Hello my friends,
Sorry for going AWOL in the past two weeks, I have been moving and decided to take some time off to focus on me and my family. But on the plus side I had over two weeks to prepare for this issue and it’s by far the best one I have ever written.
Before we jump into today’s topic ConvertKit I wanted to share some personal updates from First 1000.
In January 2021 we had over 1000 new subscribers join our newsletter! For reference It took me 5 months to take my first 1000 subscribers. Thank you Thank you Thank you ♥️.
We had over 17 people that referred 5 or more people to first 1000 and they all have gotten either $25 or $50 in Amazon Gift Cards…so I am extending this to February as well
If you refer 5 people to First 1000 in February I will send you a $25 Amazon Gift Card….If you refer 10 people to First 1000 in February I will send you a $50 Amazon Gift Card
Let’s Jump into Convertkit
What is Convertkit?
ConvertKit is an email marketing company for professional bloggers started by Nathan Barry in 2013. You can think of it as a more powerful MailChimp, built specifically for content creators (bloggers, podcasters, authors, etc).
Convertkit is bootstrapped and is currently doing over $22m in annual recurring revenue.
Convertkit is a public startup meaning all of its metrics are available for anyone to see here.
How did ConvertKit get started?
Convertkit can be put in the same bucket as Trello, Glossier, Huda Beauty, Product Hunt, Kylie Cosmetics, Mr Beast Burgers and so on. These are companies that all got their start from their founders building up an audience first then monetizing through a product later. In today's lingo these companies are often referred to as the "creator economy" and the next decade or so is going to see a huge boom in such companies for a simple reason: in the 90's we used to trust media corporations, and in the 2010s that trust started to erode and we became evangelist of companies(Uber, Snapchat, Facebook) and now in the 2020s trust in companies is eroding and we are now in the phase where we trust individuals (you see it in the rise of Solo VCs, Business Influencers, Podcasts, Substacks..etc). And this is why the story of Convertkit could not be more valuable today and I am extremely excited about this issue.
How did Nathan build his personal audience to launch Convertkit?
First let’s talk about who Nathan is. Nathan is a designer turned indie maker turned founder. Back in 2012, he built a blog where he talked about the inner-workings of building iOS apps for himself and audience. He managed to build a modest list of 798 subscribers on Mailchimp in the process. He turned this blog into a book called The App Design Handbook and sold over $12,000 in the first day of launch. From there he figured out his Indie-maker flywheel
Great Content -> Book Sales -> Word of mouth -> Bigger Audience -> More Book Sales.
So in the next 4 months he wrote another book "Designing Web Applications" and to double the audience and made twice as much money. At this point he was making 20k/month just from book sales.
From Books to Saas Software
Building in public (the entire process is documented in his blog)
Books were great but Nathan wanted to build a more predictable sustainable business. So on his blog he create The Web App Challenge. The premise was to hit 5k/month in monthly recurring revenue in 6 months! But he gave himself some restrictions as described in his blog
“I am starting without an idea. So I don’t know what the application will be, what it will do, or who it is targeted towards.”
“I can only spend $5,000 of my own money in this entire process. Meaning all other funds necessary have to come from paying customers. Since I will be hiring out the development, getting paying customers right away is mandatory.”
“I cannot spend more than 20 hours a week on this project. If allowed, I waste tons of time on projects. This limit is partially because there are other things that need my time (contract projects, writing, etc) and to help keep me focused.”
How this public challenge turned into Convertkit?
Throughout the process of finding an idea to take to $5k in monthly recurring revenue Nathan found himself fighting an uphill battle with Mailchimp. Every time he learned something new about best marketing practices he had to fight with Mailchimp to stitch something together (drip campaigns, following up sequences, adding value through guides..etc) and slowly that pain took over his Web App Challenge. It was enticing for several reasons
He had a competitive advantage from the audience he has built. Distribution is king.
He was his own customer, so knew the nuances of the problem
He had a unique insight into marketing software...its primary focus should be to add value first then ask for a sale second. That wasn't the way any of the existing marketing software were created
Losing interest in Convertkit
The Web App project went relatively well, Nathan didn't quite hit his 5k/month goal but managed to get 2k/month in the 6 months timeframe. But a year later he was actually making 1.5k/month. His audience and the challenge he set has helped him get to 2k, but Nathan lost motivation, he dedicated less and less time to Convertkit and over the following 6 months his revenue declined further to 1.3k/month. At this point he had to make a choice ...shut it down or double down and put in the hours and money this project deserved
Going All In
After two years of treating Convertkit as a side project Nathan decided to give it his best shot to making it work. That meant doing a few things
Shutting down his other projects (books) and focus full time on Convertkit
Invest over $50k in the product from his own personal money.
Focus on direct sales: Content marketing doesn’t work nearly as well for a new product. Direct sales killed it.
Find a niche: First he tried “email marketing for authors” (headed in the right direction, but ultimately a bad idea). Then he settled on “email marketing for professional bloggers.” Best decision ever.
Concierge migrations: The biggest objection in the sales process for him has always been “but it’s so much work to switch!” So he did the ultimate thing that doesn’t scale and offered to switch them over from their old provider to ConvertKit. Totally for free. Yes, it cost him a ton of time and money, but the referrals and ongoing revenue gave it incredible ROI.
Hire amazing full-time employees: Nathan's friend Danny Iny said that “If you pay for half of someone’s time you get a quarter of their attention.” Ever since then he has tried to hire full-time employees for critical roles. When he hires contractors he almost always does it with the expectation that if things go well, he’ll move them to full-time.
The impact of doubling down:
This new focus, dedication and investment changed the trajectory of Convertkit from this ⬇️
to this ⬇️
Zooming in: First 50, 500 and 1000 customers
This graph only tells a part of the story, things that usually work for one growth journey doesn’t work anymore once you need to hit bigger more ambitious numbers. So we dive a little bit deeper into how Nathan got his first 50, 500 and 1000 customers.
First 50 customers: Content Marketing from the Web App Challenge
First 500 customers: Direct Sales and word of mouth (from doing things that don't scale as switching people manually to their product)
First 1000+ customers: Affiliate programs. This worked really well since affiliate links came naturally to his niche audience:Bloggers. This is just a core part of how they make money and plugging in a product they actually used and loved and being able to make money out of that was a no brainer. Affiliate program was based on a forever ongoing 30% revenue share on each month a person you referred is using Convertkit.
if a small business owner loves your product they might tell 2-3 friends. But if a blogger loves your product, they'll tell 20,000 readers! So we had a very natural distribution path built in
That is it! The story of Convertkit and how they got their first 1000 cusomter. Today Convertkit is doing $2.2m in revenue every month with $1.9m in net revenue…with no external money raised! What a beast of a company!
Hope you enjoyed this issue as much as I did 😉 and don’t forget to refer your friends, family, significant other or literally anyone you know! There is a $25 Amazon Gift card waiting for you
See you next week ♥️,