About this episode

Ben Chestnut is the CEO and Co-founder of Mailchimp, a leading marketing platform for small businesses and Inc’s 2017 Company of the Year. They democratize marketing technology for small businesses, creating innovative products that empower our customers to grow.

So much of the startup noise today is about how much you've raised or if your startup is even worthy of investment. I want you to understand the idea of entrepreneurship that has been propagated in today's media outlets is not the standard or the norm. You do not need VC money to build your business or to validate that you have something worth pursuing. So when you hear Ben's story, I hope it leaves you walking a bit taller, knowing that it is absolutely possible to build a billion-dollar business one customer at a time and with no investment capital. In fact, Ben learned from a very early age that anything is possible as long as you're willing to put in the work.

In this episode, you'll hear.

Ben’s early days and what led him to start MailChimp.
Ben’s thoughts on bringing capital into the business.
How he stayed the course despite competitor noise.
Tactics Ben used to acquire his first 10,000 users.
How to determine pricing and consumer tolerance in a SaaS product.
How COVID-19 has affected Ben and his leadership team.
Ben’s advice to any entrepreneur who feels stuck.

Resources from this episode

ExpressVPN: Get 3 Months Free → ExpressVPN.com/StartupStory
The Startup Story Inner Circle: https://www.thestartupstory.co/vip
Ben Chestnut on LinkedIn: https://www.linkedin.com/in/mailchimp/
The Startup Story on LinkedIn: https://www.linkedin.com/company/thestartupstory
The Startup Story is now on YouTube: https://www.youtube.com/jamesmckinney
The Startup Story on Instagram: https://www.instagram.com/thestartupstory

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Episode transcript

The Startup Story - Ben Chestnut

Ben Chestnut: Hi, I'm Ben Chestnut, cofounder of Mailchimp, and this is MY startup story.

Every wildfire began with a spark. Every superhero has an origin story. And every single startup has a moment that they point to as their beginning. And every founder has a purpose that drove them in the midst of all obstacles. THAT is The Startup Story.

James McKinney: Welcome to another episode of The Startup Story. About three weeks ago we held our first ever private livestream event for our Startup Story Inner Circle members. Our guest founder for this event was Ben Chestnut, founder of Mailchimp. The entire goal of this event was to give all those in attendance the opportunity to ask Ben their entrepreneurial questions directly to him and it was a tremendous success. We had attendees from the UK, Canada, Germany, and of course the US. It was a remarkable experience for all those in attendance. Well, I thought it would be of value to the larger Startup Story audience to release a segment of our time together with Ben.

But before we get to his episode, I want you to know that another private livestream event is coming up on September 10th with Russ Perry, founder of Design Pickle. Russ has created a company that allows entrepreneurs like you and I to have unlimited graphic design work completed with a flat monthly fee. I'm excited for this chance to unpack Russ' business model because from the outside I just can't wrap my head around the various layers of human interaction involved to deliver such a service at such a low rate. I'm looking forward to discussing his customer acquisition strategy because again, from the outside, his audience appears to be the same audience type that I serve, entrepreneurs.

So if any of these topics are of interest to you - customer acquisition, how to get started, the capitalization of it - then make sure to join us on September 10th for our private livestream with Russ Perry. Like I've said before, this is the opportunity tohave your startup questions answered directly by a founder that is a bit farther down the road than you are. To help you understand his tactics and strategies so that ultimately you can accelerate your personal entrepreneurial journey by learning from Russ' journey. But here's the thing, you need to be a member of Startup Story Inner Circle.

Look, if you're not already an Inner Circle member then you missed out on our private livestream event with Ben Chestnut, founder of Mailchimp, our private livestream with Julie Bornstein, founder of the Yes and Stitch Fix board member. So this is an opportunity that you want to be a part of then all you need to do is join The Startup Story Inner Circle ASAP because our recording session with Russ will be taking place on Thursday, September 10th. Don't let this rare opportunity pass you by. Just visit thestartupstory.co/VIP tosign up today so you can be part of this super private event. When have you ever been afforded the chance to sit with someone who has accomplished so much within the realm of business and entrepreneurship, and receive direct mentorship from them? This opportunity truly can change the trajectory of your business but it is only for The Startup Story Inner Circle members so visit thestartupstory.co/VIP today. All right, now let's jump into this week's episode as we share a segment of our live recording with Ben Chestnut, cofounder of Mailchimp.

Now just to tee up the uniqueness of Ben's story, I thought you might want to know why interviewing Ben was on my bucket list, if you will, of founders to interview. So much of the startup noise today is about how much you raise or if your startup is even worth of investment. If you remember back a few weeks, we had Christina Stembel of Farm Girl Flowers on the show, and she has received over 80 "no" responses from investors despite double digit growth year after year, and she's on track to hit $60 million this year. And even saying $60 million despite COVID. Her story doesn't get nearly the attention it would if she were to close a Series A round of funding. For some reason, the media loves the fundraising narrative and not the bootstrap story.

Well, Ben's is somewhat similar to that in that Mailchimp is now valued over $4 billion and they've received zero investment capital. We will definitely be unpacking that element of Ben's story within this episode, but I share it with you up front because I want you to understand the idea of entrepreneurship that is being propagated in today's media outlets is not the standard or the norm. You do not need VC money to build your business or to validate that you have something worth pursuing. So when you hear Ben's story I hope it leaves you walking a bit taller, knowing that it is absolutely possible to build a billion dollar business, one customer at a time, and with no investment capital. In fact, Ben learned from a very early age that anything is possible as long as you're willing to put in the work.

Ben Chestnut: My mother ran a hair salon in the kitchen. I've learned that that's called a "kitchen tician", but yeah she ran a hair salon in the kitchen. The ladies from the neighborhood were always in there. They would bring their kids. I got to see business right there in our house and customers were always filling up the living room, the kitchen, the dining room. I like to joke that to this day if I close my eyes and think about business it has a smell, and the smell is cigarette smoke and hairspray. So that's what I know about business, and I have fond memories of watching my mother talking to customers, helping them out, the money exchanging hands. And when it's business, it's business. I remember going fishing with my dad and coming home and showing my mom the big fish that I caught, and she'd say, "That's great, that's food I can sell to the customers." And she'd just take it and fry it, and she'd sell it. I thought I was feeding the family, but in a way I guess I am.

James McKinney: That's awesome, I love it. In fact, early age transactions in the business department. So growing up, what did you think you wanted to do? You had this example of your mother who's running a business in the house. I'm sorry, what did your dad do?

Ben Chestnut: He was in the military.

James McKinney: Oh really, what branch?

Ben Chestnut: The army.

James McKinney: Oh, excellent. So I'm a Marine Corps vet, so thank your dad for his service as well. But when we think through your upbringing, you had this entrepreneurial example. Again, I don't know what aunts and uncles might have done, or any other influence, but as you're getting to the end of high school, what did you think you wanted to do? Because that's a natural next chapter for us. So what were you thinking you wanted to do?

Ben Chestnut: Oh, by the end of high school I thought I wanted to be an automotive designer.

James McKinney: Really?

Ben Chestnut: I wanted to design cars, yeah. I love cars.

James McKinney: Let's unpack your middle school, high school years. What was it towards the leaning of cars that was of interest to you?

Ben Chestnut: Probably the independence aspect of it, just being able to get in your car and drive and get away. That was very empowering to me. But also just the design of the darn things and the challenge of designing them, the engineering that's behind them. Every car is like a microcosm of a business. There's design, engineering, manufacturing, the marketing of it, the brand behind the car. Everybody at Mailchimp, they're sick of my car analogies. I've got a car analogy for everything. You can also tell who's gotten the cheats to get through to Ben. They put car analogies in all of their presentation. I always loved them and I thought I had to be an engineer. I asked my dad for auto cad software for our computer, and I thought I had to go through that whole process.

Then I got to college and my first year in I had signed up for physics and all the engineering type classes, and then my sister who was working at Hallmark around a lot of creatives and designers, she knew what I wanted to do. She asked her friends and they said, "Why is he studying engineering? He could study industrial design here." They gave her, I remember it was a college book from Art Center in Pasadena, and she mailed it to me in like a care package, because she's from Hallmark and they're caring. I got a care package like first or second week of school, freshman year, and I get this and half of me is in love. I'm inspired. Half of me is like oh my God, I signed up for the wrong major.

James McKinney: Oh man.

Ben Chestnut: And so that began the process of looking for an industrial design school, and I found one in Georgia, at Georgia Tech. it's a pretty darn good one. And that began that process. I transferred after a couple years.

James McKinney: So you did, again you're pursuing this automotive design is what you're wanting to do. And again, we are not talking to you because you're an amazing automotive designer, although I'm sure you probably have some sketchbooks and some files on your computer that you messed around with a bit. But how do you get from automotive design to Mailchimp? There's probably so many steps in there. So can we talk about some of those steps? What happened in college where you realized I don't want to be doing this?

Ben Chestnut: Well I was in college. I just wanted to get near the computers, the computers where you did the design. I wanted to do 3D design. I started to study that. From there what happened? Oh, my brother in law, he was working in Iowa for Amana appliances and he invited me to come up and stay with him in an apartment one summer, working at an appliance company as an industrial design intern. That was the year when the Olympics was in Atlanta so all of my friends were staying in Atlanta to participate in a once in a lifetime thing. I was like uh, I've got to think about my career. I was such a nerd. I was like I've got to build up my resume, I'm going to Iowa.

James McKinney: Oh my goodness.

Ben Chestnut: I leave the Olympics behind, I drive up to Iowa and I was an industrial design intern. I wasn't good at it. I flat out just wasn't good at building the models. There was an industrial designer in the room. He took me aside and he said, "You don't want to do this. Get into web design."

James McKinney: Wow.

Ben Chestnut: "There's more money there, you should look into that." So here, I was making these steps again. And again I was like oh my God, I made the wrong decision again. So I started to research web design and what I loved about it was the same aspects of industrial design. You design, you engineer, and then you put it in front of customers but unlike a car which at that time was taking five years to get out to market, Chrysler was innovating and getting it down to like three years. The fastest you could do was three years? With a web design, you could get it up in hours and you could see traffic, and you could see how it performed. I was just addicted to that. So I started to study web design in college in my final year.

James McKinney: When we think back to mid to late nineties in web design, it was very early on. Gosh, what was, Geocities I think was like one of the first CMS platforms that people could leverage for their own website? When you think back to the beginning of your web design career in the mid to late nineties, what were you seeing from a creative space? Because there just wasn't a lot of examples of what could be. It was so early.

Ben Chestnut: Oh it was the Wild West. You had to learn everything. You had to learn how to code. We didn't even know what colors were web safe. We had to rely on remember Lynda Weinman's books. She progressed that to lynda.com eventually but it was all Lynda's books. We were all just hacking everything. It was fun, but I mean it was like you designed for one screen size and then PC's would come out with another screen size, and then you'd have laptops and then web TV. It was insanity. But it was fun, you know? We were learning.

James McKinney: There were no boundaries for what design could be. In fact, there were a lot of, I remember designing web pages in the late nineties and man, I wish I had a screenshot of what some of them looked like because they were button laden. They were just infinite buttons on what I wanted-

Ben Chestnut: Scrolling marquees. Link tag, that was so controversial. Remember that?

James McKinney: I do, oh my goodness. So you have this I'll say mentor, this boss of yours for your internship telling you that you don't want to be an industrial engineer, you want to do web design. So I'm assuming you come back to school. Did you change majors or was this just something you learned on the side and you finished up your degree?

Ben Chestnut: There was no major. I went all over the school. No one knew what I was talking about, it was still too new. If I wanted to learn coding they would say, "You mean C, C+" or something like that. The closest I could find was maybe Java Script. There was nothing. They have it all over the place now, but back then, no I had to teach myself. I had to, in the multimedia lab where I worked I found every excuse I could to build a website for any professor. We had a professor who taught art and architecture history, and he had like 1000 old school slides that he needed us to scan and build into a website, so I took on that project and we just learned as we went.

James McKinney: That's incredible. So what happened as college came to an end? What was that step for you? Because now you have a degree. Maybe student loans, maybe not, but what was that next chapter as college ended for you?

Ben Chestnut: Well, you know right before it ended I started a little freelancing business and I was getting a lot of business on the side doing websites. I knew I was in love with it. I looked around for a web design job. It just wasn't working. I think my style, no one really understood. I was approaching it like a renaissance man. I wanted to design, I wanted to code, I wanted to do it all. I was interviewing at ad agencies that said, "We just want a designer. The coders do the coding." Or it was vice versa, you just couldn't find it. I was scared because I had just a couple of weeks left before graduation. The timer was going down, and my girlfriend at the time, she's now my wife, she had moved in with me into my dorm room.

James McKinney: Oh my goodness.

Ben Chestnut: So I needed a job bad. Our plan was to get married immediately after and so a friend of mine had gotten a job designing banner ads, and I'm Mr. Hoity-toity website designer, I'm like, "I'm not doing banner ads." I looked around at that same company and they had a job for a website designer so I applied. My resume went to the wrong person. I showed up for the interview and it was the banner ad design job. And I'm half way through this interview, and again I'm like oh my God, in the wrong place again. Made the wrong decision again. But I find out halfway through that this is a banner ad design interview and my future boss told me the pay. It was like $3,000 more than the web designer job so I just took it. I said screw it, I need the money.

James McKinney: Yeah, oh wow.

Ben Chestnut: I took the banner ad design job and it was probably the best thing that ever happened to me because I learned how to design things really succinctly in a tiny little slot, grab people's attention, and make them click. And it was scientific. We always got the results minutes after running a banner ad, so I could just see in real time how to influence thousands, millions of people to click on things. It served me well.

James McKinney: No kidding. So how long were you at that company for?

Ben Chestnut: Oh, it's a blur. Maybe just a couple of years before the internet really started to explode, really get popular, and then I transferred to another division which shut down within just a few months and laid all of us off.

James McKinney: Oh my goodness. Now that had to have been, if I'm dating things correctly just based on internet and technology, that was probably near the dot com bust?

Ben Chestnut: That was April 2000 where everything just imploded, yeah.

James McKinney: What was that season like for you? You were an employee let go. You're in technology. It seems to be falling apart. What was that season like for you? And then what were your next steps out of that?

Ben Chestnut: It was more than just being in technology. You're coming out of college around '99, 2000, all the magazines you're reading, all the business research you're doing, it was all about the internet economy which never made any sense back then, but that was the truth. So for me it was like all the truth I had been told about business was wrong. That's what it felt like.

James McKinney: Oh man.

Ben Chestnut: Like a huge betrayal is what it felt like, so I didn't know what to think. I was lucky. That boss who hired me to do banner ads, she called me two weeks before we were laid off because she had inside information.

James McKinney: About coming back? Or what was that information?

Ben Chestnut: She connected me with some people who could bring me back to the mother corporation, the mother ship because this was like a spin off that we were working at. But I had two weeks before the whole thing shut down to kind of make my plans, and that's when I started doing some research and thinking the parent company was very generous. I knew they would probably try to find a home for me but if I did, I probably would never try to become an entrepreneur, and I knew I had that in my. I knew that if I didn't try, I would regret it.

James McKinney: So let me get this straight. If I'm understanding the timetable right, the internet world falls apart. You find yourself unemployed, potentially being offered a secondary opportunity, and you're thinking about starting your own company.

Ben Chestnut: Yeah. I got an interview at the parent company. I remember that senior manager showed me an organization chart. He knew that I was a hard worker. Id' really advanced fast in the company. I came highly recommended by my former boss, and he said, "Here's the org chart, point to where you want to be."

James McKinney: Wow.

Ben Chestnut: That's an extremely tempting offer, and very generous. I'll never forget him for that. In that moment, I just felt like if I take it I will regret it because I will never try. I need to try to be an entrepreneur. It wasn't bravery, it was fear. But it was fear of regret. Regret is something that scares the crap out of me. So I just didn't want to regret.

James McKinney: I have to ask the question, and this question comes from my own personal experience. Were you married at the time? Because you said she was your girlfriend, so I'm assuming you're married at the time.

Ben Chestnut: high school sweetheart, yes, we were married.

James McKinney: So you were married at this time. You lost your job. What was that conversation like? Because you're without income. Again, the world is falling apart. All headlines are the internet is a bust, it was a bubble that burst. Nothing was positive out of it. What was the conversation at home like when you're like, "I want to do something on my own"?

Ben Chestnut: I took her to dinner. Took her out to dinner-

James McKinney: Always a salesman.

Ben Chestnut: … I needed her permission. I needed her buy in obviously and she was so nice. She said, "This is something you've wanted to do, you need to go try it." But look, the reality is she was a nurse. She was a nurse and she was getting really good income and health insurance, and that's what helped us really take that leap. If she wasn't a nurse I don't know that I would have had the courage to do it.

James McKinney: And I ask that question because in entrepreneur, there's a lot of times, a lot of the narrative is this solo journey narrative and it's like without consideration of the family, like no. if you're married there is a conversation that took place, what was that. Because we may have want- repreneurs, watching us now or going to be listening to the episode for sure. We have want-repreneurs that have a book full of dreams and ideas, and not quite sure what to do. Part of that narrative is I have family and a mortgage, and I don't know if I can do this. So to hear people like yourself having those conversations I think sometimes it's a vocabulary word that people just don't even think. Maybe I should just talk to my spouse about this, we might be able to figure a way out together, versus this heroic mindset that I'm going to come with a business plan and solution to my family table, and that's not always how it works.

Ben Chestnut: Yeah, I didn't come home and say, "Guess what hon? I'm starting business." No, I said please.

James McKinney: Love it. Absolutely love it. So what was day one when it came to your own venture? Was it web design? Did you bring on a business partner? Did you have a strategic partner you worked with? What was that venture?

Ben Chestnut: Day one we were a web design agency, and when you say day one, you brought back a memory. I was excited to start. April 10 was supposed to be the first day, you can see how well prepared I was, right? April 1 laid off, April 10 I start my business. I was saying this is day one, this is the first day of my new history, my new future. The day before day one, 3 a.m. my cousin called, her father passed away. I was just like oh my God, this is so much going on. It just felt like a lot was working against me, a lot of headwinds already, just on day one.

See, since I had that two weeks advanced notice and time to prepare, I already had two clients, two paying clients, ready to go. I'll never forget the two invoices. I had a $13,000 project and a $35,000 project ready to go.

James McKinney: That's awesome.

Ben Chestnut: So I mean day one, I was ready.

James McKinney: That's an incredible start, incredible start. So now part of the Mailchimp narrative, and we get there through this venture that you have, and somewhere along the story you have a business partner that comes into play. But this web design firm is really where Mailchimp kind of has its beginning stages. So can you walk us through this venture and how we get to Mailchimp?

Ben Chestnut: Well, we were a web design agency for, oh my gosh, 10 years or so, 7 years I think. It was just rough. It was a service business and you know how that goes. When we were pitching clients and doing the work, you could do both at the same time because we were so small. I was doing the work. If I was working, I wasn't selling. If I was selling, I wasn't working and making any of those billable hours. It was just tough. It was a grind and it felt like… the name that we came up with was Rocket Science Group. All kinds of reasons for that, but what it ended up meaning was we could never make a mistake because our clients would say, "Come on guys, it's not rocket science. What's up with your name?" A lot of extra pressure on us.

But I started to look ahead and dreaming about how are we going to make $1 million? How are we going to make $1 billion? And started to research ad agencies and other service based companies. IBM was getting into service. And so I looked at it and just said oh my God, it's about the billable hours. It's about all the heads. It's about managing tens of thousands of people. I felt like that was my weakness. I wasn't going to ever be able to be good at that, and I said maybe there's something more about software that I should look into.

My wife was off, or she was a night shift nurse so during the day while I was working in the home office she was right next to me watching Oprah and kind of resting and catching up. There was an episode of Oprah she had running in the background, and I'm trying to work, and I'm like rolling my eyes, why are watching, I've got to listen to Oprah all the time. And there was a guest she had on and it was resonating. What he was saying was controversial. The audience was yelling at him, telling him he doesn't know what he's talking about, and it was this guy named Robert Kiyosaki talking about Rich Dad, Poor Dad. Remember that book?

James McKinney: Yep, yep.

Ben Chestnut: He talked about passive income and recurring income, and that's the only way to really make it. You know, I turned around, I listened to this guy, I was like I think he's onto something. Mailchimp was just a side project for a handful of our web design customers, and it was very manual. We logged in and we sent the emails for them. And then I'm listening to this guy on Oprah and I'm looking at our software, just saying how do I automate this thing? How do I make it just so that our customers can just log in and use it themselves? I was sick of doing it myself, sending out an invoice for $50 or $100, and then I had this stack of checks that I always had to deposit. It's a nice problem to have, but it became a chore to take this big pile of checks and deposits them all the time. And so I just I asked my cofounder how do we charge credit cards, how do we make it just automatic? And that's what made us become a SAS company. We were one of the first, this is circa 2005. Starting in 2005 we started to run both companies at the same time.

James McKinney: Interesting. So in that story though, you talk about how you were sending these emails for your client. Can you give us a perspective of the landscape in 2005? Why the need to create an email system for your clients? Was there nothing existing in the years that you were needing to serve that for your customer?

Ben Chestnut: Well, email marketing in general was new. No one had really thought about it. Email was generally new. The software available at the time, you had to install on your computer which was kind of a chore to keep updating. SAS was the thing that was really revolutionary for us, putting it out in the cloud. Prior to that, it had never been available to do that. I think that was just because of the dot com implosion made all of these servers suddenly available for rental. So we started to manage, you had managed hosting from rack space and media temple. That's what made SAS a lot easier for people like us.

James McKinney: That's incredible, incredible. So as this started, what do we consider the beginning date of Mailchimp? What year do we put that on?

Ben Chestnut: It's a little bit blurry which says something about entrepreneurialism I think. We had no time to jot anything down. 2001 was definitely the year we got our first customer on Mailchimp, but it was 2007 when we said let's stop doing all of our consulting services with web design and let's just make Mailchimp our fulltime job. That took like a year of building up the courage to drop all of our clients who were paying $20,000 a project, you know for websites, internet, to Mailchimp which is maybe $20 a month. But we had this theory that eventually we could get thousands, maybe millions someday in the distant future, paying us $20 a month, it's going to work.

James McKinney: How many customers did you have when you made that decision?

Ben Chestnut: I don't quite remember but I think that when we made that decision we had it was around 30,000 I believe. I think it was around 30,000 customers at that time.

James McKinney: So that's incredible, especially when I think now to user acquisition, I think we think of all the current strategies at our fingertips, especially Facebook and Google AdWords, and all the various other growth hacks because of mobile. But in 2001 through 2007, you didn't have those. What were some of your user acquisition strategies in that period? Because 30,000 people is a lot.

Ben Chestnut: Okay, you're getting into the tactics.

James McKinney: Especially early days, right. And some of those tactics may be applicable now, some of them may not be but nevertheless to take that though process when you didn't have the resources, it forces all of us to rethink differently our own business and that's what I love to unpack.

Ben Chestnut: So this is what I would spend many late nights just doing this. So it was about search engines, but this predates Google. We were Lycos-ing, Yahoo-ing, Vista-ing, and so I was just desperately trying to get better rankings and I couldn't pay for the keywords that I wanted because all of the competitors out there were spending way more than me. Google was relatively new and becoming more and more popular, and it began to sort of supplant all of the other search engines. So I started to use Google and I got curious about Google. I started to play with their ad words, but at that time it was like pay per impression in the early years. They didn't do pay per click for quite a while.

So I started to tinker with those ads, wasn't getting a lot of great results, and one day they said that they were going to start indexing PDF files. I said huh, let me just try this. So I had all of this knowledge about how to hack email and make people open and click with your subject lines and stuff, so I compiled a useful PDF guide and I put it on the website, and I pointed Google at it, and I got number one ranking for email marketing just because of the PDF. It was a fluke in their algorithms where they were kind of indexing PDFs a little higher because it was new for them I guess, and that's how I got a ton of attention. I couldn't afford ads, magazine ads, so I considered the PDF a magazine and I put full page ads in my own PDF.

James McKinney: I love it!

Ben Chestnut: Yeah, I had full page ads. I felt a sense of power, like I'm going to get my own full page ad in my own PDF. So I did that and that guide just took off, and it just began sort of this slow steady climb for our traffic.

James McKinney: That's incredible.

Ben Chestnut: That's the kind of hacking and customer acquisition-

James McKinney: Even in just your thought process here, just as you're sharing this. I was thinking of all the other people that have an audience or a channel, even a customer, like the boxes of shipping a package. We don't think of that as a way to insert an ad for a secondary product. Hearing these stories are still helpful to today's business owners as we start thinking through how we can leverage what we're doing. So 2007 you say we're going all in on Mailchimp and no longer doing web design.

Ben Chestnut: You're making it sound so easy.

James McKinney: Right, of course.

Ben Chestnut: There's so much pain in that.

James McKinney: Those six years were incredibly painful. I'm sure that first year was frightening, even with 30,000 because now it's is this thing truly going to take off, because when I think 2007 can you give us a reference for what other SAS solutions were out there at the time? Not even just your industry, but SAS solutions, I just can't think of too many.

Ben Chestnut: When I looked around there was Survey Monkey and there was Basecamp by 37 Signals. They were the only inspiration.

James McKinney: I didn't know Basecamp was that old, because-

Ben Chestnut: Oh yeah.

James McKinney: Wow, wow. Fascinating.

Ben Chestnut: Yeah I think we both bid on a web design project and I lost to them, even before all of that. I'll have to take that up with Jason Freed someday.

James McKinney: Oh, I love it. So as you enter the Mailchimp era-

Ben Chestnut: Can I tell you about day one?

James McKinney: Well, I assume day one is 2001. Are we now talking 2007 day one?

Ben Chestnut: 2007 day one of Mailchimp.

James McKinney: Oh, I would love to hear about day one.

Ben Chestnut: The night before when I finally get my partners to vote to say we're dropping web design, we are all in on Mailchimp, I'm so excited I'm driving home, it's about midnight. I get pulled over for running a red light. So all things, so many bad things happened to me before day one.

James McKinney: Oh man, day one is a big deal in your life. All right, so now you're all in on SAS and now the entire mindset and perspective is how do we grow Mailchimp. But the question I guess is now it's there's product development that comes into place, there's product roadmap, what are all the feature sets we're going to have. How do you shift your focus from a web design agency where it is about getting projects on the board and closing deals? What was that transition like for you and all the things that are entailed in shifting the way you lead the company?

Ben Chestnut: By that time, Mailchimp had already been around for roughly six or seven years, and so we already had a bunch of customers. We already had some momentum and we already had a website, we already had an app. It was about tweaking it and making it better, and thinking more about the customer flow, making it more usable. At that time, my mind had shifted more towards I was kind of getting in the weeds too much and I needed to work on the business instead of in the business. I'm sure a lot of our entrepreneurs are thinking that way right now. I just couldn't figure out how I was going to get away from designing. It was my passion, it's what I studied, but I realized if I kept doing what I loved I would never grow the business. So there was a bit of an act of letting go, and one day we got swamped with signups on Mailchimp. We had a dashboard and we could see all these people signing up and we thought it was hackers attacking us. We shut them all down as fast as they signed up. It was a teacher in art school getting students to sign up to Mailchimp to learn email design. He called me and he said, "Hey, I'm Aaron Walter, you just shut down all my students. Can we talk?" And so we were talking and he said, "Can you come speak for my class?" I spoke for his class and then I asked him afterwards, "Would you like to be a designer at Mailchimp?" And so he joined.

James McKinney: Wow.

Ben Chestnut: I suckered him into joining us.

James McKinney: That's awesome, that's awesome.

Ben Chestnut: He became our first app designer and he was brilliant. What he allowed me to do was get out of design, and I just had to trust him with everything. He deliberately switched platforms. I was a PC designer back then. I switched to Mac so that I wouldn't know how to design anymore. I deliberately handicapped myself.

James McKinney: Wow.

Ben Chestnut: To kind of let him run it.

James McKinney: That's incredibly intentional of you, to ensure that you weren't in that.

Ben Chestnut: Painful.

James McKinney: I bet it was. So how big is the company at this stage?

Ben Chestnut: Four people.

James McKinney: Four people. So your business partner is Dan correct?

Ben Chestnut: Right.

James McKinney: So it's you, Dan, you now have this designer, and who was the fourth?

Ben Chestnut: The fourth one, you know we didn't talk much about after I started my business in 2000, 2001 we had 9/11.

James McKinney: Yes.

Ben Chestnut: My top client was a company called World Span that was in the airline business. I did all kinds of… we got all of our business from the airline industry and ticketing. We lost them all like that, and that company laid off a bunch of people. My client at World Span joined Mailchimp to be our COO, so he was the fourth person. And he is what really took us to the next level. So in a lot of crisis there's a lot of opportunity there to bring in leadership if you're always scouting.

James McKinney: And we get to, as we continue to advance through the story of Mailchimp, but when we get to current day with the COVID, one of the things that I always like to unpack just to kind of tee it up so our brain can start circling around it and we'll talk about I later ,very led a company through 9/11, through the worst recession the US has ever seen in 2008, and now coronavirus and there's probably some micro things that occurred in those years as well. But a lot of big things and Mailchimp continues to grow and just continues to be opportunity now, but we'll talk about that as we get there but I just want to kind of tee that up when we get to that point.

In 2007 you're on your own, full SAS, you're ready to roll but we do get to the worst recession the US has ever seen. One of the things that's amazing about your story is that no investment capital, bootstrapped and self-funded. It's amazing to me because there aren't too many stories like that. Actually, let me correct myself in that. I'll bet there are more stories like that than we're aware of but they don't make the headlines. The headlines become series A at $100 million, with a $2 billion valuation. Those are the headlines, but when you find these amazing companies that are significant in size and how many people they feed through their employment, all the good they do through charity, and we find out that they're bootstrapped it blows my mind away.

So I wish I knew, I wish there was like a list of just incredible brands that were fully self-funded, never took investment capital. But nevertheless, we get to 2008 where cash would have been super helpful for a lot of businesses in that season. You have some companies, if I'm not mistaken I think Constant Contact went public in '07. How did you navigate that season with no venture capital and you didn't go public as far as cash infusion? How did you navigate that?

Ben Chestnut: Well you know you talk about the Series A, those headlines, that's where all the attention was going. I remember feeling a lot of jealousy. I remember feeling like why won't I get the recognition? I was chasing after that validation right about that same time, and then I just decided that's not the right validation. The validation is when a customer opens up their wallet. It means that I built a tool that is worth paying for, so I'm going to chase that validation instead. And I just said I'm going to keep my head down and focus on the work. By the way, having my first child in 2007 helped. That helped with focus just a little bit too and so I just focused on what I could and it also forced me to delegate more. When I delegated, we just started to grow really fast as well. So all of those things played in. then around 2007 and 2008, with this focus on just optimizing and just getting more customers, when the recession happened a lot of businesses had to shift their spending online. They went from TV, newspapers, et cetera to email. So it really benefited us in that way and we just had this renewed focus on just the customer was our only validation, so that got us through that.

James McKinney: That's incredible. That is absolutely incredible. Was there a conversation, because you said as you were looking to the validation of the headlines that were out there with fundraising, was there a conversation among you and your partners when it came to we're not taking outside investment capital? And what was the reason for that conversation? Was there some closed door tenants and principles you said you're adhering to and here's what we lose if we do take investment capital so we can't go that route? What was that conversation?

Ben Chestnut: There was a lot of pressure. Constant Contact had just gone public and they were something like 10 times bigger than us. We were looking at the math and just saying oh my God, we're not going to catch up. It was pretty scary. And so when they went public, that actually got a whole lot of investors to fly to Atlanta for the first time to talk to us, because they were all trying to build up the number two, who's going to be next.

I could tell when talking to them, they had just flown into Atlanta after talking to my competitor in North Carolina, or the competitor that's in Tennessee, or wherever so I thought you're not authentic at all, and I just felt like I couldn't trust any of them. a lot of them kept saying, "This is really cute what you're doing for small business, but take our money, we can help you move to the enterprise." And we just felt like it was a lot of business in serving small business. It didn't look right, it was the long tail, it wasn't very predictable, but we knew that we could do it and so it didn't seem like they really got us. A lot of them frankly didn't understand SAS at the time. It was still relatively knew. It wasn't like we had a philosophical thing against it, it just was a lot of them were clueless. A lot of the investors didn't resonate with us. They didn't really get what we were doing. I just could not trust them to be honest with you.

James McKinney: You know, it's interesting some of the points that you made there Ben, because I remember when I had a mobile startup in 2014 I think it was. I had a mobile startup that was centered around helping the local restauranteur. That was my entire vision for it but every time I went to pitch, every time, it was all about the chains. How do you get it to the 10,000 unit heads, how do you get to the enterprise level as far as restaurants go. But my passion was the independent restauranteur. There were challenges in that. There's challenges in working with the small businesses, the independent owners, especially when it comes to getting in front of them, asking for their dollar. Obviously, you've done it so well and that's why we're talking today, but one of the things you also said too about small businesses and maybe there's something that is subconscious in the way Mailchimp brands itself in the messaging, but I have always, I've been using Mailchimp since 2007 for various startups. I remember the various iterations of the logo and Fred I think is the mascot's name, right?

Ben Chestnut: Freddy, yeah.

James McKinney: Freddy, so I remember the various iterations of it. But I've always, I don't know what it is but I've always just associated Mailchimp as a supporter of small businesses. I've always felt as though there's some type of champion of small businesses. Is that intentional? Is there something you've done in your advertising and branding that I've made that part of the Mailchimp experience? Where do I get that from? Because you said it right here in talking about investment capital, so I have to feel like there's something woven within the brand and company.

Ben Chestnut: I grew up in a small business family, so did my cofounder. His father was a baker. And we know that it's not just a business, it's a human being behind that and if that small business fails it's a whole family that can suffer. Also they can suffer for a couple of generations. It can be that devastating. So that was in our hearts but we also knew in our minds it was lucrative as well because it was so underserved. SAS was like a key unlock for them. They could final spend $10 or $20 a month instead of thousands of dollars for enterprise software. So it was just logical and also our hearts led us down that path to serve the little guy. We love the underdogs. We ourselves always felt like misfits and underdogs who never fit in anywhere. It was juts natural for us.

James McKinney: I love it. And again, whether it was part of the branding and messaging as in your own newsletters or whatever ads you may have run or online ads, there's something that I totally attach myself as Mailchimp being a supporter of small business, and that's probably why you were on my bucket list of interviews was because as someone who is such an advocate for small businesses, because I too was raised by an entrepreneur who owned a local print shop, I saw the grind of the local community business. I want to do everything I can to just provide that expertise from people like yourself for this audience.

So as we continue through our time, and monitoring the clock, we're going to advance our time within Mailchimp. There's a lot of tools and features and functionality inside Mailchimp beyond email now. There was a period of time when I lost everything and I had to go back to being an employee for a period of time, so there was a five year gap where I wasn't in Mailchimp, but when I come back there's all this marketing suite, there's so many other things that Mailchimp now does, and it makes it pretty easy for local small businesses. When you think of your product, when you think of everything that Mailchimp does, what is that person that you have in your mind? And if you can't share, maybe it's proprietary, I don't know but what is the persona you have in your mind of who is using your software?

Ben Chestnut: Oh, her name is Danielle. We have a couple of personas. We have an Ethan and a Danielle. Ethan is that startup founder, and Ethan was me when I was young and when I started on my journey, just hacking away, just chasing at this silver bullet that's going to help him get to escape velocity. There's no silver bullet, it was the work to get there was what the silver bullet was. But he's just grinding away and grinding away all night, whatever, and he's dreaming of the day he can finally hire a fulltime marketer to take this on. That is who we're really aiming for, that Danielle. When she comes on board, she's ready to take the business to the next level. She says, "Thank you Ethan for all of your hard work, I'll take it from here. Hand me the keys. I'm going to use the advanced features now." And that's truly what we're building for. We have this philosophy that I don't design for Ethan, because Ethan has ambition. Ethan wants that company to scale someday so I don't top down, I don't dumb things down, I don't over simplify anything. I tell Ethan, "We've got amazingly powerful stuff. Data, science driven, artificial intelligence stuff like recommended products. We have brilliant functionality and it's really powerful. You should aspire to this, and some day Danielle will use this and take your company to the next level." So that's who we're designing for.

James McKinney: I love it.

Ben Chestnut: It's kind of confusing to a lot of people. They think that we're designing just for the Ethan, but no Ethan aspires so we design up here.

James McKinney: I love it. And I hope everyone listening to the podcast once it releases and those watching, the importance of that person was just explained so clearly. The Startup Story has three personas that we speak to. To hear Ben talk about Ethan and Danielle, it's so powerful to understand exactly who it is you're catering the product and the messaging to. Man, what a powerful takeaway so thank you for sharing that because I know a lot of people one, don't or don't even have necessarily at a granular level the names, and I'm such a believer in naming the personas.

Ben Chestnut: Hang pictures of them all over your halls.

James McKinney: Oh, I love it. I'm going to start adding that down into the office. So as those are your personas and you're building things out, if we were to have a where are they now episode say in five years from now, we have you back, where is Mailchimp?

Ben Chestnut: Oh, hopefully still around, hopefully still alive and kicking.

James McKinney: I'm sure that will be the case.

Ben Chestnut: Well, you know it's a grind. So we're reinventing ourselves, so it's hard. We are nose to the grindstone, heads down, building multiple channels beyond email. The picture that we have internally is an octopus, and we're just building the tentacles. The arms that send the campaign over email, landing pages, Instagram, Facebook, we're just trying to get that done but eventually they're going to connect to a brain. And that brain is going to make marketing recommendations. It's going to look at 20 years of email history and 4 billion email addresses, and umpteenth gajillion iterations, and we're going to say, "We know what sells. So here, small business owner, we think you should do this." And it's going to automatically design things and automatically traffic it for you.

James McKinney: Oh, I love that.

Ben Chestnut: That's the dream. That's connecting to the brain, and you're already going to start seeing that in the next couple of weeks, some of that stuff getting unveiled. It's really exciting.

James McKinney: I absolutely love that. One question I want to ask as you were talking about the different channels, it reminded me of and maybe it was 2019 when you launched it, there's a creative studio you guys have now. You're putting out content. Is that strictly for advertising or is there a purpose behind that? Because some of the content is amazing. You have a whole tradeshow series that's hilarious.

Ben Chestnut: It's hilarious? I love the stock photography one is my favorite one. Anybody who's not an entrepreneur scratches their heads and says, "What the heck is that?" But entrepreneurs who watch the content, they get it. They can see the business story in all of them and they're meant to inspire, and they're meant to basically bring us traffic. It's a lot more affordable to build movies and TV shows than you think, and they get us a lot of traffic. And while they're in there, we can tell them the whole Mailchimp story, but you have to inspire first. It's also meant to, it's really good branding for us too. We want to be known as the brand that inspires small businesses and that's part of that as well.

James McKinney: And I want to talk one last thing, before my final three questions that I ask every founder, and that's about pricing. As a SAS product, pricing is key. It's part of your understanding of persona, it's part of your growth strategy. How do you look at pricing? How do you evaluate pricing? And I ask this question specifically to talk about the "freemium" model. Maybe this is self-serving a bit and trying to understand whether I should be offering freemiums in some of the services I have, but the way I look at freemium and then I'm going to turn it over to you for your guidance and correction, and feel free to whip me if I'm way wrong, the freemium is really just gain as many people as you can but they may not always be the right people. That's the part I have a hard time with, because I want to get the right people. So when you think of your pricing strategies and all the various tiers, has freemium always been part of it and what have you learned through the freemium option as it relates to today?

Ben Chestnut: That's a great one. Freemium came in 2009 and 2010, and after it came we started to grow exponentially. That was the breakthrough for our company. It came from our hearts. We truly wanted to give people something free to start their business. We knew that small businesses would get a start, die after a couple of years, but then come back after a few more years, after they learned how to run a business maybe from a fulltime job somewhere. They come back. They revive the account and then they grow again. So I always joke it's like a 10 year sales pipeline when you're selling to small businesses. You need a freemium.

Freemium came during the crisis, during the 2008 recession that we talked about. We wanted some attention getting deal. That was sort of the marketing behind freemium was just going to give small businesses a second chance. So what have we learned? And you definitely do, you get millions and millions of users and it can cost you. So what we did, you've got to survive, we put our logo in the bottom of all of their emails. If you're going to use us for free, fine, but when you send out if I have one free user and they send an email to 1,000 customers that's 1,000 images of my banner down there. It's all about my banner ads, so we got a lot of traffic from that. I think now we get about two billion views from that a month.

James McKinney: Two billion views from your freemium clients?

Ben Chestnut: Something along those lines, yeah.

James McKinney: That is amazing, absolutely amazing. But what is the, and if I'm throwing a curveball to you feel free to say you don't know, but what is the conversion from freemium to pay? Because to get back to my hang up with freemium is you get so many people that may never convert to a paid client, and then really is that audience of any value? I understand the 10 year pipeline for sure, but what is Mailchimp's conversion of those freemiums?

Ben Chestnut: It's low, it's low and it's not… I've tried everything on the app. I still tinker all day, all night trying to optimize it and you cannot control the factors of running a small business. The failure rate of small business is really bad. 30% die in two years, 50% die in 5 years. There's almost nothing I can do to optimize Mailchimp to increase my conversion rats. But generally speaking, a lot of studies out there I think they say something like 10:1 you're going to have 10 free users to every 1 paying customer if you go freemium. Generally, that's about right.

James McKinney: Okay, excellent. So let's talk about coronavirus. I'm sure you had big plans for Mailchimp coming into 2020, as did every person watching, as did all of the 65,000 listeners of the podcast. We all had incredible plans. The Startup Story had amazing plans. Everything was going great until mid- February. How did COVID affect you and your leadership, and Mailchimp? And then how did your learnings from the various crisis that you've gone through help to settle you and direct you as you lead through COVID?

Ben Chestnut: All of the previous crises, they kind of tempered me. They just sort of made me think everything can go wrong. Anything that can go wrong will go wrong. All of those day one stories that I gave you, I mean you're just always prepped for something horrible to happen right around the corner. Honestly, 20 years in I still think that way. I wake up excited but I also know something's waiting so be prepared.

So when it came, I don't think that I was like shocked. I was always ready. We always saved a lot of money in the bank as a cushion, because we learned from all the previous crises you'd better have some money. So I wasn't scared. I had always prepared. The first thing that we thought was what can we do to help small business. We made accounts free if you were part of a government agency or any kind of local group that had to disseminate information about the pandemic. We made Mailchimp free for them. We made Mailchimp free for any kind of creative studio that was helping small businesses. We made it free to pause your account for three months. And then we started to donate money. We did a whole bunch to try to help small businesses get through the first few months. And we're relatively lucky. We have offices in Brooklyn, Oakland, Vancouver, and now London. We work online. We're pretty digital and we had always these disaster planning days where we work from home just to test the servers and test the VPN, and stress test everything. So we were well practiced. Because of all of the previous disasters we've been through, we're always ready for something horrible. And it just sort of kicked in… all the processes just sort of kicked in.

James McKinney: That's incredible. Absolutely love it. As our time does come to an end because I want to get to audience questions, first question I ask every founder is the question about entrepreneurship. Do you think anyone can be an entrepreneur?

Ben Chestnut: Yeah. I think anyone can be an entrepreneur, especially in America. All you have to do is be very observant, look for trends, and then be willing to just roll up your sleeves and work.

James McKinney: Love it. Absolutely love it. You know, the second question has to do with gratitude. I'm a big believe that we are where we are because of other shoulders that we've stood upon, infrastructure people have put in place. We are so fortunate to be where we are today in 2020, even amidst coronavirus. The resources we have to try and even now start a new business. When you look back on your own entrepreneurial journey, who are the people that you look to with such immense gratitude for their contribution to where you are today?

Ben Chestnut: Oh man. My initial COO Neil Bainton, he was a great mentor and business partner for quite some time. When he joined, we were at $3 million in revenue and when he left we were at $300 million in revenue.

James McKinney: That's awesome.

Ben Chestnut: He had some impact there.

James McKinney: Yeah, some.

Ben Chestnut: Thank you, Neil. My family who taught me so much. My mother in law who was also a kitchen-tician. I learned a lot just watching how she ran her salon versus my mother ran her salon. I mean there were just so many, I means Linus Torvalds, Linux, the whole open source movement. Mailchimp is built on all of that. It was a scary time during the dotcom implosion but so much innovation happened and so much new opportunities presented themselves. It's been a crazy ride but there's so much to be thankful for in all of that. That's a great segment.

James McKinney: Well I just, I've always said that if I could trim, if I had to trim the show down to 20 minutes that question is not going to get lost because I think entrepreneur again, back to the incorrect headlines, there's this idea that entrepreneurship is this solo isolated journey, and there's certain components that if it's only a side hustle you're not an entrepreneur. All these false things that I think if I can afford opportunities where highly successful entrepreneurs like yourself can share about all the people that have helped them to get to where they are it starts to reframe how other people view entrepreneurship, and then therefore that want-repreneur sitting at home actually might take the leap and start building something on the side. So that's why I do it, so thank you for sharing that.

And our last question as our time comes to an end, and this is my mentoring minute if you will. This is the chance. We've been talking to tens of thousands within the podcast. I want to bring the conversation down to the one. And so if you were having coffee with just one of my listeners, maybe it's the frustrated entrepreneur who had big dreams coming into 2020 and now is just scratching and clawing to hang onto the business. Or maybe they've been around for 20 years and cash flow is always an issue and they're seeing other competitors just continue to skyrocket. Or maybe it's the want-repreneur who has got a book full of dreams and ideas and has just had some narrative as to why they don't move forward on it. Or maybe it's the defeated entrepreneur, the one who has tried time and time again but continues to get punched in the gut and just can't make progress, and just wants to call it all quits. Whatever those personas resonates with you, I suspect at some point in your journey you resonate with most of them if not all of them as we all do that have been trying to build something. Who would you like to speak to?

Ben Chestnut: If you're one of those entrepreneurs who is just struggling to get it off the ground and reach escape velocity, and you want it to move faster but it just feels like you're just stuck and you just can't get out of it, I'd say the best advice I ever got is these things take time. Nothing good happens fast. Only bad things happen fast. You always hear that about bad stuff, "It happened like that." Good things take lots of time and usually the question that I ask every entrepreneur that comes to me like this, I say what is working? And they tell me one little thing that worked, and I say, "Why did you do that again? Go back and do that again." Then they come back and tell me, "It worked!" and I say, "Well why don't you do that again and again and again until it stops working." The entrepreneurs usually come back and tell me, "Wow, that really took off. I should have done that a long time ago." So just find out what works and just keep doing it over and over again. Hire someone to do it.

James McKinney: Once you've had a few moments to process all the value Ben brought us in this week's episode, please hit me up on LinkedIn, Facebook, or Instagram and share with me your thoughts on this episode. And lastly, if you've been around The Startup Story for any length of time then you know how much emphasis I put on the idea that entrepreneurs support other entrepreneurs. Ben is such an advocate for entrepreneurship so reach out to him on Twitter and let him know your key takeaways from his story. His Twitter account is BenChestnut, all one word, and also visit Mailchimp.com and checkout their latest features like surveys, websites, and customer journeys. All those features are free. And remember, entrepreneurs support other entrepreneurs so let's show up for Ben and the Mailchimp team in a huge way. All right, and now for my personal ask.

The Startup Story community has been so incredible about sharing our podcast with others, but we have more stories to tell and more people to reach. We too are a startup and word of mouth is everything, so please follow us on Facebook and Instagram @TheStartupStory or on Twitter @StartupStory_. If you're on LinkedIn, please search for The Startup Story and follow our company page. LinkedIn is a really powerful way to raise awareness of the show. But the most impactful way you can help us grow our audience is to leave a review on Apple Podcast. Or if you listen to the show via Spotify, then please simply share the podcast directly from your Spotify app or wherever you listen to the show.

These simple actions can make a huge impact in getting these amazing founder stories out to the masses. And please make sure to tag or mention The Startup Story when you do share so that we can connect with you and say thank you directly. I'm so incredibly appreciative of the fact that you listen to the show each and every week, and I look forward to sharing these amazing stories with you every Tuesday with hopes of encouraging and inspiring you to start your story.

If you like this podcast and are thinking of creating your own, consider talking to my producer Danny Ozment. He helps thought leaders, influencers, executives, and authors create, launch, and produce podcasts that grow their business and make a real impact in this world. You can contact him today at emeraldcitypro.com/startupstory.

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August 18 2020
Ben Chestnut, co-founder of Mailchimp

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