SaaS Interviews with CEOs, Startups, Founders
ConvertKit's Shocking Growth to $25m Revenue, Power of Creator Economy
07 Apr 2021
Chapter 1: What valuation approach is used for ConvertKit?
If we're valuing ConvertKit at 7x ARR, 8x ARR, something like that.
That's conservative for even for what you've built.
Then you're looking at what it takes to add an additional million dollars in value, in enterprise value for ConvertKit versus what it takes to go make a million dollars somewhere else. And it's just an order of magnitude more effort to do it in real estate investing or something like that because ConvertKit has so much momentum.
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Chapter 2: How does community building relate to entrepreneurship?
We've got to grow faster. Minimum is 100% over the past several years. Or bootstrap founders like Vivek of QuestionPro. When I started the company, it was not cool to raise. Or Looker CEO Frank Behan before Google acquired his company for $2.6 billion. We want to see a real pervasive data culture, and then the rest flows behind that. If you'd like to subscribe, go to getlatka.com.
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Chapter 3: What lessons did Nathan Berry learn from his early sales experiences?
You've definitely heard of ConvertKit and hopefully you've seen so many 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. 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 your 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 4: What challenges did ConvertKit face during its growth?
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, three books. Yeah, well before anything.
Chapter 5: How is ConvertKit structured to support profit sharing?
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, um, 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? 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.
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Chapter 6: What marketing strategies have contributed to ConvertKit's success?
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. Have you guys been able to have sort of a mastermind where you're just living in old mining cabins and waking up in the morning and seeing Mount Whitney and Death Valley?
Chapter 7: How does Nathan Berry view the creator economy?
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... get it livable again.
Chapter 8: What future plans does Nathan have for ConvertKit?
And then there were some big setbacks in there. Like this summer, there was a fire caused by some really old electrical that burned down the hotel there. 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've 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 2000 in MRR to a hundred thousand 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 net burn.
Net burn was 80 grand a month or gross burn.
So gross where, you know, we were still profitable and like 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
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.
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