Kit (Formerly Convertkit) Revenue (2024)

we've i don't know gradually invested in over time and now um it pays off in a big way um and actually in a massive way i mean if you look at ahrefs i mean you're now generally ranked for almost 70 000 organic keywords you're getting 120 000 clicks organically per month i think that's unique 10.2 million backlinks there's obviously a credit to probably a bunch of hosted page products that you guys have but i mean you're killing it in seo yeah so it drives about 40 of all of our new accounts um wow it's from search one interesting if people are looking for like a a quick tip for link building that's been fascinating we didn't do it on purpose but it's worked out really well is we've been doing these creator stories where we profile creators tell their story and we've been paying for photographers to come out you know and like a local photographer to come do all the photos for the story and give it to the creator and say hey use these on your website use this because if you've ever built a website for yourself you're like realizing oh and here's where i'll put the perfect header and you realize like i don't have that i haven't hired a photographer to do that and some people love it right when we give those uh away but then what we also did is say hey we have this unsplash uh collection of creator photos if you'd like we'll release those you know if you sign off on it and you're up for it we'll release those photos um on splash as part of our convertkit you know creator collection and that has like there's millions and millions of downloads of those photos now and a bunch of people will credit convertkit but what's interesting is on all the popular sites that use them and they get used a lot we just send a quick little outreach email and say hey i saw that you used this photo um i'd love it if you uh provided a backlink back to you know if you linked back to convertkit as the the creator of this photo if not no worries it's like licensed under creative commons you know like you don't have to yeah but if you want to we love it and that has driven so many backlinks you get these photos that millions of people are using and they're just like oh yeah sure i'd love to give credit and especially when you're up front of like you don't need to at all like we're not coming and saying you have to do this like fascinating how much did you spend on photog on local photographers featuring your customers in 2020 do you have a general idea uh that's a good question we um i don't have that i'd say 500 to a thousand dollars per shoot somewhere in there and then maybe one one shoot per week um okay got it so 50 it's this this tactic could you know cost 50 to 100 000 per year yeah um exactly and you get direct return in the form of these backlinks but you also get just amazing community return i mean this helps this helps your customers in so many ways and it's free yes so this is kind of the way that i think about marketing is if there's an activity that we're going to do like we're going to release these creator stories because we want to be a brand known for um great storytelling i think all the most iconic brands are storytellers and so we're like great okay let's start telling stories and then we need to we need a process for that so there's like we need to do photos for the stories we need to do those things and you end up with a sequence of events that you do and you do this over and over again and i think that's the way that most people approach marketing or whatever task of like i have to do a b and c and i will do that a bunch of times and uh now i guess jim collins in good to great talks about flywheels and taking all of these sequences of events and turning them into a flywheel where each step logically feeds into the next and around and around you go and so we think about it in marketing of these different like these stories you know we want to produce a great story and it needs writing and photography and around that since we're producing the photography we should promote that and share it as many places as possible so that's where these unsplash collections come in because then that will get more attention for the stories and then our our search for like seo flywheels should fit into that of like oh since this asset is being created and millions of people are downloading it let's you know tie that into our link outreach and basically see how can i make these different systems that when they fit together every you know every rotation the flywheel makes the next rotation easier and i look for that everywhere of okay great if we're doing this one activity here how can it serve the rest of the business or how can it have these other buy products that are really valuable nathan is there somebody on your team that is that you've hired that is solely responsible for watching systems that other people are running documenting the system and then creating a flywheel or do you try and build it into the dna where everyone if they do something that works they have to document it and share it so you can invest in systematizing yeah i would say um there's not one person uh the person who does it the most is barrett brooks who's our ceo okay um and he's been with the team for quite a while he started working in marketing and then grew to leading marketing and then it's now this doo so he's probably the best at it but it's definitely something that we're trying to teach everyone to do and like issa adney who runs she's our her title is storyteller um she's the person who we like taught this to at a high level like in the company and she's just like okay i'm gonna take that concept and run with it and take it so much further than you thought and so she's the one that's implemented all of that and to give you an idea where it's at now um i'm working on a book called create every day and so in writing those chapters i'll get stuck on about okay i need what do i need i think a story of a creator who uh created really consistently every day you know and so i'll be like issa what do you have there and she goes to her database of all the creators that she's interviewed and says here's four of them i'm like oh perfect i dive into the stories there's already great photography there's already these quotes and everything and then i'll i'll come back a while later i'm like okay i need someone who uh really persisted for a long time and didn't get the success early you know they got it three years four years in and she's like goes to her database and she's like okay here's these four people right and so obviously we're doing the work to tell the stories to build the brand that we want but we're trying to do it in a way that serves everybody else so then when our content team is writing something about uh how to use commerce or a new like uh how to do email marketing or growing a list like they're pulling these snippets and examples from the rest of the of the content machine basically this is this is fascinating to hear um how you how you build all these on top of each other you know you've now you've now stacked a bunch of these things and one of the things that i'm curious to ask you is you clearly focus on community i mean you must at some point see yourself almost like a talent agency for creators where you're making them their own celebrity with the photos with the distribution and their then that enables them to get attention and build their own brands do you ever think about that are we gonna see a convertkit talent agency for creators i don't think we're gonna see that to quite the same extent of like us trying to get bookings and and things like that we're you're definitely gonna see it um down the road from a marketplace perspective of here are featured products to buy and you know here's the best um the best ebooks uh the best photography resources you know all of those sort of things we're driving the when does that launch when's the convertkit marketplace launch it's probably a couple years off uh okay just for like a little bit of uh i don't know i don't know if it's inside baseball or what but marketplaces are very trendy exciting thing to do and one thing we almost went from what we have today right into like and then let's do a marketplace and what we realized is when it come it comes to discovery um and getting you know using the attention the platform that we have for more creators to be discovered there's a lot that we could do of making each piece of content created in convertkit um available to be discovered on other platforms so if you think about internal discovery versus external discovery internal is like oh you just finished reading this article or because you're subscribed to james clear you should also subscribe to tim ferriss you know like that kind of thing and that's like what medium has done a lot of and um that sort of thing but what we realized is the step we need to do first is the external discovery of the little things of like oh i just subscribed to nathan's list and it pops up and says like hey you should tweet about it and we put these little moments all the way through so every time you buy a product every time you subscribe to a list um like these little viral loops happen for the creator and basically we'd be getting ahead of ourselves if we're like oh let's do it on our platform when really we're trying to say like no let's get it out there onto let's automatically post to twitter on behalf of the creator let's automatically do these other things so it's basically external discovery first and then later do the internal once the platform is bigger before i move on to profit sharing and how you build a great team and keep great humans around you building convertkit touch on affiliates real quick how much revenue do you pay out to affiliates in 2020 i don't have that number off the top of my head um affiliates has been a huge channel for us and and it's been declining let's see affiliates is growing i would just say that other channels have been growing faster so affiliates are how we grew you know substantially for a long time and at one point i feel like um we're driving uh a little over 30 of all of our revenue that's probably dropped um into the 20 20 range as like the well so if we talk about flywheels or compounding you know these things affiliates kicked off a lot faster and then now you like over time you get searched coming in lower or like more slowly but then search turns into this monster yeah exactly yeah and so it's like affiliates are still growing it's just that search is now outpacing it as far as the the growth um so yeah affiliates have been absolutely massive and it's just that like a lot of it is the type of business that we're in right if we were selling to traditional businesses then like we had an affiliate program then at your chamber of commerce event that's not a thing anymore but um you know you'd be like oh i'm using convertkit you tell like three of your friends but in the community that we're in right a blogger uses us and loves us and and tells 10 000 of their closest friends like use convertkit so do you know how many affiliates you paid at least a dollar out to in 2020 yeah it'd be at least three thousand oh wow okay that's you know sometimes you hear a lot of concentration in these programs that is not that doesn't sound like huge concentration yeah and the concentration is definitely there um you know and so there's probably uh only a hundred that are making at least ten thousand dollars a month but there's some in there that are making 25 000 a month or more um so yeah there's there it's a really really solid program so just just make sure you understand that nathan so if you've got at least a hundred affiliates making 10 grand a month and some making way more i mean that's a million yeah so that's probably too high of numbers i'd have to dig in more okay okay i was going wait a second there's no way that's 60 of his cost base is affiliate expenses yeah no that's too high so i'd have to i'd have to dig in because it might only be 20 or so okay but there is some concentration of what you're saying is there is some concentration at the top yeah so we're paying out about 250 that we can figure this out about 250 000 a month to affiliates okay and paying a 30 commission so that's the easiest way to back into it that's great yeah that's great yeah so 200k affiliates we can do an average into the 3000 but it's clear there's some concentration with some driving 25 grand a month and affiliate payouts yeah so we're dividing that out we're we're at about 830 000 in monthly uh like top line revenue driven by affiliates yeah that's okay that's a really valuable number thanks for sharing that so so are these other before i move on to how you've structured profit sharing are there any other flywheels that like you just found it you love it you haven't written a blog post on it yet you haven't put on a podcast you probably don't want to share it but i'm going to pressure you anything you guys should ask about uh i think i think our free plan you know in the software community um everyone's very adverse to free they're like no i i charge for a product i i sell things and we get paid for the value that we provide we're not those silicon valley startups that like don't have a business model or like are losing money on every customer and there's truth to both sides of it but i i just read well so two things in 2018 i sat down with ben chestnut the ceo of mailchimp at the inc 5000 conference he was super generous with his time we just got to chat for 30 minutes in a hotel lobby and he was just like look free was huge for us that is the inflection point and it still is huge and it's not a bunch of low value customers it is those but it's all of these high value customers that just show up and you're like where did this 100 000 subscriber account come from you're like trying to attribute it and you're like you know you're not you can't figure out like it's not from paid it's not from search you know it just doesn't make sense and so you do customer interviews and your product managers sit down with this account you find out that this marketer used the free version of mailchimp spun up a free account did some stuff learned how to use the product grew it to i don't know 50 subscribers 500 subscribers something that's not material for mailchimp and then got a job at you know this big company who was using constant contact and he's like no i'm not using constant context for this let me go use mailchimp which is the tool that i know how to use and so basically freemium drove all of this where they would get big accounts switching over knowing how to use a tool right away and he was just like this is this is mind-blowing this is amazing and um we were in the process of figuring out how could we offer a free plan we basically looked at it and said look what if as a a profitable company with plenty of cash in the bank and all that we started to adopt some of these more like silicon valley startup methodologies and said we don't have to make money from every customer upfront we can play this long game because we're profitable and you know so we launched that free plan and and honestly it's doing so well we in our models we expected a three percent free to pay conversion rate um we came in at a five percent rate and we're like that's fantastic um and you you know just to be clear nathan sorry that's uh do they do you require a sign up when they uh sorry a credit card when they sign up for free trial so um you can sign up for a free a free account without a credit card and then if you want to try out like our automations product or something like that you can start a free trial for the paid version and that requires a credit card you know to go from the free version to trialing uh that on a 14-day trial and then you're saying you expected three percent conversion and it got five three yeah three percent so not three percent conversion on the trial but three percent of um all free accounts converting to a paid account wow and wow ended up at five and we we see a lot of opportunity to bump that a little higher maybe just six or seven percent um let's see next year let's talk about you know let's wrap up with two two topics here one is keeping great people around you um right you're not venture back so you can't just go pay people three million a year to stick with you and that's not a race that you want to be in anyway uh when did you launch profit sharing and how does it work yeah so we have iterated with a lot a lot of different profit sharing things um we launched profit sharing on our very first team retreat uh as we talked about earlier what year was that nathan sorry 2016 20 yeah summer 2016. okay um and we had grown from 100k to 300k in monthly revenue we'd saved up three months of expenses in the bank we got into 50 profit margins through like the team being really lean and i wanted to reward the team for it and so we took a hundred grand and paid it out to the team in profit sharing uh everyone was totally blown away um how did you do that though how many how many are on the team at that point 12 we were up to 20 but six of them had been hired in the previous like 30 days okay so so 14 participated yeah everyone participated but for some people it was like 600 bucks you know so how did that's that's my question is if someone right now is finishing 2020 with 100k and they want to do this exact same thing how do you decide who to give the check size to is there a formula yeah so what we do is we do a six month period um is when the profit sharing is and so for everyone that has been there for the entire period you're eligible for it and we actually give partial credit so we give out like if you joined we have people who will join and then like profit sharing is 30 days later and they're like you still get 500 bucks you know that's amazing because we want them to kind of have that taste of it yes and the person next to you got 17 000 or something yeah like that's because they've been with the company for quite a while so in that pool um it is 75 based on you're just team member and everybody participates equally and then 25 is based on time with the company so we take there's just a spreadsheet that has everyone's start date like so all the team members their start date how many days since that and it totals up you know the total days um worked uh like ever and then it distributes you know so it just says x percentage of this pool should go to charlie she's been with us for four years to you know this person because they've been with us for one year um just so like the profit sharing that we did uh in the spring let me think the average was eleven thousand dollars per person um the smallest check was three thousand dollars for someone who joined really recently and the biggest was i think nineteen thousand and so that's kind of the swing that uh that you'll get we used to have something in there where we we had another score for individual performance um and we took that out and we basically decided we're gonna set a high bar for performance just like to work at this company default then everyone wins and loses together fascinating okay and you're paying this out you're doing this calculation once a month or once every six months every six months okay got it interesting okay and so so you're going to be doing this sometime soon in the next 30 days as you close out 2020 um what's the total pool that you'll be paying out um it'll be 400 000. we our goal was actually to lose money in the second half of the year and now you sound like a tech crunch thirsty headline chaser vc guy exactly our goal is to lose weight we we have not spent much on advertising as a company this year we're like okay we're going to double down and we're going to spend aggressively on uh you know brand and product advertising and we we didn't do that we spent a bunch in the first half of the year but we're still way more profitable than we expected we doubled down further in the second half of the year we're and our accounting team last week was like guys we're still profitable you know like um so it's going to be smaller i think the average check size is going to be five grand instead of like the 11 that it was last time but do you hear any pushback from teammates when they sort of have already calculated what they think their checks going to be and then you guys decide you want to spend more aggressively so there's less profit to share and how do you balance that yeah so one we like the same all the transparency that you see on the outside we have even more transparency on the inside so for example um you know we have a full open book so everyone can see all the expenses see what we're what we're spending and everything um and we just are really upfront about all of the trade-offs in the business so we talk about this like short term versus long term and what the effects are with compounded growth and everything else so i think of compensation in two different ways that kind of makes a quadrant so i think of short-term versus long-term compensation and i think of guaranteed versus performance based so short-term guarantee to salary uh long-term guaranteed is like 401k match you know retirement short-term performance based is profit sharing and long-term performance based is equity and what i think that does is it makes this whole like this matrix where it's all covered and you're taking care of it each way and the individual team member can get a feel for the the trade-offs that the business is making so for example i as a founder i'm like let's spend right now because let's get on the growth directory that we want on our path to 50 millionaire or 100 billionaire and you don't want a team member be like no no i want money in my pocket sharing yeah yeah and so by having them participate in each side of it they get to live in that tension that you as a founder live in and they go okay yeah let's invest now because profit sharing will be bigger down the road and because um you know my equity is going to have more value down the road mm-hmm so what portion of 58 companies nathan decides your own equity what portion of companies have the teammates own currently yeah so i own 90 and the team pool is ten percent of which seven percent is currently allocated that's great that's great okay and yeah paid spend is growing drastically i'm just looking at ahrefs while we're doing this i mean you used to like may rank for like and pay for 325 keywords and now it's at like four accents like 1200 keywords um so clearly you're running experiments there yes interesting how much are you spending per month now on paid ads i think about 400 000 okay interesting and how do you i mean is it working um it's working decently um there's a lot of things that we're having to figure out we're able to drive a lot of free accounts but one for example we found that our mobile experience isn't as good as it should be and so you know inexpensive accounts to drive or mobile accounts but if you don't have that a great in-app mobile experience then you know they're not going to convert or they're not going to have a good uptake so there's a lot that we've been trying to figure out um the other thing is we've been we're about to kick off some big new brand campaigns where we actually hired like a major marketing agency to produce like video brand ads for us we'll see how that goes um but why not hire little videographers and send them to your creators and have them shoot like raw a little blurry videos that seem like really real and it's like a cook and splashing on the lens and yeah i mean there's the whole all kinds of different ways to to do it and i think we're just excited to see actually what's funny so the agency we hired is a mechanism in there based out of new york and jason harris who runs it i don't know very well but we're both investors in the ghost town together oh nice and and they do stuff for alaska airlines and peloton and everybody else you know and so that's one of those things of uh sort of keep it in the family in that one yeah well i like that that brings me up to where i want to wrap this up you know going back to your ladders of wealth creation that you've modeled time for money your own services product type services selling products and then there's this next level which is hey you know not only nathan is making money like you are making money from convertkit but your team members are too and they're sort of capital leverage and so you know you write your about your investments on your website like you know what i enjoy working with these people they're my friends i'm going to give them capital and see what happens can you talk to me about that because i don't see that on the ladders of operations or a chart you built how are you thinking about literal you know you know capital leverage moving forward for nathan barry yeah i think it's not on the chart because it's relatively new for me of you know if you look at my my earnings they trail like convertkit's growth like my earnings trailed out by a few years right of um that's something interesting that my wife and i talked about of like it was only three years ago that we like didn't really have you know like the things were really tight you know um and so i think that's something that i'm uh learning a lot right now and is just what that investing looks like and um someone that i follow a lot in that space is andrew wilkinson from tiny um it's just fascinating to see him deploy capital um and it's just been been fun to read books like uh the outsiders or you know snowball about warren buffett or some of these other books of like okay wow you know it's not just all angel investing and stuff like that i have a you know a decent number of angel investments not a lot i think maybe nine um but um what i'm trying to do more of now would be inspired by like what andrew is doing or warren buffett's style of like great can i buy ten percent of a company um and so like uh there's an e-commerce brand that i was able to do that with um which ones here they're called hakla okay and they're um they sell products for special needs um and they just have incredible opportunities to to grow um and then you know we we acquired a uh minority share of a company called spark loop um so we're basically looking for what are these things were were instead of buying a tiny percentage to an angel investment we could buy five percent 10 20 um and then it could become part of a portfolio that could eventually feed each other when when is the nathan berry convert kit rolling fund but private equity version not vc version launching i don't know probably the biggest thing that i'm torn on right now is chasing after some of these fun opportunities like i have a real estate business here in boise that i started with two friends mainly because they had all this energy and the desire to like move up the ladders of wealth creation but needed some more help and needed capital and so to do that with them has been really really fun but then at the same time all the opportunities in convertkit like let's say if we're valuing convertkit at 7x ar 8xar or something like that that's conservative for even for what you've built yeah um 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 making 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 and so it's an easy trap to fall into like oh i've made this money here now let me go to this other thing when if you just look at the the course the leverage just let just straight up leverage then the answer is this has worked so let's keep doing it put in more effort there go faster and so it's a balance between what's fun and like a little bit of a diversification and like no just keep doubling down and convert it last question nathan you sent out an loi to buy a company this morning which company was it for i can't tell you [Laughter] i thought that would be the answer so let me back up where how do you go about finding companies you send lois to yeah um that's a good question so it's things markets that we're spending into um uh something that is a a good fit something that we hear a lot from our customer base of like if we see integrations popping up a lot um if we look at say our three-year roadmap and there if there's a a something that we're planning to build but it's a few years off and then we see someone who is getting good traction in that space right our customers are already using them then it's like oh we could accelerate a plan two or three years out if we buy them today especially when in any in any software company uh engineering time is the single greatest constraint and so there's so many opportunities to chase and you just have to take the um richard branson quote of like opportunities are like buses there's always another one coming um and so you end up in a point where capital is more available than like skilled engineering time to apply to problems and that's when acquisitions start to become interesting of like okay i can accelerate this plan um you know for a million dollars rather than having to spin up a whole new engineering team and then spend a year building it guys there you have it nathan barry 2005 a long journey when his parents dropped off he showed up with the van afterwards with 120 bucks of woodworking sales quickly got into college early said give me to-do list of what i got to get done then landed a ten thousand dollar contract marketing contract ended up dropping out of school to pursue that and eventually turn those professional services goods into a couple thousand dollars a month but it really changed in 2015 when you started really focusing on convertkit community building and that first team retreat in 2016 when they paid out their first profit sharing to employees of 100 000 now 58 convertkit team members strong focused on building the creator economy they're empowering these creators in many different ways and they continue to drive growth 19 million last year and run rate up to 25 million run rates today totally bootstrapped nathan barry thanks for taking us to the top thanks for having me boom guys cut nathan what do you think man