How Kit (Formerly ConvertKit) Reached $25M ARR While Staying Bootstrapped and Profitable (Interview with Founder and CEO Nathan Barry)

Introduction and Community Building

Nathan Latka

00:01Hey guys, my guest today is Nathan Barry, you've definitely heard of ConvertKit. And hopefully you've seen some other things he's working on related to tiny houses investing in friends companies, but most importantly, just creating and building and supporting the creator ecosystem as he really brings his customers to the forefront of everything he's doing, whether it's sharing their stories on a podcast, writing about them on the blog, or many other ways they do this at ConvertKit. We're

00:26going to touch on all this today. Nathan Barry, thanks for coming on the show.

Nathan Barry

00:29>> Yeah, thanks for having me.

Ghost Town Investment and In-Person Community

Nathan Latka

00:31Okay, so the first thing I want to touch on is actually is not software related. Know, we're in a very weird time right now where everyone's sort of locked down. We also know that your community is extremely important. You've personally built community both online and in person. And I want to go back to sort of pre COVID days and just ask for your thesis on why you decided to get involved with your friend Brent in buying

00:53an old ranch and how that relates to community.

Nathan Barry

00:56>> Yeah, oh man. Well, if I look back on my journey as an entrepreneur, so many of the inflection points came from people that I met in person, right? Say a conference like MicroConf, where there was one years ago that Amy Hoy and Alex Hellman put on called Bacon Biz, which is just a fantastic conference. And it was just for the people who were focused on making money, right? And there's all of these events that you hang

01:23>> out with, hang out at and meet someone and they're the one who drops an idea that changes something for you. Or for example, there was this conference years ago called the World Domination Summit that Chris Guillebeau hosted. And I went in 2012 and I knew no one, super shy, like, okay, I guess let's do this. I'm supposed to meet people, you know, that kind of thing. And I just decided to walk up and talk to two

01:47>> guys who were standing there talking. Turns out to be James Clear, who's the author of Atomic Habits now. But like at the time he had a tiny little newsletter.

Nathan Latka

01:57Yeah, pre books.

Nathan Barry

01:58>> Yeah, well before anything. And then Caleb Wojcik, who's this incredible video producer. He's done everything for Pat Flynn. He invented the SwitchPod with Pat Flynn, all of this, right? And that's the kind of thing that happens when you show up at an event that's a curated group of people and you have these conversations in person. And so I've always just been a fan of great in person experiences. We've started our own conference four years ago, ran

02:29>> that every year except for this year. And so it's just something that I've loved. And so when actually Ryan Holiday was the one who texted me and was like, Hey, we're buying a ghost town and like it's closing soon and we need more money.

Nathan Latka

02:49Yeah. And with Brian, you gotta go wait a second. Is this a headline he's pitching? Because you know, genius, Mark or is this a real like, you actually, is there actually a ghost town or bot?

Nathan Barry

02:57>> Yes, exactly. And I had known Brett Underwood from, because he has an agency with Ryan and they run the website Daily Stoic together, which is a ConvertKit customer. And so I'd known him somewhat, but Ryan was the one that kind of pulled me in. And it was just this thing where, because it was a unique property and this is Cerro Gordo, which is a 300 acre ghost town in the Sierra Nevada Mountains. So when you stand

03:27>> on the peak behind it, if you look to one side, you see Mount Whitney. So the highest point in the Continental US. And if you turn around and look behind you, you see Death Valley, which is the lowest point. And it's just this crazy place. And so then I thought, okay, one, Brent and Ryan and their other partner, John, just have this great idea for what they're going to do with it. And I was like, can

03:52>> you imagine the mastermind groups and the like mini conferences and the writers retreats and whatever else that you can have, like the stories and memories that you can make at a place like this. And so, I had to get involved.

Nathan Latka

04:06And so what has happened? Obviously COVID changes and Brent's putting out great content on YouTube. It looks like he's been living there for a while. Have you guys been able to have sort of a mastermind where you're living in old mining cabins and waking up in the morning and seeing Mount Whitney and Death Valley?

Nathan Barry

04:21>> Yeah, some of that has happened. The property has taken a lot longer, I think, than we originally had thought to get it up and running and get it to the point where groups can stay there. So I've actually only been there. I've only been there twice and just taking my family down. So we haven't yet had a big gathering because there were things like had to get running water, had to get

04:44>> it livable again.

04:47>> And then there were some big setbacks in there. Like this summer, there was a fire caused by some really old electrical that burned down the hotel there, that it was on its one hundred and forty ninth anniversary of opening that the hotel burned down. So, I mean, it's kind of like anything in entrepreneurship where you have these great grand dreams and then it turns out it's way harder than you thought. And then just when it's really

05:13>> hard, then like there's this crazy setback of like the coolest building in the whole town getting burned down or I don't know the equivalent from like you're in my businesses would be like, when you lose that customer that you've fought so hard to get or that was that stretch thing.

Nathan Latka

05:28Can you make an analogy there? If you look at ConvertKit's history and we'll dive more into ConvertKit here, but is there an equivalent to the old 149 year old hotel burning down?

ConvertKit's Early Near-Death Moment and First Team Retreat

Nathan Barry

05:39>> I think that So our very first team retreat,

05:46>> let me set the stage. So January 2016, the previous twelve months we'd grown from 2,000 in MRR to a 100,000 in MRR. Just crazy We had no money in the bank. We were thinking, should we raise money? I think we were spending $80K a month and we had like $15K of cash in the bank, but we were making

Nathan Latka

06:04Sorry, net burn was $80K a month or gross burn?

Nathan Barry

06:09>> Gross, where we're still profitable and like the dollar amounts were going up. Like the bank balance is getting bigger,

06:19>> but at the same time,

06:23>> you know, like your days worth of expenses is going down, right? Because $15K in the bank when you have $5K of MRR and $5K of expenses, that's fine. But when you have $100K like, it's not cool anymore.

Nathan Latka

06:35Yeah. We had a $100K MRR, $80K expenses, $15K in the bank, team retreat.

Nathan Barry

06:41>> Yeah. So that's where we were. Had basically, we wanted to get the team together because we had, I don't know, thirteen, fourteen people on the team at the time. And we thought, okay, but we just can't afford it. And so we cut expenses, doubled down, or we didn't cut expenses. We basically locked expenses and then grew our way out of it. And we grew our way from like barely break even to five months later, we had

07:06>> 60%, sorry, 50% profit margins, three months of expenses in the bank. And we did a team retreat to celebrate. And so that was like the big high in entrepreneurship. And the whole team flies into Boise. We have like, everyone's showing up for this team retreat and we get a denial of service attack where someone goes like very deliberate, very malicious goes to take down our servers. And, you know, it's like, I distinctly remember picking up Brad,

07:32>> one of our lead engineers at the airport and I show up and he's like next to baggage claim on his laptop, like trying to keep the servers up. And it's that sort of thing where you go from these crazy high and it's like, Oh man, I can't believe we pulled that off. To the equivalent of your hotel burning down or like this, like, I don't know how we're gonna recover from this. And you always do. That's

07:54>> just part of entrepreneurship, but that's the journey that we all signed up for.

Nathan Latka

07:59Nathan, I want people to stick around. And so I want you to plant a big open loop here. And then we're gonna dive more into the sort of emotional side of the story going back to when you were doing woodwork at 13 years old, door knocking. Today, where's ConvertKit? What's top line revenue?

ConvertKit Revenue and Profitability Today

Nathan Barry

08:14>> Yes, we're at 25,000,000 ARR right now.

Nathan Latka

08:17And how much profit?

Nathan Barry

08:19>> Yeah, we've been spending a little more aggressively this year. So we're doing about 5% profit.

08:27>> But at the beginning of the year, we're close to 23%. So next year we'll return to the 20% mark.

Nathan Latka

08:3520% EBITDA margin? Yeah. So guys, you wanna stick around for that? Something else Nathan is doing, which he puts on his website as he specifically says $1,800,000 paid out to the team. So there's some profit sharing happening here. A lot of you guys who are bootstrap founders are wondering how the heck do I set up profit sharing without spending $500,000 on legal. So we'll get back to that in a second. Nathan, take us back to 2013.

Nathan Barry's Origin Story: Woodworking and Early Sales

Nathan Latka

08:57Sorry, when you were 13. Nathan, I think what maybe 2005 or earlier.

Nathan Barry

09:01>> 2003.

Nathan Latka

09:022003. '90. '19. Okay. Wow. '19. Okay. So we're about the same year. What? '30 right now?

Nathan Barry

09:07>> Yep. '30.

Nathan Latka

09:08Okay. So woodworking. So first off, do you remember the moment did your Was there something you really wanted and you needed to make money and your parents said you gotta figure out a way to make money and then you said, I'm gonna go sell woodworking or what was the genesis of that first thing you created?

Nathan Barry

09:23>> Yeah, well, for me, like I grew up in a household where money was really scarce. My dad ran like a Christian college ministry. And so it lived off of donations and support from churches or other groups. And so money was just not a thing that there was much of. And so my parents did a really good job of instilling that like, if you want money, go earn it. And the way that I did it was my

09:50>> dad was really into woodworking. He built the house that we grew up in. So we had this like little shop of, it was a lot of like kind of hand me down tools, but it worked great. And so I would do these woodworking projects and then go door to door to sell them to earn money. And I remember I had made a bunch of these like wood carvings and stuff. And we were headed in, it was

10:14>> actually Black Friday. So we're gonna head into town because we grew up in the mountains outside of town. We could do some Black Friday shopping.

Nathan Latka

10:22Hey, Nathan, which town I know obviously, but I don't know the audience.

Nathan Barry

10:24>> Yeah, Boise, Idaho. Yep.

10:28>> And so

10:31>> we were going to do that. It was one of those things we're going to head into town at noon or something like that. And so at 10AM, I was like, great, I'm gonna go wander around this neighborhood, go door to door, and then like, pick me up here, you know, a mile from town, and then we'll just see how much money I've made by that. Wow. It was one of those things where I think I made

10:51>> $100 $120 selling these things door to door an hour later when my parents picked me up as we drove into town. And that was just sort of the mindset that we always had of like, great, if you want something, I'm not gonna give it to you. Go pursue it. Go figure out how to get it done.

Nathan Latka

11:09What their reaction when you got in the car and emptied your pockets with a bunch of crumpled up dollar bills?

Nathan Barry

11:17>> What's funny is I think they were so used to us just as kids figuring out how to make money that they were just like, cool. And there wasn't like, it wasn't even this big celebration moment. Was just like, well, yeah, obviously.

Nathan Latka

11:31Who's us Nathan? How many siblings?

Nathan Barry

11:33>> I have five siblings. I have fourth of six kids.

Nathan Latka

11:38Okay, okay. Wow, fourth of six. That's incredible. Okay. And are they so so did they all end up just building sort of communities and creators world or or did did one of them end up in like Wall Street finance or something?

Nathan Barry

11:51>> I do have a brother who works in corporate finance buys I private

11:58>> mean, everyone's all over the map. I've got a sister that lives in Seattle and works on copywriting and that kind of thing for a bunch of big clients like eBay and American Airlines, or sorry, Alaska Airlines. Yeah, brother who's a physician's assistant, got a couple of siblings who are programmers. You know, it's just, it's all over the map. And I think that's, you get into a whole nature versus nurture sort of debate, but I think, humans

12:23>> are just very different.

Nathan Latka

12:24Now, Nathan, has your little guy had his woodworking door to door knocking first sales moment?

Nathan Barry

12:30>> I don't know. Let me think about this. We don't do an allowance or anything, so they come to us with ways to earn money. I think this year probably would have been the year of the lemonade stand or something like that. Just based on my kids are nine, six, and then 11. And, it's just, it's not a With COVID, it's not a good year for door to door sales.

Nathan Latka

12:57Yeah. Definitely not a good thing. Opposite of what you wanna be doing. Yeah. Okay. So wow, $120 woodworking, four of six siblings, 2005, you're 13 years old. You eventually obviously end up, I believe going to college. Let's fast forward here a bit. What did you do in college? What did you study?

College Dropout and First $10K Contract

Nathan Barry

13:13>> Yeah, I studied graphic design and then marketing. So I wanted to do graphic design, Photoshop interface design and all of that. And I went to college super early because all my friends were older than me. I was homeschooled and I wanted to keep up with them. And so I basically asked my Hey, is high school four years or is high school a set amount of work? And to their credit, they said like, Oh, it's a set

13:42>> amount of work. And I was like, Great. Can I have that in to do list form? Cause basically all my friends were gonna graduate two years before I was and go off to college and I didn't wanna be left behind. And so when my parents listed all out and I had older siblings who had finished high school already, and so they had already figured out this will be all the homeschooling curriculum. Then I just sat down

14:03>> and knocked it out. I remember thinking, I'm bored when we go on these family road trips from Boise to Seattle every summer. I'm also bored when I do algebra. So why don't I combine these things? And on like an eight hour drive, I do a month's worth of algebra lessons or something. And so then I graduated high school when I was 15 and started going to college.

Nathan Latka

14:25And graduated college how old?

Nathan Barry

14:27>> I dropped out of college at 17.

Nathan Latka

14:29Okay. Okay. So why the dropout? Were you making just so much money selling your own stuff at that point or why drop out?

Nathan Barry

14:36>> Yeah. So I was going to college to learn how to make money. This was all a quest of, I want to figure out how I can make money

14:45>> earn a living and eventually become financially independent. And I had started a web design business by then. It was doing well. Basically, I got my first $10,000 contract and I called my mom and said, Hey, I think I'm ready to drop out of college. And I expected to have to convince her that it was a good idea. And she'd followed my progress and I talked to her about the web design business I'd been running and the

15:11>> freelancing and stuff like And she just said like, Yeah, I expected that we'd have this conversation soon. So, yeah, my Did clinched name

Nathan Latka

15:19she have money on the line? Were your parents helping cover college expenses or anything like that? Or were you paying yourself?

Nathan Barry

15:25>> I was paying for it myself. I got a lot of grants because the low income FAFSA grants and stuff like that, financial aid. And then the rest So I dropped out with $5,000 of student loans rather than a crazy amount. So yeah, that was a case where coming from a low income family really helped.

Nathan Latka

15:47You, and we're gonna, I wanna put all this sort of on a mental map which you've used and I can't credit the person because I forget maybe you can the ladders of wealth who created that again?

Nathan Barry

15:58>> That's just an idea that I've dreamed.

Nathan Latka

16:01That was you. Okay, I wasn't sure if you pulled that out of a book or if that was you. Okay, got it. So Nathan has put together sort of ladders of wealth that explains how he thinks about wealth creation and so one of the things you talked about is sort of moving from trading your time to eventually, you know, bundling your hours into project sort of things, would you call this 10 ks sale your, your first

16:19sort of bundled agency product where you weren't selling hours?

Nathan Barry

16:24>> Yeah, and I think that one I was still, that was probably this transition, right? Between selling hours and like selling an outcome.

16:34>> And so, yeah, that was an early example of a product, but still largely hourly project based work. But it was definitely on a continuum. It was not the hourly web design work that I've been doing before. It was like, okay, now I'm getting paid for an outcome. And there's starting to be this disconnect between the effort that I put in and the money that I make, which is what we're looking for in entrepreneurship, right? As these

17:00>> things are tightly coupled, there's no leverage, But the more those can be disconnected, then there's at least an opportunity for leverage. It can go terribly wrong and you can have a project that like you're a hundred hours in to deliver this outcome that you're not getting paid enough for, then the leverage goes poorly. But we try to create those situations where the leverage goes well, where we can deliver a ton of value with less inputs and

17:25>> get paid for it.

Nathan Latka

17:26Nathan, one of your recent tweets was something along the lines of, is there anything that you've actually committed to and done consistently for a long period of time and not had success? And there were a couple replies, but I mean, if I didn't know you personally and I just looked at charts and graphs and numbers, I would sum it up by saying consistency, but both maybe people would say sometimes bad consistency and good consistency. And so

17:48like bad consistency, which it's not actually bad, but when you look between 2013 and 2015, you were so consistent at ConvertKit. MRR never really got above five k per month. It was sort of one to five k. And then in 2015, something happens. And literally the curve of your revenue growth shifted. And now it's been like literally consistent for five years in terms of just growth. There's very little like blips happening. Is this intentional?

Nathan Barry

18:15>> Well, I think it's that all of these things take a lot more time. And so we think about if I show up in the right way, then I'll achieve the success or something. And that's true. It often takes a long time to figure out how to show up and what things to work on. And so I can ConvertKit things that made a difference were moving from like content driven, you know, for trying to grow a SaaS

18:42>> business. Content by the way is a really hard way to grow a business. Like go from zero to one and like basic, like no traction to simple traction. And that's what I was trying to do. But if you don't have the community already, it's very hard to do. And it was really shifting from that to a direct sales model of kind of this Paul Graham, like do things that don't scale, do anything to get the customer,

19:05>> do custom development work, migrate them all yourself, all that and do these things to inch forward the progress. And that's what turned into something that was actually working. And then,

19:18>> Naval Ravikan talks a lot about looking for things in life that compound and so much in entrepreneurship compounds just like it does in investing and everything else where those returns come over time and they come much later. And if you remember learning about compound interest in middle school, you're like, wait, this isn't actually any good. You're saying that I'm going to put in all of this and then five years later, this is what I get from

19:47>> it? And it's just not impressive at all. And then you have to fast forward another ten years, another twenty years. And you're like, this is incredible. This is mind blowing. How does it turn into that? And it's like, well, compounding takes time. And I think in entrepreneurship, we're like that kid in middle school where we're like five years and that's all I get. Like no point. And we fail to look further down the road and be

20:08>> like, Oh, but in ten years it'll be this. And that's what I think everyone does with their companies where say a company like Mailchimp. I don't have their exact numbers. I'm assuming at this point based on trends from previous numbers, there's somewhere around $750,000,000 in annual revenue. Maybe as much as a billion, but probably not quite there yet.

20:30>> They've been at it for nineteen years. And so when I look at the curve that I'm on with ConvertKit and the curve that Mailchimp did, and if we were to overlay those two, ConvertKit is far ahead. If we put the start date of the two of them, ConvertKit is far ahead on that curve than Mailchimp was eight years into their business. And I think this is the point where people go like, wow, you've made it with

20:55>> ConvertKit. You should sell. You should have sold a while Like the moment that first $100,000,000 acquisition offer came up, you should have sold and move on to the next thing.

Nathan Latka

21:03When was that?

Nathan Barry

21:05>> So we haven't had like a crisp, like here's the offer on the table, but like the private equity people show up nonstop.

Nathan Latka

21:13And

Nathan Barry

21:15>> I just always say no thanks before it gets to

Nathan Latka

21:18Just charge for the call. Say, I'll get on a call with you, but it's $5,000 for twenty minutes. And then make a That's little a good idea.

Nathan Barry

21:28>> And anyway, so I guess what I'm saying is I feel like I'm just getting started. And if I want to build the scale of company that I need to, or that I want to do, then I need to give compounding time to really kick in. So we're eight years in and selling and being done now is just way too early. And so it's really like, if I want to build a Mailchimp level company or a Stripe

21:52>> level company or something like that, then it's like, great, show up for another decade. And then we can start to talk about the level of commitment that you have and where the results come from.

Nathan Latka

22:00I mean, Nathan, is it really sort of a start and a stop? I mean, everything I'm seeing you do. I mean, this is this is just you. It's build a creator community. It's build team members. It's allow your team members to build wealth with profit sharing. You're obviously also making money. You're then reinvesting in friends businesses and things you love and and you're talking about you know now not only multiplying your time or an agency work

22:24or now software, but also now capital leverage after that. I mean, what would you do if you sold ConvertKit?

Nathan Barry

22:31>> I don't even know. Maybe build a tiny house community But you're already doing that. Yeah. And that's the thing of like, it's not this all or nothing. I think that's a really good question to ask when those acquisition offers come in or something like, okay, but what would I do? And I go right back to building software because I love it. And one thing that I love now is the leverage that we have. So for example,

23:00>> this year we launched ConvertKit commerce, which is our digital product sales platform. And if I were to That's something that's just different enough from ConvertKit that it could be its own startup entirely. And so if I were to start over and do that, that initial traction is really hard to get. It's lot of work. Obviously having done a successful company, the next one is easier, the relationships that you already have, the brand reputation and everything. But

23:26>> now for ConvertKit, like, Oh, we have 250,000 users and so let's just tell them to use this new thing. And so when you come out with something, you're like, Wow, this is getting used by thousands and thousands of people, which is the creator's dream. And so it's one of those things that if you sell it, if you move on, then you lose that or some amount of that leverage. So I'm just like, nope, I like the

23:47>> leverage too much. I'm going to keep doing this.

Nathan Latka

23:49It's great. And it's so hard to quantify like this leverage idea is so hard to quantify. So it's I wanna dig here a little bit. Let me just ask a bit, obviously commerce and any, we call it sort of a SaaS plus plays a SaaS business plus something else, professional services, percent of GMV model, a marketplace maybe. When you look at the commerce business, one of the goals you talk about is, man, love to get to

24:11the the point where we pay a billion dollars or help creators make a billion dollars. You launched last year in 2019. How much went through your system in 2020 to creators?

ConvertKit Commerce Launch and GMV Progress

Nathan Barry

24:21>> Yeah, so we have two different numbers that we track. The first one is like the total amount earned by creators using ConvertKit as email products. In beginning of twenty nineteen or 2018, I'm trying to remember exactly when we launched new APIs so that when people are selling through ConvertKit and using Shopify or Teachable or Stripe or any these others, includes the reporting of where the revenue came from and how much you're earning and it aggregates it

24:50>> across all these different platforms. So you have one creator dashboard. And that's been really cool. And actually January of this year, passed a billion dollars earned by creators on ConvertKit

Nathan Latka

25:02or through

Nathan Barry

25:05>> like other platforms.

25:05>> Through the aggregation.

Nathan Latka

25:06Yeah. Through the aggregation.

Nathan Barry

25:07>> Yeah.

25:08>> And so now with ConvertKit commerce, it's basically like, we checked out this big goal, which is on our mission page. And then we said like, done, next, now it has to be a billion, like processed through our payment systems.

25:24>> And that we launched in private beta in mid July. And one thing that's been interesting is it is much harder to get traction than I expected. So we're at almost half a million in GMV

25:39>> and it's fascinating how

Nathan Latka

25:41It's total GMV process through July.

Nathan Barry

25:44>> Yeah. And so it's a lot lower. Just for example, the conversation that we were having over email, you're like, Hey, have you hit that billion dollars yet? And I was like, Not only have I not hit it, but this is hard. And it's again, these compound returns that are going to come into play. You've got to get people to switch over from what they're doing. You've got to get all the beginners who are thinking about selling

26:05>> their first product, right? They made their first $50 their first $100 and it's going to be a few years before they're making 10,000, 100,000. And so it's been a really healthy reminder for me of, oh yeah, I'm starting compounding on a new thing and it's going to take time because I'm that entrepreneur who's like, okay, let's Let's be at a million by this date and then a million a month by that day. And then, you know,

26:33>> and just realizing like to get all of this momentum to shift, it takes a lot of time. And so I'm having to learn both to put in the concerted effort and to be patient for the results.

Nathan Latka

26:43And how do you think about launching new product like that? Do you really go deep on a persona and maybe actually use that persona? You call Pat Flynn say, Pat, I know you do more than 1,000,000 a year in revenue. We'd love to process all your commerce. What's that have to look like for you to switch over? Or do you try and build something more broad and appeal to a 100 beta users? I think you try

27:01to do both because

Nathan Barry

27:05>> you can fall into traps in both ways. And like we use we use OKRs, objectives and key results, to manage and track our business. And what you usually end up doing is having a main objective that you're going after. And in our case, like let's say GMV, right? We're trying to We want the most dollars sold. But if you optimize only for that metric, then you might do things that is for short term gain, but not

27:32>> the long term. We could say, okay, we're trying to get to 10,000,000 in GMV in X amount of time. Then if I just go out and get a single client that sells a million dollars a month, done. We're set. But that isn't success for the platform. And so then could go the other extreme and say like, Oh, I'm going to help X number of creators earn their first dollar. And that's all well and good, but everybody

27:59>> follows the big names. So if you don't have any of the big names, it's way harder to get those. And so what I look for is the key metric, which is GMV and then the counterbalancing metric. And so in this case, we're looking to drive the most GMV. That's the main thing. Small creators, big creators all contribute to that, but obviously the big creators drive far more. And then I have a counterbalancing metric of I want

28:21>> X number of creators to have earned at least a dollar on the platform. So that says, I'm going after this big number, but I also have to include all the small creators because two years from now, three years from now, they are the big creators. So that way I'm not trading short term success for long

28:42>> term results. Because five years from now, I get tens of thousands of the small creators, then I'm for sure going to have, like there'll be the big creators five years from now.

Nathan Latka

28:54It reminds me, you think politics, and I know you dabbled on the hill for a bit. It's sort of like when the folks report their fundraising numbers and its average check size. You want millions of small donors versus one massive donor if you're gonna build a movement.

Nathan Barry

29:08>> Yep, for sure.

Nathan Latka

29:09Okay, so that's the status of convert commerce. Let me give a little bit of ammo here to our SaaS folks that are listening and going, I want tactics. Nathan is amazing. From what I can tell, you've used really three acquisition channels really effectively. One sort of the powered by ConvertKit. In fact, in one of your Twitter tweets, you said, hey, why did you upgrade? And there were folks when we wanted to pay to remove the powered

29:32by ConvertKit. So you get obviously some free clicks and a lot of free traffic from that. I think you also have a great affiliate program. I noticed the affiliate link in your guys' footer and you also have big names that are known for promoting products they really believe in. And then lastly, your SEO content seems to be super strong. You put some of the key anchor articles in your footer as well. So I'd love to spend

29:53five minutes just touching on those. Could we maybe start with like the powered by ConvertKit? Can you quantify the success you've had using that as a growth channel?

Powered By ConvertKit as a Growth Channel

Nathan Barry

30:02>> Yeah, so it's still relatively early. Just for some more context, we've always been a paid product, like free trial but you gotta pay to use it until January of this year when we launched And

30:15>> so you can see like prior to this year, so last year maybe we were driving two to 3,000 visitors a week through Powered by links. And then after launching freemium, scaling that up, we're now driving fourteen, fifteen thousand visitors a week from Powered by links. So you're just seeing, and it's actually a couple of step functions in there as we made our free plan more valuable, got the adoption up, stuff like that. Now Powered by traffic

30:43>> converts a lot lower than other traffic. I don't have the exact numbers in front of me, you know, if a visitor to visitor to free account conversion rate is seven or 8%, like in other channels, then Powered by traffic might convert at one to 2%. So it's much more of this like broad awareness play than like a direct conversion, but just like not many traffic channels just keep climbing like that. So it's really fun to see.

SEO Strategy and Creator Photo Link Building

Nathan Barry

31:13>> The next one, search is really like just that anchor that we've, I don't know, gradually invested in over time. And now it pays off in a big way.

31:28>> Actually In a massive way.

Nathan Latka

31:30I mean, if you look at Ahrefs, I mean, you're now generating almost 70,000 organic keywords. You're getting a 120,000 clicks organically per month. I think that's unique. 10,200,000 backlinks. So 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.

Nathan Barry

31:45>> Yeah. So it drives about 40% of all of our new accounts. Wow. It's from search. One interesting, if people are looking for like 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, and like a local photographer to come, do all the photos for

32:13>> the story and give it to the creator and say, Hey, use these on your website, use these. 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 And photographer to do so people love it, right, when we give those away. But then what we also did is say, hey, we have this Unsplash

32:34>> collection of creator photos. If you'd like, we'll release those. If you sign off on it and you're up for it, we'll release those photos on Unsplash as part of our ConvertKit creator collection.

32:48>> 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. I'd love it if you provided a backlink back to, you know, if you linked back to ConvertKit as the creator of this

33:13>> photo, if not, no worries, it's like license and a creative comm, you don't have to, but if you want to, we'd love it. And that has driven so many backlinks because 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 upfront of like, You don't need to at all. We're not coming and saying, You have to do this.

Nathan Latka

33:34Fascinating. How much did you spend on local photographers featuring your customers in 2020? Do you have a general idea?

Nathan Barry

33:41>> That's a good question. I don't have that. I'd say 500 to $1,000 per shoot somewhere in there and then maybe one shoot per week.

Nathan Latka

33:52Okay, got it. So this tactic could cost 50 to $100,000 per year.

Nathan Barry

33:57>> Yeah, exactly.

Nathan Latka

33:59And you get direct return in the form of these backlinks, but you also get just amazing community return. I mean, this helps your customers in so many ways and it's free.

Nathan Barry

34:08>> Yeah, so this is kind of the way that I think about marketing is if there's an activity that we're going to do, we're going to release these creator stories because we wanna be a brand known for great storytelling. I think all the most iconic brands storytellers. And so we're like, great, okay, let's start telling stories. And then we need a process for that. So there's like, we need to do photos for the stories, we need to

34:33>> do other things. And you end up with this sequence of events that 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

34:49>> now, I guess it's 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 stories. We want to produce a great story and it needs writing and photography and around there. And since we're producing the photography, we should promote that and

35:16>> share it as many places as So that's where these Unsplash collections come in, because then that will get more attention for the stories. And then our SEO flywheel should fit into that of like, Oh, since this asset is being created and millions of people are downloading it, let's tie that into our link outreach and basically see how can I make these different systems that when they fit together, every rotation of the flywheel makes the next rotation

35:42>> 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 byproducts that are really valuable?

Nathan Latka

35:55Nathan, is there somebody on your team that you've hired that is solely responsible for watching systems that other people are running, documenting the system and then creating the flywheel? Or do you try and build that into the DNA where everyone, if they do something that works, have to document it and share it so you can invest in systematizing?

Nathan Barry

36:12>> Yeah, I would say there's not one person. The person who does it the most is Barrett Brooks, who's our COO. And he's been with the team for quite a while. He started working in marketing and then grew to leading marketing and then is now COO. So he's probably the best advocate, but it's definitely something that we're trying to teach everyone to do. Like Issa Adney, runs, her title is Storyteller. She's the person who we taught this

36:42>> to at a high level, in the company. And she's just like, Okay, I'm going to 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 of where it's at now,

36:56>> I'm working on a book called Create Every Day. And so in writing those chapters, I'll get stuck and I'll be like, okay, I need, what do I need? I need a story of a creator who created really consistently every day, you know? And so I'll be like, Issa, what do 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

37:16>> the stories, there's already great photography, there's already these quotes and everything. And then I'll come back a while later and be like, Okay, I need someone who really persisted for a long time and didn't get the success early. They got it three years, four years in. And she goes to her database and she's like, oh, here's these four people. And so obviously we're doing the work to tell the stories, to build the brand that we want,

37:40>> but we're trying to do it in a way that serves everybody else. So then when our content team is writing something about how to use commerce or a new, like how to do email marketing or growing a list. Like they're pulling these snippets and examples from the rest of the content machine basically.

Nathan Latka

38:00This is fascinating to hear how you build all these on top of each other.

38:07You'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 there then that enables them to get attention and build their own brands. You ever think about that? Are we gonna see a ConvertKit talent

38:30agency for creators?

Nathan Barry

38:32>> I don't think we're gonna see that to quite the same extent of like us trying to get bookings and things like that. You're definitely gonna see it down the road from a marketplace perspective of here are featured products to buy and here's the best ebooks, the best photography resources, all of those sort of things as we're driving the-

Nathan Latka

38:58When does that launch? When's the ConvertKit marketplace launch?

Nathan Barry

39:01>> It's probably a couple of years off.

Nathan Latka

39:03Okay.

Nathan Barry

39:04>> Just for like a little bit of,

39:07>> I don't know if it's inside baseball or what, but marketplaces are a very trendy, exciting thing to do. And one thing, we almost went from what we have today right into, and then let's do a marketplace. And what we realized is when it comes to discovery

39:27>> using the attention of 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 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 Jim Ferriss, that kind of thing. And that's what Medium

39:52>> has done a lot of and 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, these little viral loops

40:17>> 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 creators. Automatically So do these other it's basically external discovery first and then later do the internal once the platform is bigger.

Affiliate Program Size and Payouts

Nathan Latka

40:38Before we 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 did you pay out to affiliates in 2020?

Nathan Barry

40:49>> I don't have that number off the top of my head.

40:53>> Affiliates has been a huge channel for us 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 substantially for a long time. And at one point, affiliates were driving a little over 30% of all of our revenue. That's probably dropped into the 20% range as like the, so if we talk about flywheels or compounding, you know, these things, affiliates kicked off

41:24>> a lot faster. And then now you like, over time you get search coming in lower or like more slowly, but then search turns into this monster. Yeah, exactly. And so it's like affiliates are still growing. It's just that search is now outpacing it as far as the growth. So yeah, affiliates have been absolutely massive and it's just that a lot of it is the type of business that we're in, right? We're selling to traditional businesses, like,

41:52>> we had an affiliate program, then at your chamber of commerce event, that's not a thing anymore. But you'd be like, oh, look, 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 tells 10,000 of their closest friends like use ConvertKit.

Nathan Latka

42:10Do you know how many affiliates you paid at least a dollar out to in 2020?

Nathan Barry

42:14>> Yeah, it'd be at least 3,000.

Nathan Latka

42:16Oh wow. Okay. Sometimes you hear a lot of concentration in these programs. That doesn't sound like huge concentration.

Nathan Barry

42:23>> Yeah. And the concentration is definitely there. And so there's probably only a 100 that are making at least $10,000 a month. But there's some in there that are making 25,000 a month or more.

42:39>> So yeah, it's a really, really solid

Nathan Latka

42:43So just to make sure I understand that Nathan. So if you've got at least a 100 affiliates making 10 a month and some making way more, I mean, that's a million.

Nathan Barry

42:49>> Yeah, it's probably too high of numbers. I'd have to dig in more.

Nathan Latka

42:53Okay, okay. I was going, wait a second. There's no way that 60% of his cost base is affiliate expenses.

Nathan Barry

42:58>> Yeah, no, that's too high. So I'd have to dig in because it might only be 20 or so.

Nathan Latka

43:04Okay, but there is some concentration at that. What you're saying is there is some concentration at the top.

Nathan Barry

43:07>> Yeah, so we're paying out about 250,000, we could figure this about 250,000 a month to affiliates and paying a 30% commission. So that's the easiest way to back into it.

Nathan Latka

43:18That's great, yeah, that's great. Yeah, so 250,000 affiliates, we can do an average into the 3,000, but it's clear there's some concentration with some driving $25K a month in the affiliate payouts.

Nathan Barry

43:27>> Yeah, so if we're dividing that out, at about 830,000 in monthly like top line revenue driven by affiliates.

Nathan Latka

43:35Yeah, that's so, okay, that's a really valuable number. Thanks for sharing that. So are these, before we move on to how you've structured profit sharing, are there any other flywheels that like you just found it and you love it, you haven't run 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?

Freemium Plan Launch and Conversion Rates

Nathan Barry

43:52>> I think our free plan, you know, in the HR software community,

43:58>> everyone's very averse to free. They're like, No, I charge for a product. I sell things, and we get paid for the value that we provide. We're not those Silicon Valley startups that don't have a business model, or are losing money on every customer. And there's truth to both sides of it, but 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

44:25>> was super generous with his time. We just got to chat for thirty 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,

44:49>> and you're like, you know, 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

45:11>> for Mailchimp, and then got a job at this big company who was using Constant Contact. And he's like, No, I'm not using Constant Contact 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 the tool right away. He was just like, this is mind blowing, this is amazing. And we were

45:37>> 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 profitable company with plenty of cash in the bank and all of 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.

45:59>> And so we launched that free plan and honestly, it's doing so well. In our models, we expected a 3% free to paid conversion rate. We came in at a 5% rate and we're like, that's fantastic.

Nathan Latka

46:18>> And just

46:18to be clear, Nathan, sorry, that's Do you require a credit card when they sign up for free trial?

Nathan Barry

46:25>> So you can sign up for a free account without a credit card.

Nathan Latka

46:31And

Nathan Barry

46:32>> then if you wanna try out our automations product or something like that, you can start a free trial for the paid version. And that requires a credit card to go from the free version to trialing that on a fourteen day trial.

Nathan Latka

46:44And then you're saying you expected 3% conversion and it got five?

Nathan Barry

46:49>> Yeah. 3%. So not 3% conversion on the trial but 3% of all free accounts converting to a paid account. Wow. It ended up at five and we see a lot of opportunity to bump that a little higher, maybe to six or 7%.

Profit Sharing, Equity Split and Paid Advertising Spend

Nathan Latka

47:08Let's about, let's wrap up with two topics here. One is keeping great people around you, right? You're not venture backed. So you can't just go pay people 3,000,000 a year to stick with you. And that's not a race that you wanna be in anyway. When did you launch profit sharing and how does it work?

Nathan Barry

47:23>> Yeah, so we have iterated with a lot of different profit sharing things. We launched profit sharing on our very first Team Retreat. As we talked about earlier

Nathan Latka

47:33What year was that Nathan? Sorry, 2016?

Nathan Barry

47:35>> Yeah, summer twenty sixteen.

Nathan Latka

47:37Okay.

Nathan Barry

47:40>> And we had grown from 100 ks to 300 ks in monthly revenue. We'd saved up three months of expenses in the bank. We'd gotten to 50% profit margins through like the team being really lean. And I wanted to reward the team for it. So we took $100K and paid it out to the team in profit sharing. Everyone was totally blown away.

Nathan Latka

47:59How'd you do that though? How many were on the team at that point? 12?

Nathan Barry

48:03>> We were up to 20, but six of them had been hired in the previous thirty days.

Nathan Latka

48:09Okay, so 14 participated?

Nathan Barry

48:12>> Yeah, everyone participated, but for some people it was like $600.

Nathan Latka

48:15So that's my question is if someone right now is managing twenty twenty with 100 ks and they want to do this exact same thing, how do you decide who to give the check size to? Is there a formula?

Nathan Barry

48:27>> Yeah, so what we do is we do a six month period, 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 thirty days later. And they're like, you still get $500.

Nathan Latka

48:49That's amazing.

Nathan Barry

48:50>> Because we want them to kind of have that taste of it. Yes. And the person next to you got 17,000 or something. But that's because they've been with the company for quite a while. So in that pool,

49:01>> it is 75% based on you're just a team member and everybody participates equally. Then 25% is based on time with the company. 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 worked, like ever. And then it distributes, you know, so it just says X percentage of this pool should go to Charlie because

49:32>> she's been with us for four years to, you know, this person because they've been with us for one year.

Nathan Latka

49:37Interesting.

Nathan Barry

49:38>> So like the profit sharing that we did

49:42>> in the spring, let me think, the average was $11,000 per person. The smallest check was $3,000 for someone who joined really recently. And the biggest was, I think 19,000. And so that's kind of the swing that you'll get. We used to have something in there where we had another score for individual performance and we took that out and we basically decided we're going to set a high bar for performance, just like to work at this company.

50:13>> Default. And then everyone wins and loses together.

Nathan Latka

50:16Fascinating. Okay, and you're paying this out, you're doing this calculation once a month or once every six months?

Nathan Barry

50:21>> Every six months.

Nathan Latka

50:22Okay, got it. Interesting. Okay, and so you're gonna be doing this sometime soon in the next thirty days as you close out 2020, what's the total pool that you'll be paying out?

Nathan Barry

50:35>> It'll be 400,000. Our goal was actually to lose money in the second half of the year.

Nathan Latka

50:41And now you sound like a TechCrunch, thirsty headline chaser VC guy.

Nathan Barry

50:45>> Exactly. Our goal is to lose money.

Nathan Latka

50:49We

Nathan Barry

50:50>> have not spent much on advertising as a company. Year we're like, okay, we're going to double down and we're going to spend aggressively on, you know, brand and product advertising. And we didn't do that. We spent a bunch in the first half of the year, but we were still way more profitable than we expected. We doubled down further in the second half of the year and our accounting team last week was like, guys, we're still profitable.

51:15>> So

51:19>> it's going to be smaller. I think the average check size is going be $5K instead of like the $11K that it was last time, but

Nathan Latka

51:25Do you hear any pushback from teammates when they sort of have already calculated what they think their check's 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?

Nathan Barry

51:37>> Yeah, so one, like the same, all the transparency that you see on the outside, we have even more transparency on the inside. So for example,

51:47>> we have a full open book so everyone can see all the expenses, see what we're spending and everything. 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

52:15>> compensation. And then I think of guaranteed versus performance based. So short term guaranteed is salary, long term guaranteed is like 401(k) match, you know, retirement. Short

52:26>> 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 it's all covered and you're taken care of in each way. And the individual team member can get a feel for 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 trajectory that we want on

52:51>> our path to 50,000,000 ARR, 100,000,000 ARR. And you don't want a team member be like, no, no, no. I want money in my pocket.

Nathan Latka

52:57Pocket sharing. Yeah.

Nathan Barry

52:58>> 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

53:15>> my equity is going to have more value down the road.

Nathan Latka

53:17So what portion of 58 companies, Nathan, besides your own equity, what portion of the companies do teammates own currently?

Nathan Barry

53:24>> Yeah, so I own 90% and the team pool is 10% of which 7% is currently allocated.

Nathan Latka

53:31That'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 in paper three twenty five keywords and now it's at like four accents, like 1,200 keywords. So clearly you're running experiments there.

Nathan Barry

53:46>> Yes.

Nathan Latka

53:46Interesting. How much are you spending per month now on paid ads?

Nathan Barry

53:50>> I think about 400,000.

Nathan Latka

53:51Okay, interesting. How do you, I mean, is it working?

Nathan Barry

53:56>> It's working decently. 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 are 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.

54:20>> So there's a lot that we've been trying to figure out. 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.

Nathan Latka

54:33How interesting.

Nathan Barry

54:35>> We'll see how that goes.

Nathan Latka

54:37That's Why not 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 a cook and it's splashing on the lens.

Nathan Barry

54:47>> Yeah, I mean, there's the whole, all kinds of different ways to do it. And I think we're just excited to see, actually, what's funny, so the agency we hired is Mekanism and they're based out of New York and Jason Harris who runs it, I don't know him very well, but we're both investors in the ghost town together.

Nathan Latka

55:07Oh, nice.

Nathan Barry

55:08>> And they do stuff for Alaska Airlines and Peloton and everybody else, you know. And so that's one of those things of sort of keep it in the family in that one case.

Acquisitions, Investments, and Capital Leverage

Nathan Latka

55:18Yeah, well, like that. And that brings me up to where I wanna 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, 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

55:40write your about your investments on your website, like, know what, I working with these people, they're my friends, I'm going 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've built. How are you thinking about literal capital leverage moving forward for Nathan Barry?

Nathan Barry

55:57>> Yeah, I think it's not on the chart because it's relatively new for me. If you look at my earnings, they trail, like ConvertKit's growth, like my earnings trailed out by a few years, right? That's something interesting that my wife and I talked about. It was only three years ago that we didn't really have The things were really tight. And so I think that's something that I'm learning a lot right now and is just what that investing

56:26>> looked like. Someone that I follow a lot in that space is Andrew Wilkinson from Tiny. It's just fascinating to see him deploy capital.

56:37>> And it's just been fun to read books like The Outsiders or Snowball about Warren Buffett or some of these other books of like, okay, wow. It's not just all angel investing and stuff like that. I have a decent number of angel investments. Not a lot, I think maybe nine.

56:56>> But what I'm trying to do more of now would be inspired by like what Andrew is doing or Warren Buffett style of like, great, can I buy 10% of a company? And then so like, there's an e commerce brand that I was able to do that with Which one? This They're called Harkla. They

57:18>> sell products for special needs and they just have incredible opportunities to grow. And then we acquired a minority share of a company called SparkLoop. So we're basically looking for what are these things? Where instead of buying a tiny percentage through an angel investment, we could buy 5%, 10%, 20%. And then it could become part of a portfolio that could eventually feed each other.

Nathan Latka

57:48When is the Nathan Barry ConvertKit rolling fund, but private equity version, not VC version launching?

Nathan Barry

57:55>> 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

58:19>> same time, all the opportunities in ConvertKit. Like let's say if we're valuing ConvertKit at 7x ARR, 8x ARR, something like that.

Nathan Latka

58:28I'd say that's conservative for even for you've built, yeah.

Nathan Barry

58:32>> 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 of like, Oh, I've made this money here, now let me go to

58:55>> this other thing. When if you just look at Kohl's- Leverage. 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 on ConvertKit.

Nathan Latka

59:17Last question, Nathan, you sent out an LOI to buy a company this morning, which company was it for?

Nathan Barry

59:21>> Can't tell you.

Nathan Latka

59:24I thought that would be the answer. So let me back up. How do you go about finding companies you send LOIs to?

Nathan Barry

59:30>> Yeah, that's a good question. Markets So that we're spending into

59:38>> something that is a good fit, something that we hear a lot from our customer base of like, if we see integrations popping up a lot.

59:49>> If we look at say our three year roadmap and if there's 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 software company, engineering time is the single greatest constraint. And so there's so

60:19>> many opportunities to chase and you just have to take the Richard Branson quote of like, opportunities are like buses, there's always another one coming. 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

60:42>> for a million dollars rather than having to spin up a whole new engineering team and then spend a year building it.

Nathan Latka

60:49Guys, there you have it. Nathan Barry 2005. A long journey when his parents dropped him off, he showed up with the van out for the $120 of woodworking sales quickly got into college early said give me to do list of what I got to get done then landed a $10,000 contract marketing contract ended up dropping out of school to pursue that and eventually turned those professional services goods into a couple thousand dollars a month. But it really

61:10changed in 2015. When he 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 focus on building the creator economy, they're empowering these creators in many different ways and they continue to drive growth 19,000,000 last year and run rate up to $25,000,000 run rate today. Totally bootstrapped. Nathan Barry, thanks for taking us to the top.

Nathan Barry

61:35>> Thanks for having me.

Nathan Latka

61:36Boom, guys. Cut. Nathan, what'd you think, man?