in profits can't be called a lifestyle business, your business
can't scale more and you are happy with what you created and control. Also,
only the process to get initially funded is very time consuming (e.g. look at
the kickstarter videos).

------
Ayraa
As a regular user of all the main email marketing services:

I feel Mailchimp is missing the boat by focusing entirely on email and not
offering a way to contact customers via:

1\. In-app messages 2\. SMS 3\. Push notifications

It's also difficult / impossible to set up advanced automation sequences with
it. For example, if Customer X does Y on your site, direct them to another
branch with a different sequence.

Of course, their main target customers are small businesses so they may not
need these advanced features but these customers would benefit tremendously
from being able to for example text certain messages to customers instead of
only being able to email them.

------
pitchups
Another example of a company that has grown quite large without using venture
funding is Zoho.com - based out of Chennai, India. They are even larger than
Mailchimp in terms of revenues - clocking over $1 Billion and with over 3000
employees.

[1] [https://pando.com/2014/10/14/anti-burn-how-bootstrapped-
zoho...](https://pando.com/2014/10/14/anti-burn-how-bootstrapped-zoho-
survived-two-tech-bubbles-and-became-a-massive-success/)

~~~
sridharvembu
(Zoho CEO here) Thanks for the mention, but we are not yet at a billion
dollars - we wish we were, though we are gaining on that goal :)

We are bootstrapped like MailChimp, have never taken any venture capital, and
we won't. We have focused on building what we call "the Operating System for
Business", because we envision that all the business applications will come
together. That's why we have so many engineers to build that vision. By the
size of the engineering workforce, we are probably already bigger than
Salesforce.

------
gopi
I think such a story is difficult now unless its a niche small market. Lets
say someone start a company and stumble-upon a massive market but decides to
grow slow financed by revenue. The problem is others are going to copy the
idea and grow fast with VC money and crush the original company. May be
possible in the next downturn when VC money dries up

Read Blitzscaling by Reid Hoffman -
[https://hbr.org/2016/04/blitzscaling](https://hbr.org/2016/04/blitzscaling)

------
ungzd
Glory to the company but shame to modern internet — you have to use one of few
"email providers" instead of just installing Postfix otherwise all your emails
go to spam folder.

~~~
sumedh
To be fair, they also provide link tracking, email opens, bounce rate etc, so
these companies do provide value to users.

------
yoamro
If you can continue growth and profitability without taking outside investors,
great for you and I recommend it. The reality is, a lot of times founders are
faced with the problem of funding/paying bills and are left with no other
option than to take VC money. If you go down that route, just make sure that
everyone on-board has the interests of your users in mind.

------
qwrusz
The article seems to acknowledge Silicon Valley is good and prolific at
startups to the point of metonymy. SV is the standard way, and so you get
descriptions like "Un-Silicon Valley Way" instead of say the "Atlanta Way"
(another startup from Atlanta called Coca-Cola appears to be doing OK too ;))

But why does this article have this tinged negativity toward SV? Why not just
highlight MailChimp's success without the jab on VCs? Clearly both VC or
bootstrapping approaches can work for a company (though both approaches fail
in the majority of cases and journalism is in love with survivorship bias).

I'm not in SV, but it's obviously the place important innovation has/is/will
be coming from (and some crap too). Innovation and growth is needed and should
be encouraged in this economy.

Just frustrating to see big journalism knock SV for no reason.

Better story: "Chimps and the Un-Silicon Valley Way to Make it as a Primate".

~~~
w1ntermute
> why does this article have this tinged negativity toward SV? Why not just
> highlight MailChimp's success without the jab on VCs?

VCs are easy to hate: they're rich, successful, powerful, and mostly straight,
white men who had privileged upbringings.

------
traviswingo
"Believe it or not, start-ups don’t even have to be headquartered in San
Francisco or Silicon Valley."

Lol. This was a great read. But yeah, don't take money unless you literally
cannot finance your growth. A real business builds itself.

------
ex3ndr
Isn't VCs needed for building such company not in 16 years but in 2-3?

------
rsp1984
What a lot of people miss (including the author) is the time factor. Yes you
can bootstrap a business and grow things organically once you have found
decent product/market fit. The problem is that it will just take a much longer
time until you reach certain milestones than with a VC-based approach.

 _" There is perhaps no better example of this other way than MailChimp, a
16-year-old Atlanta-based company that makes marketing software for small
businesses."_

This just kind of proves the point. If you have a company with great
product/market fit and lots of VC in the bank you would either reach their
numbers much quicker or have higher numbers after 16 years of operation.

------
pjlegato
> _a tech company that runs more like a normal business than a debt-fueled
> rocket ship_

Most tech startups are funded with equity, not debt.

------
Animats
Spam is profitable.

(And yes, Mailchimp is a spammer, based on the Spamhaus definition of spam.[1]
It may be legal, but it's still spam.)

[1]
[https://www.spamhaus.org/consumer/definition/](https://www.spamhaus.org/consumer/definition/)

~~~
bildung
According to that definition, you're wrong: Mailchimp doesn't fulfill the
first condition. In my experience, Mailchimps interface puts heavy emphasis on
having opt-in proof for the addresses you use, having to include unsubscribe
links and sender's postal addresses etc. Yes, they don't technically enforce
it, but how could they do that without also preventing legitimate use cases
like importing addresses from a competitor's service?

~~~
criddell
There are some easy things they could to though.

Cory Doctorow had this exchange with them:
[https://twitter.com/doctorow/status/641660268720689152](https://twitter.com/doctorow/status/641660268720689152)

I think Doctorow's request was entirely reasonable.

~~~
Animats
If they gave you enough info to opt out effectively, people would _do_ it.
Also, then people could check up on them, checking the list of claimed "opt
ins" for spam trap addresses. Giving the user that access would allow users to
definitively catch spammers and mailing services in lies, and could lead to
prosecutions under the CAN-SPAM act.

------
kareemsabri
Works better in a market that is not "winner take all".

------
Taylor_OD
and my buying ad space on every podcast ever.

------
balls187
Mail...Kimp?

------
veryhungryhobo
I'm looking to write a powershell script for creating lists and updating
subscribers for mailchimp api v3. However, Im kind of lost. I only found old
code samples. [http://poshcode.org/3479](http://poshcode.org/3479)
[http://poshcode.org/3351](http://poshcode.org/3351) Does anyone know any new
code samples for mailchimp v3 api for powershell.

------
gallerytungsten
You know what word doesn't appear in that story?

Spam.

Mailchimp is a company that provides lots of unsolicited commercial emails. In
other words, spam. You can dress it up and call it "marketing software for
small businesses" but that doesn't change the essential fact: Mailchamp is a
spammer. Is it any surprise that spamming is profitable?

I've received hundreds of Mailchimp emails. Not once did I sign up for any of
those lists.

Does Mailchimp make it easy to unsubscribe? Sure. But that doesn't change the
fact that they are spammers, and that if you want to send spam with some semi-
plausible deniability that you're a spammer, Mailchimp is probably a good
choice.

Of course, this story, like nearly all "business news" stories, is very likely
the work of a highly paid public relations agency. That is one more reason
that the word "spam" does not appear in this story.

~~~
samsolomon
I've got to disagree with you. I'd say MailChimp has elevated the perception
of email marketing.

MailChimp has pretty strict standards when it comes to sending emails. If you
send emails to a list that has a 20 percent or more bounce or unsubscribe
rate, they'll freeze your account.

Other providers let you upload a CSV with emails and blast out campaign after
campaign to purchased lists without repercussions.

~~~
vram22
> If you send emails to a list that has a 20 percent or more bounce or
> unsubscribe rate, they'll freeze your account.

Without giving you a chance to do anything to correct that? What if it is a
genuine case of non- spam? e.g. 100% signed up, soon after, 20% decide this
list is not for them. Sometimes that might happen.

~~~
samsolomon
When you unsubscribe from a Mailchimp email, they ask the recipient why they
are unsubscribing. If the recipient marks "I never subscribed" or "this email
is spam," the threshold is probably much lower than 20 percent. The software
tries to decide if your emails were malicious.

If your account is locked, then you have to call MailChimp and explain that
your intentions weren't malicious and that you won't send anything else to
those emails from your account.

I had a small email list that I had not sent anything in about a year and had
my account locked after sending a campaign. People just forgot they were on
the list, because it had been so long. Their support team unlocked it and
suggested that I send an email at least every 6 months.

~~~
vram22
At least there's the possibility to get it unlocked. Clear now, thanks.

