How Nathan Barry bared all to take ConvertKit from $0 to $2 million MRR
How Nathan Barry bared all to take ConvertKit from $0 to $2 million MRR
Nathan Barry (00:01):
And that is the easiest advice to give and the hardest advice to take.
Peep Laja (00:05):
What's your take on this advice right now?
Nathan Barry (00:07):
Oh, I think it's probably the best advice ever.
Peep Laja (00:12):
I'm Peep Laja. I don't do fluff. I don't do filler. I don't do emojis. What I do is study winners in B2B SaaS because I want to know how much is strategy, how much is luck and how do they win? First up, Nathan Barry, founder and CEO of ConvertKit. Email marketing is one of the most saturated spaces of all time. G2 lists over 460 tools to choose from. The amount of competition is nuts and is growing fast. So how are you going to stand out? How are you going to win? This episode we'll talk about the importance of picking a niche.
Nathan Barry (00:49):
You got to choose something, choose one group.
Peep Laja (00:52):
The value of not playing the features game.
Nathan Barry (00:54):
We can focus better. And so we can make something that is really compelling.
Peep Laja (00:58):
And the power of focusing on your long term mission.
Nathan Barry (01:01):
I think of it from the mission side of things, if you're doing it for the benefits, then you shouldn't.
Peep Laja (01:07):
Let's get into it.
Nathan Barry (01:11):
I was trying to solve a specific problem. The exact problem that I wanted to solve is I was selling eBooks online specifically about designing iPhone applications. And I wanted an easy way to give away a sample chapter and then send a series of emails, timed to convince you to come back and buy the book. And that was totally a pain to set up in MailChimp and others. There just weren't tools for that.
Peep Laja (01:36):
So you came out with a feature based differentiation? It's easier to do drip campaigns with ConvertKit.
Nathan Barry (01:44):
Exactly. And so the early messaging was all around feature based things. And part of the reason is that I didn't want to narrow the market. If I went for a specific use case or something like that, then I'd be ... I felt like I was excluding people and everyone would say like, choose a niche. And that is the easiest advice to give and the hardest to take.
Peep Laja (02:04):
What's your take on this advice right now?
Nathan Barry (02:06):
Oh, I think it's probably the best advice ever.
Peep Laja (02:11):
You need to know the answer to the question, who is the kind of person who cares a lot about what we do? If you aren't objectively better than your competition and if you can't buy your way into people's consideration set, then you need to take a fundamentally differentiated position in the market.
Nathan Barry (02:28):
It was actually my friend, Tim Grall who, I think he was like 18 months into running the business, that he kind of called me out on it. And he was like, "Hey, you got to choose something, choose one group. Because right now you're for everybody. Why don't you just do MailChimp, but specifically for one group of people?" And the first group that we tried was authors. A group of people, they had a blog, they were monetizing the blog, not just through sponsorships or ads, but also through products that they were selling, people like Chris Guillebeau or Tim Ferriss in the early days. Two things happened right away. One, we got a lot of attention. It worked. People were like, "Oh, email marketing for authors. Great. How can I help you?" And you're like, "Oh, well, I'm looking for new customers."
Nathan Barry (03:10):
Then they go, "Oh, I know five authors. Let me introduce you." But where we ran into trouble is it ended up being a whole bunch of want to be authors, who their dream was to maybe someday publish a book on the Kindle store or something like that. And I went, "Oh, a niche is amazing." And then I realized, this is the wrong niche. We renamed it to email marketing for professional bloggers. It was the same audience I was trying to reach. I just used different terms to make that happen. And that's when we started get these people who had maybe 10, 20, 50,000 people on an email list who understood the balance between sponsorships selling digital products, and wanted to tag their subscribers. And that's when it really started to resonate.
Peep Laja (03:53):
Got it. At the time, what were you also actively looking at your competition? Like which target audience are they going after? Because you don't want to overlap and things like that.
Nathan Barry (04:03):
Yeah. Well the biggest competition at the time, there were three. Obviously MailChimp is ubiquitous, still is. And it was like anything that we pick will be within MailChimp's, you know, under their umbrella or whatever. They have the market penetration. So nobody even cares who they're actively going after. It's just like, "I've heard of MailChimp so that's who I'm going to use."
Peep Laja (04:24):
Let's be clear. Market penetration is far more important than differentiation. MailChimp is the category leader. They don't need to be different. Amazon and Shopify don't need to be different. The category kings don't need to be different. Everyone else needs to be different from them.
Nathan Barry (04:42):
AWeber and Infusionsoft were the other two that we heard about most commonly. None of them were doing market based positioning. They were all doing either so broad like MailChimp or they were doing feature based positioning. And so I think we had a big advantage in going market based.
Peep Laja (05:01):
And so when did the bloggers evolve into creators and why?
Nathan Barry (05:06):
We definitely had people who we thought of as bloggers, who said, "I don't think of myself as a blogger." Take a Pat Flynn from Smart Passive Income. Is he a blogger or a podcaster? Maybe first he was more of a blogger and now he is more of a ... Who knows? But if you expand the circle a little bit, then you don't have to make that distinction. We would do direct outreach. So we'd make lists of customers who are on ConvertKit who are successful, and then we'd go after other people in their space. So imagine email marketing for Paleo recipe bloggers who are women.
Peep Laja (05:42):
As marketing campaigns, or as your overall positioning, or?
Nathan Barry (05:46):
That was individual marketing campaigns. In some cases we made industry pages related to those, but small tweaks on one template. It's really easy to swap out some headlines and feature your testimonial. But then what would happen is when I'd do cold outreach using nerdy data or built with, I'd scrape the web for people who are using MailChimp, AWeber et cetera. And then I'd email them and say, "Hey, I see that you're using MailChimp. I'm curious. Is there anything frustrating you about it? The reason I ask is I run ConvertKit, it's a email marketing platform for professional bloggers used by," and then I'd try to name drop the most relevant names that the broader market wouldn't know or care about.
Nathan Barry (06:26):
But I knew that they knew because they're in the same fitness or workout blogging community, or they both are men's fashion bloggers in New York. And it's like, "I know you know, this person." And so that would let me go out, basically take one or two customers that were successful and sort of draw a circle wider around them. And those campaigns really worked really well. We started that in the very beginning of 2015 and we were at 2000 a month in revenue. And by the end of that year, we were at 100,000 a month in revenue.
Peep Laja (06:57):
These were cold email campaigns or ads or?
Nathan Barry (07:01):
Cold email campaigns. I would send them personally. I have never been a fan of bulk mail merge tools or anything like that for outbound email. I don't know. I think it's sleazy. But if you're scraping a list and then researching each person and making a pitch for each one, I think that works really well.
Peep Laja (07:22):
So when you adopted this ConvertKit is for creators, was it just that, "Hey, this is a nice way to say who we're for," or did it also come with some product decisions? Like "Let's build a 10x solution for this particular audience."?
Nathan Barry (07:39):
It wasn't a huge pivot. It was just the natural evolution. There are things, like we built in direct integrations with YouTube and Instagram and other platforms so that you could pull media from plenty of places. Another thing would be building out our landing pages product. Because we found that a lot of creators would have a YouTube channel and not actually have a website, which was super interesting, or Instagram, but no website. Or maybe they're just using Linktree or something. So there's no way to grow a list. And so by adding a landing page part, it went from, you have to be a blogger to use the tool to your entire web presence, if it's relatively simple, could be on ConvertKit. Because so many people are building big audiences without a blog so it was important to add that part.
Peep Laja (08:26):
A lot of tools in the email marketing category are still playing the features game. You have X features. I have X plus one. You don't play that game. In fact, I would say that you have less features than most people in this category. So you've made some strategic trade of choices there, tell me about those.
Nathan Barry (08:47):
One of our customers, a couple named Seth and Katie Spears who run a blog called Wellnessmama.com, 700,000 or 800,000 subscribers. And they're wildly successful.
Katie Spears (08:59):
Hey guys, I'm Katie. Today, I'm going to show you how I naturally whiten my teeth with activated charcoal. And it's important to know activated charcoal and charcoal from the barbecue grill are not the same thing.
Nathan Barry (09:09):
And Seth said this line to me at a conference he's like, "Yeah, ConvertKit is the power of Infusionsoft, but easier to use than MailChimp." And that was a throwaway comment that he just used to describe it. And I was like, "Sorry, Seth, what did you just say? Repeat that to me." And he repeated it and I wrote it down and we used that in so many campaigns, cold emails and everything. And so what that line allowed us to do is perfectly bracket ourselves in the market.
Peep Laja (09:41):
You cannot compete in features. At most it's a short term transient advantage. If you have features that the market wants, you can be sure that others will copy. You maybe have one or two years of head start. If you want to compete in features and capabilities, you need to be a consistent innovator. Always two steps ahead of everyone else. Very few can pull it off. Be totally unapologetic about not playing that game. Flaunt your flaws, be proud of your [use 00:10:08] cases say, "Hey, we're not for everybody." You need to repel some to attract others. Aiming to be liked by everyone means that nobody will love you.
Nathan Barry (10:17):
Then there were other things like Pat Flynn, when he published a blog post.
Pat Flynn (10:22):
Hey, what's up everybody? Pat Flynn here from Smartpassiveincome.com. And in this video, I'm going to give you a quick demo of ConvertKit, a brand new email service provider that I've started using that I've fallen in love with.
Nathan Barry (10:32):
He published "Why I switched from AWeber to Infusionsoft to ConvertKit. And that ended up being really important.
Peep Laja (10:40):
So it was kind of like you were piggybacking off of known brands and people had certain ideas associated with those.
Nathan Barry (10:49):
Yeah, exactly. And what was interesting is we were able to execute on that promise of the power of X with the simplicity of Y, because it was only for the narrow market segment of Z, of creators or professional bloggers. So whereas Infusionsoft or MailChimp or others had to build this feature set of, here's the CRM functionality or "I just got off the phone with a client, let me log info about this deal." They had to maintain all of that. We could just say, "Oh, we're just not building any of those features," because the professional bloggers, the creators, they don't care about that. And so we're able to be really opinionated about the features that we build.
Nathan Barry (11:33):
So what's interesting, you mentioned not playing the feature game. I think we can play it better than they can in our market. We can focus better. And so we can make something that is really compelling and people can legitimately say like, "Oh, this is ... I'm able to do things in ConvertKit that I couldn't do in MailChimp in active campaign." And other companies can say like, "Yeah, but here's all these things that you can do in our tool that you can't do in ConvertKit." And we can be like, "Great. Creators don't care about this. Those that's not the use case."
Peep Laja (12:07):
Exactly. So that's just a beautiful, beautiful way to differentiate. So you double down on a, let's call it a niche or an audience, that you are going after. And then in terms of features, you'll also differentiate product wise by building, let's call it a 10x solution for the needs of that particular audience.
Nathan Barry (12:30):
Yep. There are other interesting things going on because you can run up to against the limits of a product in a few different ways. One is, you needed to have more functionality, more advanced automation functionality. But another is the depth, going from a beginner creator to a really large audience. And so we were able to say, within this group we can support the brand new creator who's paying us $29 a month. And the Tim Ferrises and James Clears of the world, Wellness Mama, her sending like 500,000, a million, 2 million subscribers. Whereas Infusionsoft was like, "Look, the small business ..." They probably think of like a plumbing company with 25 trucks or something like that is their ideal customer. They're never going to have hundreds of thousands of subscribers. So they're able to go broaden that small business market and we can ignore it and go deep in the creator market.
Peep Laja (13:24):
So what are some of the feature sets where that you have now further developed besides being able to handle the deliverability of large email list? What other choices have you made?
Nathan Barry (13:35):
Let's say we're queuing up a launch email and it goes out to 500,000 people, and you immediately start getting those replies back and it's like, "The link's broken," and you're like, "Shoot!" It's every marketer's worst nightmare. What did I just do?
Peep Laja (13:48):
Yeah, everybody's lived that.
Nathan Barry (13:49):
Well, in ConvertKit, you can actually just jump in and change the link on that email. You just go into the broadcast that's already been sent and you change the destination of the link, because it hits our servers first, right, for link tracking and all that. And so why don't we just point it to the correct place that you intended to in the first place?
Peep Laja (14:05):
Ah, fucking brilliant.
Nathan Barry (14:06):
And so I think there's things like that where, because we're so deeply embedded in this use case and we've all done it, I think you come up with stuff like that when you focus really deeply on one audience.
Peep Laja (14:19):
Totally.
Nathan Barry (14:20):
Our mission is that we exist to help creators earn a living. And so it's this deep care and passion for the creator industry. And so a lot of our marketing is around storytelling and is around like elevating creators, whether it's a case study or ...
Peep Laja (14:35):
Stories of your customers.
Nathan Barry (14:36):
Stories of our customers. Exactly.
Glow (14:39):
My name is Glow and I'm a travel blogger.
Speaker 6 (14:41):
We are coaches, writers, and podcasters.
Speaker 7 (14:43):
I am a cartoonist, a teacher and a community leader and I'm a creator.
Speaker 6 (14:47):
And I'm a creator.
Glow (14:48):
And I'm also a creator.
Nathan Barry (14:50):
As you go through the homepage of ConvertKit, you'll see it's all individual creators rather than screenshots of features. So it's very storytelling driven, your favorite creator's favorite marketing tool. And then when you're like, "Hey, what tool should I use?" For example, if you're a musician and you're up and coming, you're like, "Oh, what should I use?" And it's like, "Oh, well, Tim McGraw uses ConvertKit." Then people go, "Oh, well, if it's good enough for Tim McGraw, it's good enough for me." And so really taking that brand storytelling, creator driven approach to everything.
Peep Laja (15:25):
Oh, that's great. I don't know too much about it. But what I do know is that you're known for transparency. Is that a central piece of your brand?
Nathan Barry (15:35):
Yeah. Transparency is core for us. You know, all of our metrics are public. You can go to ConvertKit.baremetrics.com and see we're at 27.4 million ARR. It'll probably say like updated 27 minutes ago or something like that. You can see our churn customer growth. All of those things are right there. People always ask like, "Should I put all of my metrics public? Is that a good idea? Should I be that transparent?" And I think if you're doing it for the benefits, then you shouldn't. I think of it from the mission side of things.
Nathan Barry (16:03):
We exist to help creators earn a living. Often that means bloggers, podcasters musicians, but I mean like startup founders and SaaS companies as well. It's like leaving breadcrumbs and not just the random ones in a press release every 18 months as you're trying to piece together a story. But you have all the data that I have, my hope is that it'll inspire founders, give them tangible concrete details. I like to put as much information out there as possible, because I want to help through the tool that we're selling, but then also the story and the data.
Peep Laja (16:37):
That decision from day one was in your DNA or did that come later?
Nathan Barry (16:44):
It was from day one. The most useful blog posts that I've ever read were ones that had concrete numbers in them. Now it's a meme of building in public or something.
Peep Laja (16:54):
Now it's like public masturbation. It's like, "Look at me, how much money ... Everything is great and we're growing and everybody loves us." Transparency takes serious commitment. It builds trust. It can be a reason for people to choose your brand. And your brand is one of the best MOATs you have. I'm sure Nathan thinks about MOATs all the time.
Nathan Barry (17:19):
I don't spend a lot of time thinking about MOATs. Email's an interesting space in that it's painful to switch tools and that both helps us and hurts us. It hurts us in getting people to move over to us. Right? So that was an important thing to have like a concierge migrations team who will do the whole switch for you for free. That's done really well for us, but it does serve as a MOAT on the other side of people are hesitant to leave. A year ago, we launched ConvertKit Commerce. So you can sell digital products and coaching and eBooks and songs, and all of that directly through ConvertKit rather than through a third party.
Nathan Barry (17:56):
And so that keeps more of it on the platform, makes it easier to set up. And so I think that is going to turn into more of a MOAT, especially because then we're the tool that people are using to earn money, not just spend money on paying for your $50 a month for 3000 subscribers or whatever. You're actually earning that money. But otherwise I don't spend a ton of time thinking about MOATs. But I would say brand is probably the one that we're most actively building.
Peep Laja (18:23):
You have stated publicly that it's your goal to get to a hundred million ARR. So how are you going to get there? What are you betting on?
Nathan Barry (18:32):
Well, one big bet that we made we launched early last year is moving to a free plan and a freemium model. And basically the idea with moving to freemium is that people would be able to just start on ConvertKit and grow rather than starting on MailChimp or some other platform that was free and then later graduating from that platform to ConvertKit. We've had about 340,000 creators sign up for the free plan. We run a 4 to 5% free to paid conversion rate. Commerce is another big bet. Looking at companies like Teachable, Shopify. I mean Squarespace's S-1 just came out. Commerce is doing very well for Squarespace.
Nathan Barry (19:13):
Well, let's take Teachable as an example, since they added Teachable Payments, they've grown like crazy. And so now their payments revenue represents almost as much revenue as their subscription SaaS revenue and Shopify, very similar things are true for them. So I think that's going to be a huge thing for us, is in processing around payments. We'll not only get that MOAT and more of that lock in into a better user experience, but I think when we're at a hundred million ARR, I bet 40 million of that a year, maybe more, will be payments revenue.
Peep Laja (19:46):
Well, I'll be tuning in with you then to see whether that bet paid off. Thanks so much Nathan for coming on.
Nathan Barry (19:53):
Yeah. Thanks for having me.
Peep Laja (19:56):
So what were the three key strategic decisions ConvertKit made in order to grow and succeed? One, they picked a niche. They didn't say, "Hey, we're email marketing for everyone." They said, "ConvertKit is ..."
Nathan Barry (20:10):
Email marketing for Paleo recipe bloggers who are women.
Peep Laja (20:13):
Two, they didn't play the features game. They got clear on a very specific audience and doubled down to build a 10x solution with their chosen niche.
Nathan Barry (20:23):
Well, in ConvertKit, you can actually just jump in and change the link on that email.
Peep Laja (20:27):
Ah, fucking brilliant. Three, they focused on their long tern mission, not short term trends or gimmicks.
Nathan Barry (20:35):
Our mission is that we exist to help creators earn a living.
Peep Laja (20:38):
For ConvertKit, differentiation is baked into their DNA as a company and as a brand. That's how you win. For more tips on how to win, follow me on LinkedIn or Twitter.
