The Biggest Bootstrap Exit Ever: Mailchimp Sells for $12B
Intuit plans to combine Quickbooks and Mailchimp to help small businesses gain and retain customers. The deal is expected to close in 2022, and Mailchimp will retain its brand, products, and 24/7 customer support.
Mailchimp’s story
Like many bootstrapped companies, Mailchimp spun out of another business idea.
Founded in 2001, the web design agency Rocket Science Group initially focused on big clients while informally tinkering on the email marketing service with which we are all familiar.
Co-founders Ben Chestnut and Dan Kurzius methodically tailored the tool to small business owners, offering them an alternative to the clunky, expensive email platforms of the mid-2000s. Chestnut sketched the company’s logo — Freddie the ape — on a Post-It note in 2008, offering a friendly face instead of the sterile business apps of the 2000s and kickstarting a trend of software branding with cute animals.
As Chestnut and Kurzius describe it, Mailchimp grew as a result of listening to their customers’ desire for “look pro and grow” products, and their email marketing tool met that need.
Mailchimp now generates more than $800 million per year, has 13 million users globally, and has grown its team to more than 1,200 employees. And it did so without raising any venture capital.
The TinySeed philosophy
Mailchimp’s exit not only demonstrates the power of bootstrapping but also reinforces TinySeed’s investment thesis.
Nearly any other kind of business would need to raise tens of millions or even hundreds of millions of dollars in venture capital to attain a billion-dollar exit like Mailchimp. But, given the capital-efficient nature of B2B SaaS, Mailchimp was able to achieve a venture-level return without significant dilution.
The capital-efficient nature of B2B SaaS companies is a large part of our investment thesis here at TinySeed. Many B2B SaaS companies have gross margins of 80 to 95 percent, predictable revenue and customer acquisition costs, and net margins at 25 to 50 percent once they pass around $1-$3 million in ARR.
Despite those attractive characteristics, a large number of B2B SaaS companies struggle to access capital unless they aim for hyper-growth and an IPO from the get-go. The assumption by many venture capitalists is that most SaaS companies cannot consistently provide the kinds of returns required by LPs, as they are not geared for hyper-growth juiced by frequent fundraising from the start.
Yet in the case of Mailchimp — and we believe with many other SaaS businesses — that assumption is wrong. Mailchimp’s $12 billion exit puts paid to any notion that a bootstrapped business cannot have a massive outcome.
Mailchimp founders had their agency revenue to kickstart Mailchimp, however, not everyone is that lucky. That’s where TinySeed’s funding can help.
Figure 1. Image via Priceonomics
What about the employees?
There’s been chatter that Mailchimp employees were shortchanged from the sale as they had no equity in the company.
Mailchimp offered its employees profit-sharing instead of stock-based compensation — a choice the company explained at length years ago. It seemed to be popularly received by employees, and Mailchimp was regularly tasked with distributing millions of dollars each month in employee bonuses.
Regardless, Mailchimp employees won’t be left empty-handed after the sale is final. Mailchimp’s agreement with Intuit includes about $300 million of Mailchimp employee bonuses that will be issued in the form of restricted stock units over three years. If split evenly, that’s about $230,000 in RSUs per employee over 3 years.
Outcome for founders
For founders, how does Mailchimp’s sale compare to the IPO of a VC-backed firm?
If we take a look at Priceonomics’ research on this question, Mailchimp’s founders are in an elite group. Only Facebook, Groupon, and Atlassian founders derived more value from their IPOs than the founding team of Mailchimp look to receive in this transaction (See Figure 1, above).
In short, there’s never been a better time in history to be a B2B SaaS entrepreneur.
