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Automattic turned down $200M offer, now well past $100M in ARR
Nathan: Hello everyone. My guest today is Matt Mullenweg. He is co-founder of the open-source blogging platform WordPress, the most popular publishing platform on the web and the founder and CEO of Automattic, the company behind wordpress.com, WooCommerce, and Jetpack.
Additionally, Matt runs Audrey Capital, an investment and research company. He's been recognized for his leadership and success by "Forbes," "Bloomberg," "Businessweek," and many, many other magazines.
He's originally from Houston, Texas, where he attended the High School for the Performing and Visual Arts, and studied jazz saxophone.
In his spare time, he's an avid photographer. He splits his time between Houston, New York, and San Francisco. Matt, are you ready to take us to the top?
Matt: I'm ready.
Nathan: All right. Very good. So, I'm excited to chat with you. Now, I want to put this out there right away.
What is the relationship between Automattic and WordPress?
Matt: So, think of WordPress as an open-source project and software that people can run anywhere in the world; and Automattic, both provides some WordPress services and contributes a lot of the project.
So, they're separate, but closely related. I think where people get confused is a lot of the same people are behind each, including myself.
Nathan: Yeah, you gave an analogy on stage, which was to, kind of, think of yourself as the Procter & Gamble behind brands that we know and love, like WordPress, WooCommerce, Jetpack, and others, right?
Matt: Yep.
Nathan: All right. So, give us the back story here. You know, you are early on at seeing that, I think, doing open-source stuff, was that right out of college?
Matt: Yeah. I actually ended up dropping out to take this, you know, opportunity. It's at San Francisco. Kinda in between my sophomore and junior year and ended up connecting with a lot of great companies including Google, Yahoo!, CNET.
And then when I returned, started to get some job opportunities. And I decided that, you know, it was such an incredible opportunity I could stay in college two more years and hope to get that kinda job, or I could just go for it. And it didn't seem...
I wasn't too much into college at the time, but I also wasn't going to like amazing schools. Going to University of Houston, which is fine, but wasn't like this great on the tech side.
Nathan: You weren't gonna miss the jazz club or anything?
Matt: That's actually the thing that probably got the worse after I moved, because in Houston I've been playing jazz since elementary school. So, I'm playing saxophone since elementary school.
So, I have very deep connections to all of the groups here, and I would actually gig. I would generate a good chunk of my income from playing around town. And when I moved to San Francisco that totally stopped.
Nathan: What corner was your favorite in Houston? Where did you get the best tippers?
Matt: I think I only bust, maybe once or twice. Normally, I would play like a big band gigs or played in, you know, coffee shops a few times. Mostly just stuff with friends around town, but the big band ones were the best because they were often union gigs. So, you'd get, kind of, like an actual paycheck in the mail.
Nathan: That's pretty cool. Guys listening, if you don't know, obviously, WordPress, we'll learn more about it today, but also with Matt we're gonna touch a bit on his new project, Gutenberg, which was released earlier this year as part of WordPress.
He also did some early investments in Bitpanda and Coinbase back in 2013 before it was, you know, hot and cool and doing what it's doing today.
He then left and returned as CEO of Automattic, which I wanna talk about kinda how he did that. And then also, in 2007, he made a... well, I don't know how to describe it, but he made an important decision to turn down an acquisition offer, which, I think, there's probably some lessons there that I'd love to chat about.
So, Matt, take us back to year one.
When did you launch WordPress?
Matt: WordPress started in 2003.
Nathan: Okay. And that was...you kind of turn...you had other opportunities on the table, why decide to go do your own thing?
Matt: Oh, well, WordPress was really just like a hobby, and it was something I was doing kinda nights and weekends or instead of my school work, which was frequently.
And it wasn't until about a year after that when I took the job at CNET, and a year after that is when I started Automattic.
So, starting of Automattic in 2005 was more there were different opportunities including continuing at my CNET gig. And I decided to really dive in on a startup.
Nathan: And how did the open-source community judge you opening up a company that was clearly meant to kind of build the ecosystem, and also make money to enable WordPress build further.
How did you manage those expectations with the open-source community?
Matt: Oh, I think, people were highly skeptical, but rightly so, regardless of who I am or anything. Like, the history of most companies coming out of open-source projects, is that the open-source project really suffers.
Especially kinda years four to six when the company, like, starts to maybe feel the grind of fundraising or growth or something like that.
We now have, you know, over a decade of Automattic and WordPress. So even though today there is still some skepticism, my motives, or Automattic's motives, or things like that, or just people in the ecosystem who work against Automattic very directly.
We now we have a lot of history showing that I very much take a long-term view to these things and that the Automattic and WordPress can grow very much together.
And in fact, Automattic, I think, has helped WordPress grow far, far beyond what it would have without it.
Nathan: According to your 2016 year-in-review report…
In 2016 you shared almost 595 million posts on the platform and 457 million comments had hit.
What do you think that's gonna look like here in 2017 as we close out the year?
Matt: Oh, I don't know. I don't follow the number of posts super closely. So, maybe because it can be kind of a... it's a good vanity metric. So, I'm glad that you picked it up, but...
Blogging Platform Market Shares
according to the “State of the Blogging Industry 2017” survey, by ConvertKit:
WordPress absolutely dominates the market. Automattic’s hosted version accounts for 16% of the total 76% of WordPress market share, which puts Automattic ahead of every other blogging platform, with 12% market share.
Nathan: But it's not necessarily vanity, right? I mean, a lot of people will lead interviews or questions like these with revenue numbers, but revenue can lie if people aren't addicted to your platform.
So, I like to lead with usage-based questions and really the post is the good one for you.
Matt: Yeah. Maybe I should be thinking more about posts.
Nathan: Why don't you? Wait, why don't you? This is interesting.
Matt: Well, I think, because, you know, what we're trying to do is get more people blogging, not necessarily more posts. The post numbers can get, kind of, thrown off a lot by, you know, kind of the outliers or major publications, which use WordPress quite a bit.
Or, I think, we take this out of the number you just quoted, but some of the numbers I look at internally, like when people import. Like, let's say people are leaving Tumblr, which is actually a pretty popular one to leave these days.
Nathan: You like that story, don't you?
Matt: Oh, no. It's actually a little sad because Tumblr is a very vibrant platform. We're getting a lot of imports. And some might import like 10 years of post at Tumblr into WordPress. So those can throw off some of the posting numbers.
Nathan: I see.
Matt: So, a lot of what I'm looking at right now is kind of the monthly active users. So, weekly in that ratio to weekly and daily. And then, another thing I'm thinking about a lot is that ratio to our mobile active users.
So, people using WordPress on apps. And I guess I'm thinking about posts from the point of view of Gutenberg, which I know you want to talk about a little bit later.
But with Gutenberg, it's not so much we're trying to get people to create more posts, although hopefully that's a good side effect, we really want them to be able to realize in their post and pages, you know, really rich layouts and their imagination.
But right now, people are still, kind of, in that kinda more text blogging mode. And we want take that to the next level.
Nathan: I don't know if I'm misquoting you on this so correct me. But was the "New York Times" piece, the "Snowfall" piece written on WordPress?
Matt: Oh, I don't think it was. I think that came out to their...one of their custom dev teams.
Nathan: Got it. I wasn't sure. Now are they part of your VIP?
Matt: But that's the... Yeah, they are VIP. And that's, kind of, the idea is, that, what "New York Times" spent, probably tens of thousands of dollars, to do a few years ago will be able to enable anyone with WordPress and Gutenberg to do just kinda out of the box.
Of course, the hard part is writing the story, it's not the layout, but I'm fine with that being the hard part. Right now, both parts are hard.
Nathan: And, Matt, I have a lot of cold-hearted capitalists that listened to this. Along with a lot of developers, but I don't wanna lose my capitalists so, I have to ask the question.
You know, you're a guy that just seems hyper focused and we'll talk about what happened in 2007 or 2005 here in a second, but talk money to me for a second.
How do you guys make money?
Matt: So, we are, you know, vast, vast majority 98%, 99% a subscription business. So, the three main things people subscribe to are wordpress.com, just hosting for WordPress, and Jetpack, which is services for WordPress if you host at someplace else, like could be Bluehost or GoDaddy or Rackspace or anywhere.
And then finally, WooCommerce, which is our e-commerce platform. And so that's people who build stores, listings, they sell digital goods, physical goods, or just take bookings, like for salons and stuff. People use it for all sorts of e-commerce.
So, between those three we have kinda products you can subscribe to at each and that's really the main driver of the business for Automattic.
Nathan: And are all the, I mean, these are all kind of their own SaaS business…
Matt: So, wordpress.com is pure SaaS. Jetpack is also SaaS, but there's some software you run yourself and WooCommerce is much more of like you're buying software and it's a long-term support model.
So, there's a little bit of SaaS there, but it's mostly, more of like selling software.
Nathan: Yep, and then Toni who...we'll get to kind of Toni and I'm really interested in the story of how you kind of left and then came back and did some kind of investing in the middle.
But Toni who was the CEO running Automattic or WordPress for a while, shared an interview that you guys, I believe it was in 20...was it 2012 or 2014 you guys passed, I think, 45 million in revenue?
One of the reasons I'm intrigued to be talking to you right now is I recently, two days ago, talked with Ryan Smith, who was the Qualtrics CEO and they just raised a big round of funding and very directly said, you know, "We will be IPOing."
All the messaging around your announcement on the latest round of funding was we're doing this specifically to stay private.
And so, I wanna dive more into that with the following question we'll build up to it. But you got an offer in 2005, I believe for $200 million, or at least it was speculated, right?
Get me into your brain at that point, I mean, this is a guy where in college you were playing jazz on corners, enjoying yourself making some money, where was your headspace in that moment to turn down that offer and also try and rationalize it with yourself?
Acquisition offer turned down
Matt: Yeah. I think we've talked a bit about that publicly. It was 2008. So, it was about two years into Automattic, two and a half years.
Nathan: And it was a $200 million offer?
Matt: It was of that magnitude, yeah. And the company at the time was also really small, like, 20 or 25 people.
Nathan: Can you share revenue that year?
Matt: I would call it negligible. So, it wasn't a really revenue multiple...
Nathan: Less than five million?
Matt: I don't remember, actually, but, like, probably in that range. And so, really, really cool offer. Would've been great partners, and sometimes I wonder, not that I should've taken the offer, but just where we would've gone if we had done that.
But the main thing for me was it was very early for Automattic and it seemed like there's a lot, lot more we could do, that we could do that best if we were independent.
And then for, like, my day-to-day, the things I was doing then and now, which is like, leading the product for WordPress, working alongside great people at Automattic, creating services, I was trying to create that dent in the web, if you will.
I was like, "Well, if I had a $100 million, I'd wanna do exactly that, you know." I don't know if I'd wanna change my life at all. So, what we ended up doing is, sort of, turning that into a round of funding, where we both put some new money into the company.
Nathan: Matt, can you share you who that was? What company made that offer?
Matt: No.
Nathan: Okay. But when you say you both in... I don't understand what you mean. You say you turn that into an investment. The company then invested instead of acquired you?
Matt: No. So, you know, it's very common when you go on acquisition offer it sets a value for the company. And so, you can use that to go back to your investors and say, "Hey, you know, I'm not gonna sell, why don't you invest at this value?"
So, we were able to do a round at like a $200 million valuation. And that was, "New York Times" actually joined that, and it was largely around existing investors. So, all our existing investors kind of re-upped and we did do a secondary part of that round.
So, they bought some stock from existing folks, including myself, which I would say is good for founders by taking a little bit of money off the table. I was certainly in a place that I didn't really need to think about money again.
And that allowed me to focus on the company, not worry about any of that stuff. And really try to build it to be as large as possible.
Nathan: How did you get your brain to that? So, you launched in 2005. When was, kind of, that moment money-wise for you when that wasn't the motivating factor for you anymore? How did you make money from that quickly?
Matt: You know, I think, there was both some of the early revenue in Automattic, that for better or worse, from a pretty young age, from when I was like, 22 or 23, I had a lot of confidence in not having to pay the bills.
And then, I don't remember exactly when the... I would've been 24 I guess, that was more where I was like, "Okay, I could retire, if I wanted to at time."
Nathan: Which you wouldn't.
Matt: And I don't think I ever will.
Nathan: Got it. Okay, so, you turned that into an investment.
How much total have you raised?
Matt: I think total at this point raised around...let's say about 200 in primary and about another 150 in secondary. So, somewhere around 350, total.
Nathan: Got it. I think that last one was May 5th, 2017, right? Around there?
Matt: That would be this year. I think our last round was in 2014.
Nathan: Twenty-fourteen, got it. I'm glad I got clarification on that. And then...
Matt: No worries. I was thinking. I was like, "Wait, did we raise money?"
Nathan: Surprise, surprise. Okay, that makes a lot of sense. Again, I'm curious to understand, in the press messaging-wise you are very clear, you are not raising this capital to go public, you're raising it to stay private. Why be so clear with that message?
Matt: Oh, it's a good question. I think, well, it was three years ago. So, if we were promising to go public, we would've been wrong. I think the main thing...it was a $160 million, which is the size of many IPOs.
And really felt like being private would give us the most flexibility for the next several years including against our public market competitors who are reporting things quarter to quarter.
And while they have access to, you know, the public capital market, which is great, I think you lose a little bit of your ability, except for a very few companies, to make really long-term strategic bets.
And we believe that this is still very much, you know, the first inning of the space. And that we're making investments, some of which are gonna pay back over 3, 5, and even 10 years.
So, having a set of investors on board that thinking long-term was really, really important and we've been very lucky to really develop that investor base over time.
Nathan: In 2010, it was generally reported by TechCrunch that you guys had past that magical kinda $10 million per year market. In 2012 obviously, kinda Toni put out the statement $45 million, 70 million sites up from 35 million in 2011, and over 500,000 paying customers in that year.
Are you comfortable sharing, kind of, where you are today or maybe your range, are you more or less than $150 million in ARR?
Matt: I think the thing that we're saying publicly is that we're into the nine figures. So...
Nathan: Okay, got it. Fair enough. So, past the $100 million in ARR, but we'll say less than a billion in ARR. That's a good range.
Matt: I can say less than a billion in ARR
Nathan: Less than a billion. All right.
Matt: So far.
Nathan: Next year will be a billion, right? All right. Good. So, I wanna transition out to some of the software stuff of the business. We got some economics. You were running the company.
Walk me through the process, why did you replace yourself with Toni? And strategically, how do you recommend other founders do that if they wanna go down the same path?
Matt: Yeah. It's definitely, factually true to say I was running the company in the very beginning, but it was also just like five people. So that's not like, it wasn't like...although I was a CEO, it wasn't like CEO like you might think of a CEO.
And I had already met Toni and knew that I wanted Toni to join the company. So, it was more a matter of him, kind of, wrapping everything up at Yahoo! where he had sold his previous company to.
But I know I wanted Toni to be CEO. So, he joined, and we always work super, super closely together. So, it was very much like...we were paired essentially, and I learned a ton working alongside him.
But we were always really clear with everyone because I had seen co-CEO and other kind of arrangements and that seemed to create a lot of conflict.
So, I wanted everyone in the company to be clear there was like, there was a clear hierarchy and Toni was at the very top, so he had the final say on everything, which I just think is healthy for an organization to have, kind of, clear lines of responsibility.
But then as it, sort of, started to scale, and we started talking about this probably...certainly a few years before we made the switch, was Toni's passion about smaller teams. And I was really excited about taking on Automattic from like 200 people to 2,000 people.
So, we talked about it for a while and that was actually a good exercise because we start to think, well, things that Toni's doing that I'm not gonna enjoy or be good at, you know, and really started to build up the executive team.
Got a great CFO, general counsel, you know, Head of HR. Like, sort of, building out the team, which is something we should've done anyway.
And then, the day after my 30th birthday, which Toni came to celebrate me with, we, kind of, passed the baton and he moved to take over a small team on Automattic and I became CEO.
Nathan: And that's that?
Matt: And we still work together today.
Nathan: That's so fun. So, it's almost like you use the CEO title as a carrot to pull him into the company right from Yahoo! It worked really well and now it's working well just in a different form.
Matt: Yeah. I think, Toni and I... I like to say that we're business soulmates. Like, he's someone I definitely see...I hope that we're in each other's lives the rest of our lives. And the past, I guess, how many years? Twelve, 13 years, that's been at Automattic and hope that can continue as long as possible.
And if not, we'll figure out other ways to work together.
Nathan: Well, if we learn from history, there's somebody else right now that's winding down an acquisition and people are now with Yahoo! who was also kind of in this space. Are we going to see a David Karp at Automattic at any time soon?
Matt: Oh, you know, it's like when you try to get me to bad mouth Tumblr earlier. I love David and...
Nathan: No, I wasn't trying to get you to bad mouth him, I was curious. I mean, I was just looking at patterns, right?
Matt: No, yeah. Want to work with...yeah, David would be great to work with. He's like a really brilliant product person and just a generally nice guy.
Automattic’s acquisitions, strategy
Nathan: Switching modes here, building things internally to acquiring them. We'll talk quickly about acquisitions and then wrap up with Gutenberg. You made an acquisition obviously of WooCommerce back in 2015. I believe it was for $30 million.
Why didn't you buy WP Engine before they did their 2015 round and got way more expensive? Because you got in early 2011 there.
Matt: That's a good question. So, I would say that Automattic isn't really so much in the hosting space, except for wordpress.com, which is like our entry level product.
Nathan: But, Matt, that's a big deal, right?
Matt: Well, our strategy with the many, many web hosts out there, including WP Engine, is to really create a great set of services with Jetpack that compliment what they do.
Nathan: I see.
Matt: I mean, WP Engine at this point is 450 people. You know, that's...and Automattic's only 650 so, just serving their customer base which is much smaller than ours, takes almost the same number of people.
And if you add that up with the other people working on WordPress like GoDaddy and Bluehost, I mean, you get into the many, many thousands.
So, it's just, kind of, a different business. And there's people who will build that type of business and be really passionate about it. I'm actually really like a technology and product company.
So, that's why WooCommerce made a lot of sense because it's both a technology and a product and we'll create SaaS services for it. And, yeah, you can run it on wordpress.com so that's definitely hosting piece as well.
But we believe... Think of it kinda like Google with Android. Like, they'll make their Pixel phones. So, we'll make some versions of WordPress that we think that are the best in the world. But very key to our strategy is also working with every other manufacturer out there, and every other host out there.
So, maybe they'll be Samsung, you know, maybe they'll be HTC. Like, who knows? But there's lots of space for many companies in the workforce ecosystem.
Project Gutenberg
Nathan: Gutenberg. Why make it your first project when you get back? What is it and how can my listeners go use it?
Matt: Sure. So first, I'll say that Gutenberg is still in beta, so, it's an open beta. But if you search for it on your plug-in directory, search for "Gutenberg," you'll see it and you'll be able to install it.
The big idea is that we can basically move editing posts and pages from being, kind of, a document model where you type a bunch of text in a box, to where you're really taking these building blocks.
It's, you know, text, lists, but also things like maps, videos, contact forms, products, and you can rearrange them in blocks. Like, building things with Legos. So, this is how the best websites, and the best layouts and everything work. And we just wanted to make something core WordPress that really made it easy for everyone to do this.
Changing the editor since that's, really, in many ways, the heart of WordPress, is by far the most controversial thing you can do, and the hardest because lots of people are very used to how WordPress has worked for the past 14 years and there's lots of opinions on it and it's also just technically difficult.
Like, what we're building, to build it in a way that works for the, you know, many, many, many tens of millions of WordPress sites out there. It's just tough. It's much harder than doing it in a plug-in.
So, that's part of why we decided to tackle it, was the, you know, WordPress has a great set of developers, has had a great set of leaders. The different leases over the many years. Particularly Helen Hou-Sandi, who's been, like, super incredible. But for this, I was like, let's tackle the very, very hardest thing.
Nathan: Go for it all.
Matt: You know, it's definitely a stretch both leading core and running Automattic, the company, because both are basically full-time jobs. But by working with great folks on both sides, I'm able to have a foot in both.
And, you know, my hope is once we get some of these really, really big hard things out of the way, that will set up WordPress for kinda of the next decade of what's going to happen with it.
Matt’s investments and crypto
Nathan: Makes good sense. Last questions on crypto map before we wrap up with the Famous Five. You made bets via your...I mean, do you call it a VC from Audrey Capital, it's how it's structured?
Matt: It's structured... Well, it's a VC, but I'm the only LP. So, it was a vehicle for me to make these investments.
Nathan: I see. You made early bets in Coinbase and BitPay, why? This is 2013.
Matt: Oh, it's CoinDesk, not Coinbase.
Nathan: Sorry. CoinDesk,
Matt: Coinbase would have been awesome. You know, I, as a believer in open-source, a believer in distributing nature of the web, Bitcoin from the very early days was very interesting to me.
And WordPress, I think, was one of the first large internet services to add support for accepting Bitcoin for our services. At the time, Bitcoin was about $12 and the "Bitcoin Magazine" was edited by the guy, who later would found at the area.
So, he wrote the cover...there's a big cover article with the WordPress logo.
Nathan: Anthony Delurio?
Matt: I always mess up his name.
Nathan: Vitalik?
Matt: Vitalik, yeah.
Nathan: That's too funny.
Matt: So, yeah, he was the editor of that magazine, which is, again, really funny. You know, it's been an interesting space. I think that right now, we're some ways a little bit disconnected from the fundamentals because it's become essentially like a new commodity.
Nathan: Speculation.
Matt: You know, flight to safety, hedge against, you know, inflation and central banks preying money. Its capital flight straight to regimes like China.
It's just a lot of stuff being glommed onto Bitcoin, which is interesting and fun and that's, kind of, the cool part about open-source systems, is they get used in ways you would have never anticipated.
But, you know, my full-time job is not speculating or investing at these things. So, I mostly...I sold the vast majority of what I have. And over the years and, now, I just keep a bit just for fun to keep an eye on it.
Nathan: So, some skin in the game. Keep yourself up to date of what's going on, right?
Matt: Yeah.
Matt’s favorite books
Nathan: All right. Matt, let's wrap up here with the Famous Five. Number one, what's your favorite business book if you have one?
Matt: So, actually I see one behind you that I'm reading so "Principles" by Ray Dalio.
Nathan: You know, funny story about this. I don't know if you can see it, I don't know how clear it is, but there's actually like two copies up here because...I just did...I'm blessed. "Portfolio" just set a big deal with me and they also publish...my agent also did this book with Ray.
Matt: Awesome.
Nathan: So, I loved it so much I bought it and then I get a hand signed copy from Ray two days after. So, what do you think? Do you like it?
Matt: That's amazing. I'm not done with it, so I won't call it my favorite book. But I would say I would highly recommend it to everyone listening. It's not a blueprint, right? You shouldn't take it, you know, whole cloth and apply it and, in fact, he says that.
But it's so fascinating to really get into the mind of this guy, Ray Dalio, who's created, you know, far and beyond the sort of Bridgewater financial stuff. Just a really interesting organization.
And I often, you know, one of my fantasies is like I would love to just work at some of these really... companies like Google or be inside Facebook, for just like a year to, like, learn about their internal systems. I would just read the internet the whole year.
I don't actually wanna work at those companies as much I'd really deeply understand how they work and how they manage things and everything like that. And he really kinda opens the playbook for how they do it.
And I'm also excited for the coming year when they're gonna release some other tools around assessments. I think he's gonna release a coaching app in a few things I talked about. Like, internal tools they developed at Bridgewater.
It's actually been something Automattic's always been good about in the past and trying to be better about in the future and that we work in a unique way.
And we wanna open-source and release a lot of the tools that we use to be one of the larger tool distributing companies in the world, you know, coordinate across time zones, across 650 people and like 62 countries.
Nathan: I was gonna say you're fully remote. We did not touch on this, but fully remote theme.
Matt: And I really believe that's the future of work. And I also believe that the tools aren't that good yet. So, that's why we've had to develop a lot of our own. Other than that, I'll say two more books. I know you asked for one.
Nathan: That's okay.
Matt: Well, let's just make this the big question.
Nathan: This is gonna be good.
Matt: I love "Black Swan" by Nassim Taleb. And I'll do two more recommendations. Final and ultimate business book is one called "The Halo Effect," which basically talks about how to skeptically read other business books.
So, it's actually a good foundational one. Particularly, TechPress and some of the industry books, some of which are really good, like that recent Brad Stone one on Uber and Airbnb.
You also have to remember that, these are very much colored by how well or poorly the company's doing at the time. So, you know, some of the strategies that they...
Nathan: Got to get a copy of this.
Matt: Yeah, I read it. A really good book on, I think it's called "Losing the Signal on Blackberry." The rise and fall of Blackberry. So, that book had been written in 2005, it would have probably said how all the strategies were perfect.
Now, written in 2017, it sort of looks at the stuff they were doing in 2005 and saying, "Oh, this is a huge mistake." So, you have to be careful about taking lessons whole cloth from things.
And then, finally, something that I've started doing the past year or two is just reading a lot more fiction. I got onto this mode where I only read non-fiction and business books and science books and history and stuff for a really, really long time.
And actually reading fiction has helped to open me up in ways that have helped the business side of my work in a huge way.
And, you know, because it's relatively new to me I'm just going to all the classics, you know. "All the Light We Cannot See" or "Hundred Years of Solitude" or just like books that aren't necessarily new but, like, that people have said are really, really amazing and digging in and really loving it.
Nathan: Number two, is there a CEO in particular that you're following or studying and avoid the common ones. Anyone kind of underground, you really like following?
Matt just joined the board of GetLab
Matt: You know, I'll go super underground and talk about a company I just joined the board of, which is GetLab. And so, the CEO there, Sid, is...they're also a fully distributed company.
I would say they take some of the things that Automattic does even to a further degree. They're smaller. They're, kind of, you know, sub 200, but that's also still pretty large already.
And they're open-source but their business model is totally different because they're doing very much an enterprise side of things. So, I've been learning a ton both from the company and just learning more about the enterprise out of the business.
Nathan: That's great. Now, as a distributed team, number three here, what's your favorite online tool that you guys used to run and grow to business?
Matt: So, we use this thing we build called P2. You can look it up, p2theme.com. And it's basically like an internet blogging tool. So, you can use it to share things with your colleagues. We use that instead of email. So, there's basically no email inside of Automattic.
Nathan: Interesting.
Matt: All of the email I get is external, which is also I am not very good at replying to it often. Everything internal either goes to P2 or Slack.
Nathan: Why, by the way, I have to ask you something. Why did you agree to come on, because we tried some different...I mean, we were very tactical with you and a few other CEOs, on purpose. What worked for you? Why did you respond?
Matt: I don't recall. Sorry, I can't.
Nathan: Honest. I'm glad you didn't make something up on the spot. But I'm glad you came on. This has been very valuable.
Matt: But it's definitely, you know, email for me is...since it's generally external, and I prioritize WordPress and Automattic, I can take a while to get back to folks. So, sorry if I did.
Nathan: No, it was good. I have to work for it, it's good. Number four. How many hours of sleep do you get every night?
Matt: You know, the past few months since the summer, it's actually been not enough, but I do target at least seven hours. And actually, last night I got nine hours. So, I'm feeling really great today. But, you know, I've been going for a few months on kind of a four to six hours.
Nathan: Yep, all right. And what's your situation at? Married? Single? Do you have kiddos?
Matt: I'm not married and I have no kids.
Nathan: Single, no kids, and how old are you?
Nathan: I'm now 33.
Nathan: Thirty-three, very good. So, three years back at front there after the baton was passed off. Last question, I'm gonna change it for you. Because you're wanting to stay private, …
What's the one argument that you've made to yourself where it would make sense to go public?
Matt: Oh, well, let's assume that at some point in the future, the business is at a point where there's, sort of, no longer a strategic advantage to be in private. Access to the capital markets that are public would be fantastic. And also provide liquidity in some of our early investors that had been around since very early days.
What I also like about it would be that, you know, WordPress is a huge ecosystem. Tens, maybe even hundreds of thousands of people they make their living for WordPress outside of Automattic. And it'd be great for them to be able to have a piece of the business.
So, that's actually something... If there were a way that didn't create tons regulatory and disclosure, hassles, and everything like that, that I could give...or that everyone did ever contribute to WordPress have some ownership in Automattic, I would do it.
Nathan: Now, Matt, come on, this is ironic, like token issuance.
Matt: Sure. That is kind of a way to IPO without IPOing.
Nathan: And do what you just said very well.
Matt: I thought about that, but I think...
Nathan: Did you really? You seriously considered it?
Matt: Of course. But, you know, one, I think, there's a lot of...99% of those are gonna go to 0. But there's also some in there that will be category-changing and change the world.
But, for us, you know, I think, that the token should have something intrinsic to it. It's, sort of, proof of work that is really important for the business, or the issuers or the holders.
And there's just nothing in our business that would really benefit from a token, or distributed ledger or that sort of approach. You could definitely shoe horn something, or like make a stretch, but it's not something I would personally feel good about.
And, you know, that's always been very, very important to me that anytime I've taken someone else's money for something whether that as an investment, or as a customer, you know, that they're buying something, one of our products.
I wanna feel that I'm giving them something that I really believe in. That I believe in for the long-term, so, for decades to come and that we're proud. So, I haven't had that idea for a token yet.
Nathan: So, it's fairly safe to say, no token issuance for you and no IPO in the next 12 months. You're gonna keep building, stay internal-focused and go from there.
Matt: Yeah.
Nathan: Fair enough. Guys, there you have it from Matt, again, founder of WordPress and then Automattic, back in 2005. Then in 2008, turned down a big offer, $200 million dollars. Used that smartly to create competition, the value was still in the company.
Raised capital, they have since raised $317 million total, obviously, some of that combined into some secondary rounds as well. Healthy valuation, made smart acquisitions in the form of WooCommerce. Also built things themselves, like Jetpack.
Doing well, making money through subscriptions for their hosting and also their VIP plan. Again, well past $100 million now in revenue. Matt, thank you so much for spending time with us. Thanks for taking us to the top.
Matt: No problem.
10 Bootstrapped SaaS Companies With $1M+ in ARR
Click here to Tweet this to celebrate founders who resisted the urge to raise. All of the data on this site is taken from 1 on 1 podcast interviews I do with the CEO's. Subscribe to the podcast here.
As a founder, you dream about the day you can put out your own blog post announcing: “We’ve raised $7m in our Series A!”
TechCrunch and other press outlets that use funding round size as clickbait teach us to crave this sort of reward.
Well, you can have all the funding in the world and be broke as hell - about to be out of business.
This is the “anti-TechCrunch” article. A proud salute to the top B2B SaaS companies who have managed to grow past the $1m ARR mark without raising capital.
#1: Aweber
The energy around Aweber's office is something you can hold in your hand. When I keynoted their Ascend conference, I visited the office and enjoyed a spin down their office slide. (Note: Watch out for burns! Don't let your elbows hit the side).
Tom and team have managed to take the "slow" path to "overnight success" founded in 1999 and now doing well over $30m in ARR.
#2: Winmo
These guys help sales people find agencies and national advertisers to close more deals.
Like Aweber, founded many years ago back in 1995, Dave has slowly grown the company to over $12m in ARR.
#3 Hotjar
I use Hotjar on this site to watch user sessions which helps me make quick usability edits to the interface.
Almost every Isralei entrepreneur I've interviewed for The Top Entrepreneurs podcast has impressed the hell out of me and David is no different. Real winner. He runs quick tests, doubles down on what works, and grows smart.
Investors are hungry to get in on Hotjar. On a recent trip I had to Sand Hill road, 9 out of 11 of the firms asked me about details I have on Hotjar. Being in demand is good. I hope David keeps it that way all the way to IPO :)
#4 ConvertKit
Nathan Barry took some pushing from Hiten Shah to turn his side hustle into a full time gig. After playing around with ConvertKit with flat growth for many years, Nathan went all in.
Andrew Warner from Mixergy jumped in and helped Nathan in early days as they tested how to figure out cash issues but Nathan resisted the urge to raise capital.
Despite high churn, today Nathan's reaping the rewards of a bootstrapped life: 100% control and $5.7m in ARR.
#5 Corporate360
Competing in they hyper competitive automated lead generation space is not easy when you're funded. Its even harder when you're bootstrapped.
Well over $500m has been poured into this space with companies like Radius, FullContact, and Artesian leading the way.
Ultimately Varun has kept headcount costs low with his team being based in India, Singapore, the Philippeans, Dublin, and a small BD team in the United States.
With 300 customers and $14k annual contract value (ACV), they're playing in the low volume, high touch, high LTV game and its printing Varun cash to the tune of $6m in 2016 revenues.
Will it continue in 2017? Stay tuned for an updated interview with Varun in the coming months.
#6 Batchbook
A CRM for the rest of us. Pam killing it and totally under the radar as she quietly builds up in Rhode Island.
#7 Delivra
I think Neil was probably the first ever email marketing SaaS businesses founded in 1999. With better funded competitors will he keep his lead? At 67 years old he's keeping up with you young ramen eating, San Fran living whipper-snappers :)
I also predict this company will sell in next 1-2 years for $8-10m bucks.
#8 Vainu
There's nothing I enjoy more than finding a golden gem. A company killing it that's not on most peoples radars. Usually in a far off land and growing because they aren't distracted.
Vainu is playing in highly competitive Business Intelligence space where no one has figured out how to build a true moat.
Pitchbook selling to its biggest investor, MorningStar.
Many people questioning business health of MatterMark (team size 45 down to 13), accuracy of Owler, and value of DataFox.
Go get 'em Pietari! He certainly isn't distracted by valley Hoopla being based in Helsinke.
#9 Webinar Ninja
Omar just does his thing and does it quietly. He's using his podcast and other content assets to drive incredible growth for his webinar platform, Webinar Ninja.
In fact, growing so fast he was able to steal away Tim Paige - the leader behind Leadpages highly successful webinar partner program - from a well funded Leadpages (backed by Foundry and others).
#10 SignEasy
Just caught up with Sunil in NYC last week. He's figured out how to game the iPhone app rankings to show up at the top of search for anything related to mobile document signing.
This is at the same time that companies like Docusign have announced plans to go public, and when his competitors have raised over $500m to win the space.
Sunil is looking to hire a Head of Marketing. Tweet me if you're interested and I'll tee up an intro. $150k salary and equity is an option.
To continue exploring the top 100 bootstrapped SaaS Companies click below:
Click here to Tweet this to celebrate founders who resisted the urge to raise. All of the data on this site is taken from 1 on 1 podcast interviews I do with the CEO's. Subscribe to the podcast here.
10 SaaS Companies With $5m+ in ARR
$1m, $5m, and $10m ARR are all big milestones for a growing SaaS company. These CEO's have managed to break through the $5m ARR mark (some much higher).
Click on each company logo to see more data on the company along with the CEO sharing all of the data points, first person, that you see below.
1. Cooleaf, $500k MRR
Cooleaf helps business leaders incentivize their teams to produce more, at higher quality.
2. TREX, $450k MRR, finance tools for buy and sell side M&A ecosystem
3. LiquidPlanner, $616k MRR, project management space
4. Artesian, $700k MRR, sales acceleration tool
5. BrandYourself, $535k MRR, online reputation management.
6. Datanyze, $500k MRR, business intelligence tool.
7. HelloSign, $480k MRR, document signing.
8. ConvertKit, $400k to $800k MRR last 18 months, email marketing.
9. HotJar, $520k MRR, website analytics.
10. BatchBook, $420k MRR, CRM for small business.
Benchmarking yourself against other companies doing similar MRR can be insightful but be careful to consider other aspects like payback period, revenue per employee, and average deal size.
How ConvertKit Bootstrapped to $1.1M in MRR
With the emergence of browser notifications, chatbots, and influencer marketing, it can sometimes feel like email marketing is the dinosaur of your pipeline. But, rest assured, email marketing is still the most cost efficient acquisition strategy and it isn't going away anytime soon.
ConvertKit is a web application built to help creators optimize their email marketing efforts. They help online businesses growth their audience with easy-to-embed forms, analytics, and automation tools.
How much is ConvertKit doing in MRR?
ConvertKit is a pure-play SaaS product that charges its customers on a monthly subscription basis. Their prices begin at $29 per month and scale up as your list grows. On average, customers pay them $55 per month today.
The company currently serves more thank 19k total customers right now and is doing $1.1M in MRR, according to CEO Nathan Barry. The company is growing fast and is up from $5.8M in total revenue in 2016.
What is ConvertKit's churn?
As a consequence of playing in the SMB space, churn is persistent for ConvertKit. The company is currently exhibiting monthly logo churn between 6% and 7% at this point in time. And while they are driving expansion revenue, they have yet to hit net negative revenue churn.
Barry explained that new customers are acquired through three main channels: affiliate programs and webinars, organic traffic through content marketing, and word of mouth referrals. The company drove 5,200 new free trials in June of 2018 and traditionally has converted 50-60% of these trials to monthly subscriptions.
What is ConvertKit paying to acquire new customers?
On a monthly basis, ConvertKit budgets approximately $20-25k for paid advertising efforts. The company is currently paying $250-280 in CAC from these channels and is optimizing for payback in under 5 months.
ConvertKit is a proudly bootstrapped company with no intentions to raise outside capital. Barry and his entire team of 37 full-time employees are all in on continuing to grow the business in a self-funded manner.