Chapter 1: How does ConvertKit compare to MailChimp in growth?
The curve that I'm on with ConvertKit and the curve that MailChimp did, if we were to overlay those two, ConvertKit is far ahead. If we put the start date of the two of them, ConvertKit is far ahead on that curve than MailChimp was eight years into their business.
You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now at getlatka.com. Hey guys, my guest today is Nathan Berry.
You've definitely heard of ConvertKit and hopefully you've seen some of the other things he's working on related to tiny houses, investing in friends' companies, but most importantly, just creating and building and supporting the creator ecosystem as he really brings his customers to the forefront of everything he's doing, whether it's sharing their stories on a podcast, writing about them on the blog, or many other ways they do this at ConvertKit.
We're going to touch on all this today.
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Chapter 2: What role does community play in building a business?
Nathan Berry, thanks for coming on the show.
Yeah, thanks for having me.
Okay. So the first thing I want to touch on is actually is not software related. You know, we're in a very weird time right now where everyone's sort of locked down. We also know that community is extremely important. You've personally built community both online and in person.
And I want to go back to sort of pre COVID days and just ask for your thesis on why you decided to get involved with your friend Brent in buying an old ranch and how that relates to community.
Yeah. Oh, man.
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Chapter 3: What is the story behind Nathan Berry's involvement in a ghost town?
Well, if I look back on my journey as an entrepreneur, so many of the inflection points came from people that I met in person, right? Say a conference like MicroConf, where there was one years ago that Amy Hoy and Alex Hillman put on called Bacon Biz, which is just a fantastic conference. And it's just for the people who are focused on making money, right? And there's all of these...
uh, events that you hang out with, hang out at and meet someone. And they're the one who drops an idea that, that changes something for you. Or for example, there was this conference years ago called the world domination summit, like Chris Guillebeau, um, hosted. And I went in 2012 and I knew no one super shy, like, okay, I guess I let's do this.
I'm supposed to meet people, you know, that kind of thing. And I just decided to walk up and talk to two guys who were standing there talking. Um, Turns out to be James Clear, who's the author of Atomic Habits now. But at the time, he had a tiny little newsletter. Yeah, pre-book. Yeah, well before anything.
Chapter 4: How has ConvertKit adapted during the pandemic?
And then Caleb Wojcik, who's this incredible video producer. He's done everything for Pat Flynn. He invented the SwitchPod with Pat Flynn. Like all of this, right?
Yeah.
And that's the kind of thing that happens when you show up at an event that's a curated group of people and you have these conversations in person. And so I've always just been a fan of great in-person experiences. And we've started our own conference four years ago, ran that every year except for this year. And so it's just something that I've loved.
And so when actually Ryan Holiday was the one who texted me and was like, Hey, um, we're buying a ghost town and like it's closing soon. And, um, we need more money.
Yeah. And with Ryan, you got to go, wait a second. Is this a headline he's pitching?
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Chapter 5: What challenges did ConvertKit face in its early growth?
Cause you know, he's genius. Mark, or is this a rate? Like, are you actually, is there actually a ghost town?
Yes, exactly. Um, And I had known Brent Underwood because he has an agency with Ryan and they run the website Daily Stoic together, which is a ConvertKit customer. And so I'd known him somewhat, but Ryan was the one that kind of pulled me in. And it was just this thing where... because it was a unique property.
And this is Cerro Gordo, which is a 300 acre ghost town in the Sierra Nevada mountains. So when you stand on the peak behind it, if you look to one side, you see Mount Whitney. So the highest point in the continental US. And if you turn around and look behind you, you see Death Valley, which is the lowest point. And it's just this crazy place.
And so then I thought, okay, one, Brent and Ryan and their other partner, John, just have this great idea for what they're going to do with it. And I was like, can you imagine the mastermind groups and the like mini conferences and the writers retreats and whatever else that you can have, like the stories and memories that you can make at a place like this.
And so, yeah, I had to, had to get involved.
And so what has happened, obviously COVID changes things and Brent's putting out great content on YouTube. It looks like he's been living there for a while.
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Chapter 6: How does Nathan Berry structure profit sharing within ConvertKit?
Have you guys been able to have sort of a, you know, mastermind where you're just living in old mining cabins and waking up in the morning and seeing Mount Whitney and Death Valley?
Yeah, some of that has happened. The property has taken a lot longer, I think, than we originally had thought to get it up and running and get it to the point where groups can stay there. So I've actually only been there twice and just taking my family down. So we haven't yet had a big gathering because there were things like had to get running water, had to get...
you know get it livable again and um and then there were some big setbacks in there like this summer uh there was a fire caused by you know some really old electrical that burned down the hotel there that it was on its 149th anniversary of opening that the hotel burned down so it's kind of like anything in entrepreneurship where
you have these great grand dreams and then it's way, it turns out it's way harder than you thought. And then just when it's really hard, then like there's this crazy setback of like the coolest building in the whole town getting burned down.
Or I don't know the equivalent from like you're in my businesses would be like when you like lose that customer that you fought so hard to get, or like that was that stretch thing.
Um, Can you, can you make an analogy there? If you look at convert kits history and we'll dive more into convert kit here, but is there, is there an equivalent to the old 149 year old hotel burning down?
I think that, so our very first team retreat, um, Let me set the stage. So January 2016, the previous 12 months, we'd grown from 2,000 in MRR to 100,000 in MRR. So just crazy growth. We had no money in the bank. We were thinking, should we raise money? I think we were spending 80 grand a month and we had like 15 grand of cash in the bank.
But we were making- Sorry, net burn was 80 grand a month or gross burn?
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Chapter 7: What are the key marketing strategies used by ConvertKit?
So gross, where we were still profitable and the dollar amounts were going up. The bank balance is getting bigger, but at the same time, your day's worth of expenses is going down. Because $15,000 in the bank, when you have $5,000 of MRR and $5,000 of expenses, that's fine. But when you have $100,000, it's not cool anymore.
$100,000 MRR, $80,000 expenses, $15,000 in the bank, team retreat.
Yeah. So that's where we were. We had basically, we wanted to get the team together because we had, I don't know, 13, 14 people on the team at the time. And we thought, okay, but we just can't afford it. And so we cut expenses, doubled down, or we didn't cut expenses. We basically locked expenses and then grew our way out of it.
And we grew our way from like barely break even to five months later, we had 60%, sorry, 50% profit margins. three months of expenses in the bank and we did a team retreat to celebrate. And so that was like the big high in entrepreneurship. And the whole team flies into Boise.
We have like, everyone's showing up for this team retreat and we get a denial of service attack where someone goes like very deliberate, very malicious goes to take down our servers. And yeah, It's like, I distinctly remember picking up Brad, one of our lead engineers at the airport and I show up and he's like next to baggage claim on his laptop, like trying to keep the servers up.
And it's that sort of thing where you go from this crazy high and it's like, oh man, I can't believe we pulled that off to the equivalent of your hotel burning down or like this, like, I don't know how we're going to recover from this. And you always do.
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Chapter 8: What future plans does Nathan Berry have for investing in other businesses?
That's just part of entrepreneurship, but that's the journey that we all signed up for.
Nathan, I want people to stick around. And so I want you to plant a big open loop here. And then we're going to dive more into the sort of emotional side of the story, going back to when you were doing woodwork at 13 years old, door knocking. Today, where's ConvertKit? What's top line revenue?
Yeah, so we're at 25 million ARR right now.
And how much profit?
Yeah, we've been spending a little more aggressively this year. So we're doing about 5% profit. But at the beginning of the year, we're close to 20%, 23%. And so next year, we'll return to the 20% mark.
20% EBITDA margin?
Yeah.
So guys, you want to stick around for that. Something else Nathan is doing, which he puts on his website, is he specifically says $1.8 million paid out to the team. So there's some profit sharing happening here. A lot of you guys who are Bootstrap founders are wondering, how the heck do I set up profit sharing without spending $500,000 on legal? So we'll get back to that in a second.
But Nathan, take us back to 2013. Sorry, when you were 13, Nathan, I think, what, maybe 2005 or earlier? 2003. Okay, wow. Okay, so we're about the same. You're, what, 30 right now?
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