If the Shoe Fits: Lessons From MailChimp
by Miki SaxonA Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here
Last Friday I compared valuation based on investment vs. revenue with AppLovin as my example.
Put another way, it’s the difference between focusing on outside money and inside money, AKA, revenue.
“One of the problems with raising money is it teaches you bad habits from the start,” said Jason Fried, the co-founder of the software company Basecamp, who has written frequently on the perversions of the venture capital industry. “If you’re an entrepreneur and you have a bunch of money in the bank, you get good at spending money.”
But if companies are forced to generate revenue from the beginning, “what you get really good at is making money,” Mr. Fried said. “And that’s a much better habit for a business to work on early on, to survive on their own rather than be dependent on money people.”
That’s the approach embraced by 16 year-old MailChimp, with 2015 revenue of $280 million and will top $400 million this year.
As a private company, MailChimp has long kept its business metrics secret, but founder Ben Chestnut wants to publicize its numbers now to show the road less traveled: If you want to run a successful tech company, you don’t have to follow the path of “Silicon Valley.” You can simply start a business, run it to serve your customers, and forget about outside investors and growth at any cost.
Chestnut also doesn’t have a Silicon Valley ego, as demonstrated when defining the company’s values
I asked all of our managers and senior managers to help me out with them, and we came up with three: creativity, humility and independence.
and hiring.
I’m looking for that philosophy because I want someone to push me and make me better. I want people who are smarter than me, and who will push and fight for something they believe in while also respecting the values and unique nature of the company. We have to be creative in pushing our boundaries, but sticking to our values.
There is an interesting thread I find running through founders who bootstrap and build their companies by focusing on generating revenue, as opposed to fundraising and hypergrowth.
Both types have vision, focus, drive and grit, but, based on reading, those building their companies on internal money don’t seem to have the same need for validation — not of their vision, but of themselves.
Image credit: HikingArtist
