Intuit's $12 Billion Acquisition of Mailchimp - Lessons All Entrepreneurs Should Learn

Today we are going to talk about bootstrapping lessons from Mailchimp's $12 billion— with a B— $12 billion acquisition. Intuit was in talks to buy Mailchimp for over $10 billion. Well, that has now happened, and the transaction is actually for $12 billion. It's a combination of stock and cash. Okay, so what I want to do now is I want to pull out a couple of key takeaways that you can use when it comes to bootstrapping. So before we start talking about bootstrapping a little bit, I want to define it. Bootstrapping is where you're not necessarily going out and raising outside money from angels or venture capitalists. You're really kind of bootstrapping from your customers. You're bootstrapping your revenues, right? So that's why they call it that. I mean, there's a whole saying around it, you know, you grow something through the bootstraps, right? It's a lot of hard work. It's a lot of sweat equity. And what typically happens with the bootstrap type of business is that These owners will typically incentivize their employees through profit sharing, and they might have other incentives that are tied to it. Now, you contrast that with raising money from venture capitalists. Typically, you would raise money for like a SpaceX or a Facebook or really any company that's growing quickly that has a large TAM or total addressable market. And what happens there is you would typically allocate about 10%, maybe even a little more, of the cap table or the capitalization table, which is who owns equity, and 10 to 15% of the cap table, maybe more, would go to your employees. And the beautiful thing about that is that equity actually incentivizes people to think about the long term. Profit sharing is more short term. Okay. So what I want to do now is I want to pull up a report over here from Axios. And this was from a couple of days ago, right? And now the transactions actually happened, but you can see that MailChimp started in 2001. So they're an email service provider or ESP, and they help you send emails and all that type of stuff. They do a lot of different things now. And you can see there, this is the largest transaction by far. So I'm gonna move to this one over here. $12 billion transaction is the largest for a bootstrapped company ever. So right now you have people that are complaining on Twitter that, oh, they should have given their people equity, whatever. But actually, if you look at the bonuses, as part of this transaction, it's going to be a couple hundred million dollars, which is a huge chunk, but you might say it's not much out of the $12 billion. There's kind of a certain risk-reward pattern here. If you're trying to get someone to join your startup, you raise venture funding, maybe sometimes you're not paying the highest salaries, but you're trying, you're giving them equity in lieu of that, right? Now for Mailchimp, they were highly, you know, high cash flow business, great SaaS business, compounds over time. They decided to offer bonuses and profit sharing instead. I'm sure they have other incentives. But if you look at it this way, not only did these people get bonuses, not only did they get profit sharing, but they're also getting stock in Intuit as well. It's hard to kind of give everyone everything, right? There's a certain risk that people need. Like if you join as a late employee in a company, late stage, like how much risk did you really take? So you have to look at the kind of spectrum of risk here. And, you know, that's how I look at it, right? So, Whatever Mailchimp wants to do, I mean, it's their business. They're privately held. They don't have really other stakeholders aside from the co-founders. That's one thing I'll say, right? So you got to think about the incentives that you're putting together for the people because your incentives control their behavior. Another thing is that they started in 2001. So a lot of people that think about business, they think in years, but really the reality is you have to think in decades because the saying is that people tend to overestimate what they can do. In a year, but they overestimate what happens in a decade, right? And so when you think in decades, when you look at the last 10 years of what you've accomplished in your life, it doesn't matter where you are right now. I don't care if you're coming out of college, whatever. You've accomplished a lot and you've grown a lot as a person. It's really on you to kind of continue to accelerate, to continue that growth rate, right? Whereas a lot of people after college or whatever level of schooling they complete, they start to decelerate their growth rate. And that's really your advantage. So, you know, thinking in decades here, I mean, look, took a long time for them to get to this outcome, 20 years. The other thing I'll say is that they started out as a web design firm or web dev firm first, a web dev shop. And the co-founder really, Ben Chestnut, one of the co-founders, he really didn't know a lot about this stuff. You know, how to run an agency, how to get clients. And their agency wasn't super successful. I'm not even sure if they hit 7 figures or not, right? They kind of, you know, they were, They're trudging along, and then what they found with this Mailchimp thing, which they did for fun on the side, was that they were getting more and more checks, physical checks hitting their email inboxes. And so for them, they were like, "Well, you know what? I think we should pay more attention to this." And they, I believe they charged like a really small fee before, and they were losing a lot of money on this. And this was before subscription became a thing, before SaaS became a thing, and eventually they became a SaaS company. And they were charging subscriptions and it started— they started to compound over and over. And a lot of VCs started hovering around them. They're like, hey, like, you know, we want to give you money. We want to give you money. And they took the meetings, but they decided that it wasn't in their best interest to, to take these meetings. And more power to them because had they had raised money, I mean, they'd be giving up a ton of equity, but the stakeholders might've pushed them in a lot of different directions. But Ben, Ben Chestnut, he's kind of the face of the company, the, one of the co-founders, he made a lot of mistakes as a founder. And some of these mistakes arguably might've gotten him fired if he had a board, right? And so he learned a lot by bootstrapping, by saying no. And I think there's merits for both sides. Like, again, if you're looking to build a moonshot, like a Facebook or an Uber or a SpaceX or Airbnb, you probably need to raise money. But they found that they didn't, it didn't really make any sense to raise money. You know, for Ben, I mean, it took a lot for him to say no. So I applaud him for that. And the other thing too is like the— you have to realize that everyone's just a human being at the end. Because Ben, it took him a long time to realize the power of co-founder groups or peer groups. So I'm in a group called YPO. I'm also in another group called EO. So Young Presidents Organization, Entrepreneurs Organization. These are modern-day guilds or clans or teams, whatever you want to call them. Where you can hang out with like-minded people that are doing cool stuff and you can talk ideas. And oftentimes if you need help, they'll make introductions for you and vice versa. And so even when MailChimp was doing really well, we're talking even a couple of years ago, uh, co-founder Ben Chestnut realized that he's invited to speak at the startup conference, but then he also wanted to hang out with the people too. So he started to realize the power of these peer groups and this was way later in the business. So it's never too late. To start doing these things. But for him, I mean, he— I think he mentioned that he really didn't see the value in these initially. And by the way, I've met, you know, people kind of in the— especially in the internet marketing space where they're like, oh, you know, I don't need a coach. I can hire those people one-on-one, that's fine. But they missed the point. The point here is when you're hanging out with like-minded people, peer groups, you're talking about cool stuff, and these people aren't necessarily money motivated and they want to make a difference in the world, it's all about impact. The way they look at the world is in a different lens, and you don't sense the the kind of sliminess and the greed versus like other people that you might run into, right? So the peer groups go a long way. It helps with your psychology. It helps you reframe how you think about things. Perspective is always helpful as well. So that's good. And, you know, I don't think they screwed their employees over. Look, bonuses, profit sharing, all that type of stuff. Great. The other thing I'll talk about is if you think about the number one thing that all top CEOs obsess over once a company gets to a certain size is culture. And I used to think that's, that was a bunch of rah-rah stuff. How do you quantify culture? All that, all that, right? But you realize that culture is everything because it's how your people behave. It's how you do things. And if you don't, if you're you as the leader, you're not on top of your culture for the long term, then it's not going to be very inspiring to work at your company. Things are going to fall apart. It defines how you do things. It defines who you hire, who you fire as well. And so thinking about culture, it goes a long way. And Ben, that's certainly something that, you know, he made a lot of mistakes with this stuff, but he also learned a lot too. And he learned how to fix it. He learned how to hire the right people. And that's another thing you learn about hiring the right people too. And really at his stage, it's all about hiring the right people. It's hiring the right people, communicating the values, communicating the mission, communicating the vision. And now look, they're doing this transaction with Intuit. He's, he's, he's very rich, but he wasn't trying to be very rich. If you listen to him on the How I First Built This, his interview, he's, he seems like a very down-to-earth guy. He doesn't seem like he's very money-driven. And a lot of people that come from kind of a, you know, from an engineering background or a designer background, they just want to build stuff. And Mailchimp has built some amazing stuff over the years, and he's hired amazing people that look at things a certain way and they come up with different ideas. And now he just largely kind of stays out of the way. And well, after this transaction, he's good. He's gonna be out of the way, right? So these are just a couple things that you can learn when it comes to bootstrapping. There are arguments for raising money. There are arguments for bootstrapping. You know, I've done both before, and I largely like the bootstrapping model because the way I look at the leveling up mission long term is we're here to level up the world. And if we're here to do that, that's a long-term vision, and I could easily raise money right now for this. And who knows, maybe I might at a certain point, but right now I don't see a reason to on our path to at least, you know, $100 million in revenue, in annual revenue. And, you know, we'll just continue to grow that way. But I'm having a lot of fun doing what I'm doing. And, you know, I have my own kind of informal board of directors, but at a certain point, you know, it might make sense to raise money, right? But that's a topic for another day. So let me know if you think I missed any bootstrapping lessons with this Mailchimp $12 billion acquisition. In the comments. And don't forget to hit the subscribe and the bell button if you enjoy more topics, you want to enjoy more topics on wealth building, on crypto stuff, on marketing, on business. And we'll catch you in the next video, maybe over there or somewhere around here.