How Kit (Formerly Convertkit) CEO Nathan Barry grew to $43.8M revenue and 49K customers in 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

hello everyone my guest today is Nathan berry he and a previous couriers he's been a designer author and blogger and after learning the power of email marketing he gave up a successful blogging career to build a company called convertkit which you may be familiar with that has now changed to a new name I'll let Nathan do the reveal on that but outside of work he enjoys playing a soccer woodworking and chasing after his two little ones up there in Boise Idaho Nathan I ready to take it to the top I am alright so first things first it was a big thing on social after your after your conference crafting Commerce what's the new name and why the change yeah so we changed the name from convertkit to seven and seven a Sanskrit word and it means selfless service and basically we're trying to build a much bigger brand and we didn't want to be I guess pigeon holed into a really techie sounding name my convertkit kind of sounds like a wordpress plugin and then also if you're if you're out there serving your audience and then you know you're delivering the best content growing your audience really serving them then convertkit as a name sounds really salesy and it sounds like you know you're trying to put them through a funnel and you're trying to sell them and we want customers who have the other approach and they're trying to you know build the best content on the web and really invest in their community yeah and it's doing well you've passed i believe about 1.0 1.0 7 million monthly revenue over 12 million run rate you you're really public with your metrics I think 6.5% kind of monthly churn are those all accurate yep they don't like your it that's great so let's dive kind of ok so I want to get more a little a little bit of a backstory here but I don't have to spend too much time there cuz people can go listen to the first interview but last time you were on which I believe was about 13 months ago you were doing about 650 or 700 grand a month so the growth is really healthy where are most the new customers coming from or is the growth coming from you driving expansion revenue across the current base yeah expansion revenue definitely helps but it hasn't been enough to get us to you know net negative churn which is the ultimate goal so it cuts our turn rate in half but you know we still have to drive a lot of new revenue it comes from three major buckets of one third would be affiliate revenue so that's us doing webinars we've got a three-person team that handles that you know scheduling booking the webinars all the logistics and actually teaching them and we do about 15 webinars a month with different partners and how are those if you're only asking how those roles split up is like one person the initial reach out one is the like set up the landing page and send them emails to send down and the third is the actual instructor yep that's exactly right so it's relationship teaching the webinar and then there's just so much behind the scenes of you know landing page so I've copied logistics all of that and that's what the third person does and I said 15 months yeah yeah we tend to average 15 a month and those are range from really big ones with someone like Pat Flynn that will drive you know 500 trials or something like that which is pretty substantial yeah or we'll do smaller ones that will drive 30-40 trials and that's still a good way to go the next big bucket would be you know kind of all of our organic you know the the marketing site the blog the content marketing and that drives about a third and then the remainder would be like pure word of mouth like all the referrals that don't come through the affiliate program you know people just hearing about the brand signing up and that's still you know that's the hardest one to track where it falls into other buckets you're trying to track it down but that's generally the breakdown okay and give me a general sense of how many new customer or how many trials per month are you at today in terms of signing up and then how many those are converting to paid customers yes we're right in the middle of changing all of this we switched from credit card up front on our trials which we've always done yep to credit card after the trial ends and so you're catching right in the middle of me trying to figure out if this is a good idea or if we just screwed our growth or what well this is an this is gonna be a beautiful conversation so so let me let me go back how let's start with the first version how was that working what was the performance yeah so we were running a few thousand trials a month it fluctuated quite a bit right because if we had a big webinar month that might drive an extra thousand trials so you're looking at a 50 left over you know another month but we're running about a 52 to 55 percent trial that paid conversion rate with credit card upfront so it's basically going on 14 or 30 day trial depending on the offer and then you end up paying for that first month yeah but they all those trials have to put their credit card at the beginning they're not charged anything though right correct okay and then you're saying 40 to 50 percent of them at the end of that trial would actually move into whatever your 50 60 $70 per month plan yeah I knew it was 50 to 60 percent 50 okay sorry 50 60 okay so why chain me people listening are going whoa wait this sounds great I would kill for these numbers why is he changing yeah I I asked myself that as well so we wanted to see you know you always want to test an experiment and really work on your funnel we we thought that a lot of people were signing up and we were getting conversions purely because people forgot to cancel and so then the churn down the road was higher and so we want to see can we build a better funnel here you look at Squarespace a bunch of other great brands and they all do it credit card at the end of the trial right that's so it's a it's a tried-and-true method on different brands we wanted to try it for ourselves and we knew that we needed to make our onboarding a lot better for that to work so we spent the last four or five months really diving in trying to improve all that finding problems getting bit a lot better metrics in place like name some of those metrics you feel you had to get in place to get the onboarding better yeah so we started asking we rolled out a tool called amplitude so we can track all of these events across all you know everyone who's signing up and we switched our signup flow so that we started asking questions first so we would ask hey are you brand new or are you switching from another provider I'm switching okay cool what provider are you switching from you know how many subscribers do you have so we're collecting all of that there's a user experience principle called gradual engagement and basically what it is is if you can get people to make a bunch of simple quick clicks they'll get more invested before you ask for meaningful information like email address you know or information to sign up for account so we we did that the other flip side would be if you're brand new it'll ask you do you have a website yet you know if they say yes okay is that Squarespace WordPress works whatever so now what we can do is we can start to break out cohorts instead of just looking at the overall trial to paid conversion rate we can start to break it down based on oh the people who are total beginners don't know how website don't have a single email subscriber no surprise that they're turning but then we can you know see that okay people with 5,000 subscribers moving from MailChimp maybe they're turning out a higher rate than we want so basically that was turning the funnel on its head trying to get much better analytics on that I would say that initially the experiment we have much better data is it alive or just it's not alive yet oh it's it's all alive it's been live for about a month and a half and we've had our worst month of growth ever June and I was gonna say okay before we but that's gonna be a cliffhanger here for a second most people listening to the switch you just articulated I imagine their board meeting debates around that change would sound something like this but if we ask a bunch of questions up front they're gonna drop off and they're not gonna answer all the questions and then we should just got their email so we could re-engage them that would've been so much smarter and but but you're arguing long term activating them in the trial period with actual usage metrics which I'm sure you're you're trying to figure what those are is way more powerful in terms of lifetime value and stickiness is that accurate yeah and I'm also arguing that the and this is a big internal debate the asking the questions will not decrease the number of people that make it from you know account signup page to create an account has it in the first month so that has actually worked out oh great turns out gradual engagement in our case works yeah it did not decrease that the conversion rate for those steps so try to smack your eye and make sure I understand it so trials are still the number of new trials on both the first test and the second are about the same yeah okay yeah though once we the other test is getting rid of credit card upfront and that has increased the number of trials substantially by how am I not enough yeah I don't have that number okay but it's also hard because it's skewed so much by the other promotions so like this I think of the month of June we're at 5200 trials so that's substantial way better I think our best month ever before that was in the 3000 range yep but it's still not enough to make up for the the lower number of people I'd hang a credit card do you directly attribute that 5,200 trials which was your best month ever do you directly attribute that to the fact that there is no friction in terms of a credit card on the first step yeah so I think that's the reason that it's higher but again it's not enough higher that that the math checks out but then you have to wait even further down line and see well maybe churn is significantly lower on these people since they might need much more of a conscious decision to purchase and so that's why we're running these experiments you're having to wait in some cases months to know if it's working yeah and so it's a little painful and expensive so let me if I'm listening to this interview right now the second thing I'm thinking is it's great Nathan's asking all these questions wow that's powerful but is he than creating 7,000 different onboarding process depending on what combination of questions people pick like new user Squarespace site five people on my email list versus you know switching from whatever company blah blah blah I mean how do you how do you actually use that data on the onboarding in a scalable way and are you using any software tools to help you do that at that scale yeah so it's all custom coded it's probably ends up being about 25 to 30 different variations but they're pretty small tweaks so it's a manageable number okay and it's things like if you put in you have over 5,000 subscribers then that alerts our demo team and it tries to get you to schedule a demo we're following up with you right because then you're raising your hand saying hey I'm a lead that you should pay attention to I see and then there's other little tweaks down the road so like the emails that we send if you're using WordPress are going to talk about setting our wordpress plugin rather than like here's how to embed a form in Squarespace interesting okay good so so there's three or four things like that one helps your sales team under prioritize right hey I have 5.0 the others like hey you're a wordpress thing well here's that tutorial right you should start there and then maybe there's three or four other kind of variants like that yeah I see I see okay so the first month doesn't go so hot your internal team you can see their eyes going is Nathan gonna flinch you're gonna stick with it how do you convince folks to stick with it can saying hey we need a bigger sample size here yeah so I think the biggest thing is knowing like making a decision are we still learning or we learned everything there is to learn on this and up until this point we're still learning we're making tweaks it's highlighting problems at specific parts of the funnel whereas before we looked at the funnel as a whole and so now we're seeing okay like we found a problem that a lot of these trials you know tons of new trials but a lot of them weren't coming back a second day like they weren't logging in a second time so that's a significant problem and if we were looking at the funnel as a whole we wouldn't have noticed that yep and so that we can fix that and and go from there are there yeah that's a great first step right so so I mean I also say of all these interviews that I've done the a lot of companies start off exactly like how you did which was kind of a whole credit card upfront thing and and they know that they're getting a little extra lift by people that just forget and then at some point you realize that's good to start with like if I want to go to a real company I don't wanna rely on people forgetting about the card let me actually get them addicted to the product and then they switch and I do what you do I mean you're you're on the same track so the next big question is like what should i what are the activation metrics that most directly correlate to them putting in the card and signing up for pricing and I imagine for you do you know what those are yet is it actually embedding the form on the bond the site like getting their first 10 subscribers what what are those things yeah it's exactly those two things so really them getting visits to a forum so it's one thing to like I made a forum great but if you didn't get anyone to visit it or and then subscribe to it that tells us you didn't you didn't promote it anywhere put it on your site and so that's the first thing where we always look let's get them to get a form on their website and then let's get them to get a handful of subscribers or if they said they'd like this is great that we have this data now if in sign up they said they have 2,000 subscribers now we know that our single goal is to get them to import those subscribers mm-hmm and so it can totally change the activation metrics based on yeah that's interesting okay good it talked to me about about team growth I I think I've seen you hiring a ton so I what are you out saying from the total team size yeah we're at 37 on the team okay and where were you about a year ago well it's more question think are we 30 okay good I'm more upper 20s the reason I ask is because you're in a unique well there's a lot of stuff happening by the way like an Idaho silicon slopes that kind of area but our mean are you finding it difficult to hire people where are you finding these folks yeah so our team's totally remote we're 37 people in 24 cities and so we did not have a hiring problem every position that we put out has 3 to 600 applicants you know remote is a huge huge advantage mm-hmm are they mostly customers or people to sign up for a trial they just they love you they love your content there's definitely some of that less on the engineering side ok um but a lot of that actually the engineers that we hire I guess they may not be customers but they've followed our story all the way along because we've been public about numbers we've you know like there's a blog post on my site being like yeah we hit 5,000 a month in revenue and so we have engineers joining our team who have followed us on Hacker News or places like that since then and so then they're they're thrilled to join the company this is the argument for being transparent with the numbers right talk to me about about other kind of paid acquisition channels I know you mentioned kind of three growth drivers earlier in the form of affiliates content and kind of word-of-mouth are you doing a direct paid stuff we do some I think are our paid ads budgets about 20 to 25,000 a month okay so out of a million total and monthly revenue it's a pretty small yep chunk we've been targeting a three to five months payback period and word we do okay hitting that it's better than before but it's not look at the level of hey let's let's dump money on this you know yeah and you're at a fit about a fifty five dollar RP right now right so five-month payback would be you know call it 250 280 bucks something like that yeah and we're really trying to sit in that three to five month range with five being the top-end yep so I don't know if we need to increase our tolerance there you know I've talked to other founders who are like what are you doing five months is great like spend a whole you know well you're still bootstrap though right yeah yeah are those founders funded yeah well of course right they're playing with other people's money right and and then they're the hits them in the form of dilution yeah so so let's switch that here for a second so you like the bootstrap mode I mean would you ever raise capital you're considering raising capital now or no I'm not considering raising capital so we've gotten to this point without capital and now we can basically fund whatever project we want and so I like having complete control I like having you know no one's putting us on a timeline for an exit we're able to grow at the rate that we want and I think the biggest thing is I'm not looking to sell in cash out everyone says that but they're like but you know they're having private equity conversations on the side or whatever else but I don't have another product that I want to start or the next thing and I actually don't like the early stage like the 0 to 25 K 50km are are like that's painful yeah and so I want to be running sever for the next 10 15 years and so you know raising capital doesn't exactly aligned with that yeah well Aceves ounds like it's doing well i have one last question before we wrap up where do you get a 4-letter domain name sorry I for yeah for the domain name like that it was something that you bought ages ago and it's in your GoDaddy account no I I wish that would have been less expensive but I bought it about two and a half months ago uh and yeah we paid three hundred and ten thousand dollars for it okay that's actually that's not a horrible for a pronounceable floor domain name what did that negotiation like sound like did you reach out yourself or go through a broker or what we went through a broker it was owned by a company that has tens of thousands of premium domains they're one of the biggest in the market company called venture calm okay and they wanted to lease us the domain that's their business model which I'm gonna build a whole brand around yeah but they're gonna lease it for two grand a month which that's super cheap an option to buy they wouldn't do that yeah I was like there's no way we're doing this and so they stayed for that like we asked through a broker hey what what would the price be and they said five hundred thousand and they stayed completely firm at that and so like after a bunch of back and forth for like three or four weeks we had them down to like four hundred and sixty thousand and I made a comment to my assistant like wow this is a frustrating negotiation and she said yeah it must be frustrating to be negotiated like that like just implying that like yes they are a hundred they think you're in love with a domain and you and they feel like you have no other options and you're cooked yeah and so we ended up going back and forth and they we got them to make some pretty big jumps down ones that came down the wire and then we were basically like hey we'll go so what did you use so the biggest thing was we were negotiating payment plans and when we switch to say hey cash upfront ah then so basically the end result was I will give you three hundred ten thousand all upfront and why are you the money first thing tomorrow morning yep cuz at this point it was like you know 4 p.m. or something and they were like ok now so it was weird we're in two days it went from I don't know this deal is gonna happen yeah and even I think that highlights such an important like thing in negotiations which is there's a massive difference between like a deal price and payment terms right like there are people that you could you have a buyer company for a million bucks but if it's only a hundred grand cash upfront and then nine hundred grand earned out over three years you might be able to win that battle by saying here's 300 grand all cash upfront iyu tomorrow morning right and I think people are expecting to get then later like you agree on a price and they're changing it more there's other terms that you forgot to mention and so when you say that I'll wire you the money tomorrow morning then it's like oh no we're serious and I could have a deal right now yeah guys are very good Nathan let's uh let's wrap up here with the famous five number one what is your favorite business book oh I'm gonna go with anything you want by Derek Siver's okay number two is there a CEO you're falling or studying right now I just spent some time with Mike McDermott from fresh books yesterday Oh super sharp guy he's probably one I'm learning the most from yep and if you guys want to listen to Mike's interview on the show that was back in episode a 1260 great interview there a lot there's a lot of stuff by the way happening up there in Canada man it's a good place to spend some time number three what's your besides your own with your favorite online tool for building the business oh that's a good question I don't do a lot of e-commerce but I've been into Shopify quite a bit lately cuz we're pushing into that world and so that's the first one that came to mind you mean you're getting a lot of e-commerce brands during the use convertkit for like lifecycle emails cart abandonment things like that yeah and we've been building deeper integrations with them and I think of them because I was just at their office yesterday and so they're just great people and building a really solid product and I look at their all their growth numbers cuz they're insane it is it's incredible number four how many hours of sleep are getting every night at 7 or 8 7 or 8 I sleep I sleep plenty oh and he said I'm married with two little ones right yep and how old are you Nathan I'm 28 it's Fulani 8 last question what he was your 20 year old self new um I think that all of this is gonna take longer than you think it will I wasn't super impatient at 20 but but you know fairly impatient and so just knowing that if you grind it out for years you keep working the same company I had like a build it flip it build the next thing kind of mentality and once that changed to nope this is what I'm doing five years ten years 20 years down the road then you start to get the compounding effects of SAS and it's just so much better guys there you have it from Nathan everything takes longer stick with it especially if you're in SAS you're getting compounding effects he's where he likes to be he doesn't like the first 0 to 20 K now doing over a million bucks a month in a revenue making a big shift in the beanie on your arm courting plan moving from a credit card upfront to hey let's focus on asking questions first do gradual engagement and in customized experiences and he thinks that will help long term with churn we'll see what happens again rebrand going well as seven as he looks to build something that's less about hey just sell sell sell and more about hey build a great experience for all your customers Nathan Barry thank you for taking us to the top thanks for having me