$40M+ Product-led Business: Nathan Barry on building Kit

When you're deeply embedded with customers and like watching their workflow and talking to them, and then you pick up on these things that people really care about that are like the small things that drive word of mouth, which is effectively product-led growth. Don't just analyze the data, like use it yourself. If you can be your customer, like that's huge. We're talking about finding friction in the product. I use ConvertKit as a customer.

Why give away more for free?

I think it's a short-term versus a long-term optimization. I think if you give more away for free, it becomes more of a no-brainer to start on your product versus something else. But we're very careful to maintain our stream of beginners who are starting out so that the next generation of creators is on ConvertKit. Hello everyone.

Welcome to the Product Lab podcast. Today we have one of my favorite guests, Nathan Barry, who is the CEO of ConvertKit and What I love first off about everything you do, Nathan, at ConvertKit is there's just this aura of transparency. And I mean, even right before this call, I'm like, okay, let's like, you know, look up Barry metrics ConvertKit, and you can see like, okay, exactly how this business is doing. You can see how everything's kind of working for the most part from a metric standpoint. And then one thing you do even in addition to that is just kind of like sharing Showcasing, okay, here's what's working, here's what's not, uh, and really being open and transparent about that. So, so happy to have you on and kind of dissect how you built a successful product-led company.

Sounds good. I'm happy to be here. Transparency is one of my, uh, favorite things as I've learned from other people. You know, you get specifics in there and it makes all the difference for like how to apply the lessons. So just trying to pass it on.

Awesome. And so when it comes to like your definition of what a successful product-led company is, what does that like mean to you? Maybe we'll start there.

Ooh. So I don't think of it in terms of a definition just because I'd probably think in terms of just our day-to-day execution rather than, uh, like, you know, what does product-led growth mean? Yeah, definition. I, I just think of it as we're, we're diving in trying to build the best. Product that we can for customers, staying 100% focused on what customers need, and then removing friction at every possible point. And then, you know, see where that ends up. Basically to keep, keep playing that flywheel.

So is there like those two main components? Is it just to build the best product you can build and then remove as much friction as possible to allow people to access the value of that product? Is that like—

Well, I think the, the missing part in there would be being really close to the customer. And like so many people are doing it in terms of look at this data and analytics, which is really important. Like we could talk about, we finally really started pushing annual plans in ConvertKit not that long ago, you know, and through a data analytics approach, like radically changed the number of percentage of customers on annual plans. But I think what matters more is like sitting down, like our audience is all creators, you You know, we're selling a creator marketing platform. And so just all the time sitting with creators. The example that we were just talking about before we hit record is yesterday I was with Sam Parr, who runs the My First Million podcast. We were just hanging out in Brooklyn and, you know, we're talking about a whole range of things. And one thing he talked about was email templates and his favorite email templates and how different tools make it hard to get to his desired look. And there's just little things that. You know, isn't gonna come up in every user research conversation or all that, but like if you're deeply embedded with your customers, then you're like, oh great, that's actually easy to build. And it's not, it's never gonna get to the, the feature request level, you know, where you're like in our feature development process, like here's where the requests are coming from and here's how we prioritize them, right? Because that's all the big stuff. Someone's like, oh, made up thing, right? But, but go build a Shopify integration, you know, go build, but it's, it's. When you're deeply embedded with customers and like watching their workflow and talking to them and like grabbing coffee and whatever else, then, then you pick up on these things that people really care about that are like the small things that drive word of mouth, which is effectively product-led growth.

Okay. So there's going to be people listening who are like, sounds great, Nathan.

How? Yeah.

And I think a part of this to give you some time to even think about the answer to is like maybe part of this is like, yeah, there is like more of like, you know, tactical stuff too, but maybe this is also partly culture of the business. How do you set that? How do you really get people to care about this? Um, because it might not just be like you should do this Airtable, whatever approach and synthesize this research this way.

I think there are plenty of people that are really good at, at driving those systems for it. And that's I have a lot of them on my team. Like our product managers are fantastic about like doing real, like rigorous user research and distilling it down and sharing like little clips and all that things to understand like what we should build next and why. And that's really important. And with it, it's also like just one, like if you can be your customer, like that's huge. We're talking about finding friction in the product. I use ConvertKit as a customer. Not every day, but at least 3 or 4 days a week, you know, they're pretty close. And so you just understand it. It's not an intellectual exercise of what, what should we build next? Oh, tell me about what's frustrating. We ask all of those questions, but when you encounter it yourself and you're like, oh, I see how from the design in Figma, what got lost in translation through to the execution and how this doesn't capture the feeling of the product. So I'm much more. Like don't just talk to the customers, take them out for coffee, you know, don't just analyze the data, like use it yourself. I guess the, the softer side of all things product.

How do you expand that beyond yourself? Because I get it when I'm like, okay, I'm using my own product. There's that empathy around like, okay, this is frustrating. I'm going to want to improve this, not just for them, but for myself. Uh, but then let's say you hire someone who's not a creator like yourself, and how do you get them to feel the same thing, um, and kind of expand that beyond yourself?

Yeah, two different examples. One is like at a team retreat, this is a couple years ago, we were really pushing our landing pages product inside of ConvertKit. You know, the ability to easily, if you have an, an ebook that you're giving away or like, hey, pre-launch for my podcast, like any of this stuff, right? Spin up a landing page quickly. And we divided, I think a 50-person team at the time, into small groups of like 3 or 4 people and said, okay, over the next 90 minutes, everyone's going to go build a landing page as a customer for a real thing. And then like provide feedback on that. Um, and then we come back and share details about our experience. And some like did it on mobile and the experience wasn't super great. But you got into all these interesting things where people actually, it wasn't like click through the product as a QA person, like That is, they were actually trying to make something as a customer would. And like one example that came out of it is everyone got stuck on writing the headline of their landing page. Like literally every single group got stuck of like, what should the headline be? You know? And so like a small feature that someone built in after that is when you click on to focus on your title field of your landing page, it shows you a contextual help article that says, hey, here's 4 tips to writing a great landing page. That like shows up right then because everybody got stuck and the people who got unstuck, you know, were the ones who knew that that article existed in our knowledge base and they like went out and found it, you know, they're like, and they, it has like a generator in it. It's got all these things, right? And so marketing had done its job to like produce this content that was ranking, but it wasn't connected to product. And so that was just a simple example of. Going straight to like the customer problem and getting that contextual help. And then the other side is we actively encourage side hustles at ConvertKit and getting people to use ConvertKit as a customer. There's some companies like Automattic who makes WordPress.com. They specifically don't allow side hustles, right? They want you as a team member to be 100% focused on work. And then when you're not at work, like go do family, hobbies, and recover, but like, don't, don't do side hustles. And we say, we, we want you to do, if you have something, we want you to do a side hustle that gets you using ConvertKit and building an audience as a creator. And then you bring in that empathy. And every so often you'll get somebody, it's actually pretty common for people on our team to come in and be like, okay, I just did this. It was great. I got it done. And here's the Google Doc of feedback that I wrote in the process while doing this. you know, while making, like spinning up my product to sell through ConvertKit Commerce, um, or whatever else. Uh, I'd say we probably have a third of our team that actually uses ConvertKit, you know, through a side hustle, but that's enough to, to get like a lot of really good feedback.

Totally.

I love that.

Yeah. If you can get them to use it through the side hustles. Yeah. And like build whatever else it is, like actually using the product, creating your own newsletter. and actually building your own list, you will encounter a lot of those same challenges. And I imagine that kind of like links to your second point of building a successful program business, which is like build the best product possible. How do you connect that? Because like that, if you skip that first step of being like deeply embedded into your customer's head, understanding their unique problems, the challenges they're gonna encounter, such as creating that headline that's like intimidating, because we've all been told this is the 80/20. Don't mess this part up, and there's a lot more pressure on it. Um, so the second part of this, like building the best product, how do you connect some of those insights to really truly build that, that amazing product?

Yeah, again, like I, I think there's gonna be all these great product managers who have real processes for it, and that's why like ultimately I rely on them. I'm still like much more scrappy and just like, you know, have the conversation, sketch out the wireframes of what would be a better solution. You know, sit with the problems, play with it of what's actually gonna work, and then get it prioritized in the, in the development process. I think that my approach is basically just be as close to the product as possible. I wonder if that is gonna play out in some ways where there's things that I'm missing, right? Of being blind to other aspects of it. 'Cause you get too close to it. But competitors' products, or one of my favorite things is adjacent products as well, right? Like, um, when I was in design, I was a full-time software designer. And like interface and UX design. And you'd see all these websites that people would design and like CSS galleries used to be really popular of like people would then go rip, rip off like popular, like a site would show up on CSS gallery and then you'd see like a bunch of derivative sites like get designed around the web. And so it was common in the design world. And what I loved was to pull design inspiration from somewhere totally different. So like one of my favorite sources for design inspiration for web design was, um, like going to a clothing store and looking at how they design their labels or their like fall display or whatever, because you get just great typography, texture, all these things, and then use that in web design, you know? And so I think the same thing of like not so much looking at what your competitors are doing, um, but really getting ideas from like an adjacent industry. Maybe another example of that would be, uh, when I was doing a lot of content creation, You have the, like the SaaS software world that really cared about high quality design. And then you'd get the direct sales, not direct sales, what's the, like the internet marketer side of things where they really cared about great copy and they'd do like these long form sales pages with great copy and just terrible design. You'd be like the yellow highlighter and all of that. And these were two separate worlds and the SaaS People would be like, nope, super short sales page, straight to the point. We're just like a few buttons, get the conversion. And I played a lot with combining those worlds of what if we had great copy and long-form sales pages with great design? And that is something that like with the books and courses that I did in the early days really got a lot of traction of basically like, how can I get my inspiration from another industry, find something that works there and bring it to my industry?

Well, what does like the best product mean to you? Is it like You know, the best design, the best copy, like, I don't know, best outcomes. What is like, if you were to just kind of define it for what you're trying to build at ConvertKit, what is that, you know, best product means to you?

It's two things. It's outcomes and the feeling of getting those outcomes. So outcomes would be, we're not trying, at ConvertKit, we're not trying to help you set up the best automation or like Uh, all of that. We're trying to help you get to the point. If you're a musician using ConvertKit, like we want you to be in the product, get your thing done, and then like have it work for you while you're doing music. The outcome is making money while making music, not knowing how to use ConvertKit the best possible. So like a lot of companies will track things like, uh, how much time someone spends in the app, right? That's the Netflix. You know, hey, if we autoplay the next video, like you're 42— made up number, but 42% more likely to, you know, like watch more minutes of Netflix, right? Uh, and we actually have the opposite of like, how can we help you jump in, build the thing you need for your audience and your business, automate it, and then go back to your craft. And so that's the outcome side. How do we help you get these outcomes with the least possible time? Then I think the other thing is the feeling of it, right? You can make a product that's really straight and to the point, but like clunky. It just doesn't, doesn't feel right. It's not joyful. It's not quick. And so we're really trying to look at what are all those things where sure, you check the box.

Yep.

It does what it said, but like, how does that feel? One thing in the early days of ConvertKit before, you know, now when you're building an app, there's all kinds of things with like JavaScript like full page JavaScript applications to be a lot faster. Uh, but we'd spent a lot of time on the feeling of making something fast. So for example, when you clicked on a, on a new tab and it had to do a full page refresh, and you know, this was back in 2013, I guess, when you clicked on the, the navigation item, it would focus that. Like it would add a class, you know, so that broadcast is now the active tab and then it would refresh the page. With that actually as the active tab. But just that little thing of giving you that instant feedback made the app feel a tiny bit faster. One of my favorite examples of this is Instagram. Some designer or PM at Instagram once made this graphic, and it was just showing like the 4 screens of, uh, like selecting a photo, choosing your filter, adding the descriptions, you know, any tags, and then posting it. And it just said, You think we uploaded the image here, like from your phone to the server. You think we did it here when, uh, at the end, when you, when you told us to, when you hit post, right? We actually started uploading it the moment you selected the filter and moved on to the next step. And like, you might easily go back and change it and we'll delete the photo that we uploaded and go back and re-upload a new one. But the result was that, and I think they even had like an uploading or posting animation at the end. It's like, wow, Instagram's so fast. It's like, well, they cared about the feeling of it. And so they are, you know, as you're writing out like your description of your meal that you're posting on Instagram, right? They had already uploaded the photo. And so that's just comes from someone who's obsessive about how it feels to use, uh, rather than like just the steps and what the final outcome is.

How do you focus on that? Because I'm totally with you. Like there's the outcome and that's You just like the, you gotta have it table stakes. Like if your product doesn't do what it says it's gonna do, it's like no comprendo. Like this strategy's not gonna work for you as a whole business. But when you talk about the feeling, I, I like it, but how do you really roll that out and help more people, like especially on your team too, to really understand that part? Because there's, a few facets of it, like, okay, there's measuring it, like, okay, are people doing the outcome? And then that softer side of like, are they feeling like they're successful? Are they feeling like they're closer to that core outcome? That part to me is definitely harder to track, but it's probably more important in a lot of ways too.

Yeah, I think of a few different ways. One is using tools like FullStory to watch the recordings of users. That's big. What I like to do is just also simple user research, especially if you can sit next to someone and like at a coffee shop or whatever and be like, here, do this and let me watch you and just like talk out loud. Tell me what you're thinking, what you're trying to find, like describe, okay, I'm trying to create a new product in ConvertKit Commerce. And so to do that, oh, I guess it's under the Earn tab. Okay. I wouldn't have expected that. I thought, you know, like talking through that, that type of thing. I mean, a lot of it is using it myself. Right. And getting the team to use it themselves. I ask this question that probably there's like a series of questions that I ask often enough that they're like Nathanisms, you know, like what would have to be true? Because then people get caught up in like, this can't be done. Or the, you know, I'm like, okay, what would have to be true to do this? And it forces you to switch into like brainstorming mode and it might be, oh, we need 5 more people or we need X amount of more time or we need to cut this thing from our scope or whatever else. So I use what would have to be true a lot. But the other one related to the feeling is I just say, are you proud of this? I know it checks in the boxes, but are you proud of it? And they're like, yeah, no, no. It's like, okay, well, what would have to be true for you to feel proud of this? And then you'll see team members going through and they're like, it's got it. Like, you know, they know the things that need to be tightened up, right? And when you start to have that eye for the detail, and so the trick is building a team that values that same. That same experience in detail where they're obsessive about it. They're like, no, the, the icons aren't quite right. It needs an animation. It, you know, we're not creating that feeling. Um, where do you think that's from?

Like, in as far as like how you hire people, how you train them to think like that? Because I mean, there's that piece of like, yeah, of course, like that's gonna be great if you get the right people. But then I imagine there's, if you're doing it across the entire company, there's gotta be some sort of like overarching, I don't know, maybe it's a philosophy, part of the culture or something that's connected to it so that it, it's not just in one place or one person.

Yeah.

Yeah.

'Cause a sure way to burn out as a leader is to make sure that you are the like stopgap on that. Yeah. Like there's a movie, I think it's called The Intern with Robert, Robert De Niro and Anne Hathaway, maybe something like that. Super funny movie. Thoroughly enjoyed watching it. Yeah. At the very beginning, Anne Hathaway is the CEO of this like very tech-focused fashion company, you know, like hip new brand and all that. And you watch her in the office and she's like running from like 3-minute meeting to 5-minute meeting to 1-minute meeting, like approving the new homepage. Like all of a sudden it's kind of funny to see like tech and e-commerce portrayed, you know, in Hollywood. And the first thought when you watch it is like, wow, she's so important. It'd be cool to be that important. And then later you realize like, oh, that would be horrible. Like that, that is a terribly run company because nothing happens. Like she is the, all of like the final QA. Uh, she's the decision maker on every single thing. Like she has not empowered a team to care. And this is a fictitious character, of course, but has not empowered a team to make all of these decisions. And so she didn't show up to work that day. Like 25 people would be completely stuck on their projects and like the new user flow wouldn't ship and whatever else. And so it's exactly what you're talking about. How do you build that into the culture of the team? And you get these questions that people ask over and over again, like in conflict, there's a bunch of questions that, that we use. And we were at our team retreat last week and I heard people asking these questions. Like one example is, what are you saying that I'm not hearing?

Mm-hmm.

Right? If we're having an argument and we don't understand each other, and all of a sudden I stop and I go, what are you saying that I'm not hearing? You know, you're like, oh, this, I've said it 3 times. And every time you just like explained it away. Or another one is, how am I complicit in creating the circumstances I say I don't want? Right? And so these are like very ownership level, level things. And you, you know, you've built them into a culture. When you hear team members using them and you're not around. Like you hear, you hear it nearby. And so that happened at our team retreat with those questions. And I've seen it happen with the, like, what would have to be true? Or are we proud of this? You know, does this feel right? And so you have to use it a bunch and then that starts to become contagious and it, and it spreads through the culture.

Yeah, I think it's, it's super interesting concept too, like focusing on that feeling. I recently learned about multiple braining, which sounds really weird, but okay. It's like there's your head brain, then there's your heart brain, and then there's your gut brain. And they recently found out there was like, we have 3 brains. Who would've known? And when it comes to like making buying decisions, stuff like that, this is where you get stuck. It's like if you just convince the head, that's gonna explain the how it will work for them, but If you tackle the heart brain, like they're gonna know why this is important and the feeling side of it. And then the gut brain is really just like, I have the courage to actually make this decision and right, let's do it. So like, yeah, if you miss one of those pieces, I always like talk about like there's a functional job to be done, the like social and emotional, I was like, it's all really connected in different ways. So I wanted to double take on that one because it's like if you do miss one of those pieces, especially around feelings, yeah, you're gonna miss out on quite a lot of potential customers too because they're like, I I'm like, yeah, I get it, but like, I'm not convinced. I don't know why it did what it said it would, but I didn't feel great about that whole experience.

Yep, for sure.

And so the third piece you mentioned for building a successful product-led business was really just like being maniacal about like reducing friction. How do you enable that across your organization where people are like literally obsessed about, I'm gonna like reduce friction? And yeah, let's hear that part first.

I mean, this is a lot of the data side, conversion rates, all of that. My favorite thing is when we're doing something as well and someone goes, what if we just eliminated that step entirely? And you realize like, oh, we were jumping through hoops and there was actually around like user verification to eliminate fraud. And someone's like, look, I found out this better way to move the fraud verification step or to do it with other data that we have. Watching full story sessions, like the recordings of just people using the app and trying to figure out what are you trying to accomplish? Why are you going all these places? What? And you realize, oh, you can't, you can't find this button, you know, and doing that early, something often that we'll do is, uh, this is critical for a product-led growth company. I think it's table stakes, but you know, having the ability to release features to a portion of your user base, right? Just really easily, like a feature flipper to be able to say. Hey, first turn it on in production for like our test accounts and then, you know, our beta testing group. And then from there, like turn it on for 10% of customers. You get little things like that. Oh, and so what we do is we'll, we'll turn it on for say like 5% of customers and then turn on full story recordings for those 5%. And so we get to watch everybody have their very first experience with this feature and then see like, ooh. Okay, that wasn't good. And then go and fix those things over the next week. And then we bumped up to 10%, 20%. And then what happens is someone comes in to a new feature we released and they're like, wow, this is so great and so polished. And we're like, yeah, because you were in the 5% that we rolled it out to initially. So I don't know if there's anything special to it. It's just a lot of using it ourselves, talking to customers, watching customers use it. And again, someone who's like, more of a product leader would be like, oh, here's the real process to follow.

Totally. And when it comes to like the overall concept of like building a product-led company, one of the, I guess, assumptions I have about it is a product-led company will outperform a sales-led company typically if you're in a very competitive market and targeting the same buyer. Your product-led company just has a lot of advantages such as It's going to attract a wider top of funnel. You're going to have, you know, hopefully if you run it more efficiently, you're going to have better margins to really support the business. So I'm curious to hear on your side of things as well, what are some of the things that you would consider like a true competitive advantage that a product-led company has over, let's say, a typical sales-led company?

It'd be an easy trap to fall into to say that we're better because we're product-led. Right. And I bet we could come up with a lot of examples of sales-led companies that have trounced product-led companies.

Totally.

Um, and so especially early on, right, you're like, we're doing this because our product is so good or we have this unique aspect to it. And other people are like, look, we're reaching this customer through brute force of sales. In the short term, that sales-led company I think is absolutely going to win. Now, long term, you like a lot of product benefits don't kick in until you get more scale and all that. So if someone's saying like, oh, we're not going to talk to customers, we're not going to do all of this because we're product-led, or talk to customers is the wrong— we're not going to sell customer by customer because we're product-led, uh, in the early days, like, if you don't have traction, like, that is a recipe for disaster, you know? And that was the case for ConvertKit. But yeah, on the product side, I think it's totally true. As you build that up, you can be really effective. A couple things, it's really hard to undercut a product-led growth company on price because usually, not always, but usually they have a free plan. Usually they know really well how to monetize the backend. And so you're like, how are you giving away this product at this price point? You know, we have to charge $500 a month and you're charging $50 a month. And it's like, well, we have this really good funnel of like gradually upselling people or our expansion revenue is better. And so you can, you know, you can offer a lot more for free. I'm trying to think of other moat type things. Um, you know, this is more in the network effect side of things, but as you get it to the point, and this isn't necessarily product-led, but when you get the ecosystem of people using the product and someone's like, hey, how do I do this in email marketing? It's like, oh, I have no idea how to do it in your tool, but in ConvertKit, here's how you would do it. And when a customer encounters, or someone in the market encounters enough times of someone explaining it in a specific tool, of like the industry experts are using it, the articles are written there, then at some point they get tired of translating like, here's how to do it in AWeber, here's how to do it in MailChimp. And they're just like, fine, I'm just gonna, everyone's talking about how to do this like advanced thing in ConvertKit, I'm like, I'm just going to use ConvertKit and that way it'll make it easier. And that's where you start to get this moat because that self-feeds, right? All this content is being created by the experts, the designs are being created and all that. You can do it with some features in an interesting way. Um, and that's something we're thinking about of like, how do you make ConvertKit better because it's being used by, like, if you and I both use ConvertKit for our blog, Yep. And we want to do a partnership. Is there something that only works because we're both on ConvertKit that like wouldn't work if you were on ConvertKit and I was on Mailchimp? So there's a lot of companies that do that kind of stuff well that we're not quite there with ConvertKit, but that, that can build a real, a real moat. What other types of things, when you're talking about a moat, what are some other things that come to mind for you?

I think I, whenever I think of like a moat, I'm like, okay, what is very hard to compete with? So like if you're going to go up against, let's say, I don't know, what's like a, you don't have to mention it, but like, let's say there's like a sales-led competitor to ConvertKit. And so that company, like you mentioned, like from a pricing perspective, they're probably going to start quite a bit higher. They're probably going to need to focus more on, let's say, more enterprise advanced features because You know, that's just the nature of like, okay, we're going to solve your custom problem. They're going to have to do more of like a differentiated play for their business, which I think is fine. Like there's sales, our businesses aren't going anywhere. But I think if you want to be the dominant player, like there are some things you really have to do. Like for the majority of the market, you got to solve the problem better, which is what you talked about. Like build a product that is absolutely the best. Uh, reducing friction to me is more of a component of like deliver that time to value very fast the first time and every other time thereafter, which is making it easy to get the value. You mentioned like, yeah, understanding the customer, that one, like definitely has to precede that. But I think where a moat could be built, and this is like the hypothesis I'm working around for the new book, is like giving more away for free. So like maybe let's talk about your decision to launch the landing page product for free. Why did you consider that? Because like you already had a free product, but then you decided like, okay, let's, let's give this away for free.

In addition to that, I wanted to go to a free product for a long time. And at first we were like, you had to pay upfront.

Yeah.

And then it was credit card required trials. And then now we're at no credit card required trials, uh, free trials. And then in January 2020, we launched, um, just our landing pages product free. And then we added email and then we, we've like gradually expanded, um, what's in the free offering. Part of it's a mission basis. Like our mission is we exist to help creators earn a living and we want as many people starting with ConvertKit, you know, and just jumping in from there. The other thing, making sure we can't be undercut on price. Like you, it's something that you could do. What's a good example? Take Figma, for example, right? One of the like absolute best product-led companies. Of all time, probably, you know, um, Figma is a tool for professional designers. Uh, my whole career as a designer, like I replaced Photoshop with Figma, right? It is the tool that all of the professionals are using, but it's also completely accessible to beginners, which is super interesting to me, right? You can run it in the browser. It's totally free. The only thing you would pay for in Figma is like the team features of like, hey, let me share design libraries. Let me do some of these other things that you can't do. Like that would really require a team. And that's what we're starting to pay for. And so it's like, wait, 90% of the product is free. I just have to make an account. I actually, from another thing, I can have people in my files in real time, like moving cursors around and watching me design, and they don't even need an account. Like, this is amazing. They've— there's no barriers to entry. And so it is both the professional tool and it is completely accessible. Whereas another example, let's take Canva, for example.

Yep.

Also a design tool, very accessible, not a professional tool and not viewed as a professional tool, right? Like no professional designer is saying, oh, I'm going to use Canva. That's the industry tool, right? It's the, the industry or the, the non-designers who are saying, oh, this helps me be almost as good as a designer. And so what I think can happen is if someone says we're going after entirely after the professional market, which is a great place to be, right? Figma, Apple, you know, they're focused there. You can do it in a way that's not accessible to beginners and you'll end up losing the next generation of the market. Yeah. If you take Apple, for example, when I was going to college in 2005, 2000 to 2007, you'd walk into a computer lab on the Boise State campus. And there'd be like 40 old PCs and then 4 like brilliant shiny Macs. And every single PC was taken pretty much, and no one was sitting at the Macs. And I asked that computer lab person like, what's wrong with those computers? And he's like, they're Macs. No one knows how to use them. And what was fascinating to me was so like, there was no computer available. I was like, I'll sit down and lend this, you know, a time when you just carried around your like USB drive that had all your Word files on it, you know, and like, or like plug it in and, and work on how to use it. Yeah, exactly. And so I learned how to use a Mac from that and I was like, these are beautiful computers. And, and like every computer I bought from then on has been with Apple. So, you know, they've gotten 16 years of, you know, me purchasing computers because they donated those computers to the computer lab. So what they said is we don't care about competing with Microsoft head to head. In the business world in 2005. We're going to go upstream and we're going to quietly carve off the entire next generation of business professionals or creatives or whoever. Right. And we're going to get it so that in 3 years, 5 years, 8 years, when they are making the buying decisions, they're all buying Apple because that's what they use. And so Microsoft went from winning, like, you know, winning in the PC market to, then all of a sudden they're not and you can't figure out why. And it's because there's a whole new set of decision makers around it. I think this is also interesting. Figma did the same thing to Envision, where Envision is a product for sharing, you know, sharing like as a designer, sorry, all my examples are design examples, right? After I design something in Photoshop or Sketch or Figma or wherever else, like I then go put it into Envision and I share it and you can comment on it and we can make clickable prototypes and all of that. Well, Figma goes and says, all right, now you, you design in Figma. And so we're just going to add Envision as a feature at the end. And because we made it so every new, like, wannabe professional designer starts on Figma, every professional designer is switching to Figma, and then Envision is just this feature tacked on at the end, you've diverted the entire stream. So Envision had this whole stream of customers coming in and all that, like, nonstop. They're doing great as a business. And then all of a sudden, before they realize it, the whole river of customers has been diverted elsewhere because it turns out Figma controls the entire thing because they went upmarket. And so bringing this all the way back to a free plan and the accessibility is that in having a free plan, you get to maintain like that early stream of customers. It might not be your focus, right? ConvertKit is focused on professional creators, but we're very careful to maintain our stream of beginners who are starting out so that the next generation of creators is on ConvertKit. Because otherwise someone else could, could come in and then it'd be so easy to be like, oh, you're for beginners, we're for the professionals. We're a serious tool or whatever. And then before you know it, they're like, oh, we are too. And they like cut the flow off upstream. That was a long answer, but that's why free plans matter.

No, absolutely. And, uh, like in our program, we talk a lot about like the different problem sets. There's like beginner problems, there's intermediate problems, advanced problems, and it's like, your best stuff to give away for free is, is all in that beginner problem set because like the goal of your free product is not to necessarily even eliminate someone's problems. It's like you just wanna upgrade them. So like they go from in that Figma example, you know, develop designing their own stuff to now collaborating with it on their team. And there's a whole nother suite of like, uh, problems that come up with there, but also it solves a lot of really cool challenges for those people. So I like it.

There's on that, it's something with ConvertKit that I'm trying to figure out right now is does it make sense to release even more for free? Right? Like I look at the Figma example where 90% of the product is free. And so I, I get into scenarios, right? I'll have journaling where I'll say, what would have to be true for 90% of ConvertKit to be free? You know? Right? Because Figma does not care about making money off of the individual designer, which is wild. Photoshop, you know, is making $600 off of the individual designer or $50 a month. Right when they switched to Creative Cloud. And Figma was like, we don't even care. It's totally free. We only care about making money off Teams. Notion is doing the same thing. Notion only cares about making money off of Teams, and you've seen the shift over the last 3 years. And so you're like, okay, when you do that, you can just cast such a wide market because everyone's like, oh, this is completely free. It's amazing. Why would I use anything else? And then that person, this is a conversation I had with Ben Chestnut. Back in 2018, 2019, I met him at a conference. He's the CEO, or he just stepped down, but he was the CEO of Mailchimp for 20 years. And he talked about with our free plan, they would get all these accounts switching over to Mailchimp that were big with no attribution. Didn't make any sense. And they dig in and they do user interviews because they're like, our sales team didn't talk to them. Like, how did this person come about? And they finally found out that someone had used the free plan for a side hustle or their previous job or whatever. They'd learned how to use Mailchimp and then come over to, okay, I now run marketing for this bigger thing that has 100,000 subscriber email list. Yep. I like, forget it. We're not using Constant Contact. We're using Mailchimp. And so they would switch it over. And from Mailchimp's perspective, you have no visibility. Then all of a sudden, like 100,000 subscriber account.

Great problem.

You know, and you're like, how did that, like, where did this come from? And it's that they had hooked people early on that, like, with a great free product. And there's trade-offs in it, right? Like ConvertKit's a self-funded company. We don't have the capital to, like, give everything away. But I do wonder what would happen. Like, could you do enough of a land grab where you're, like, making a free version of the product that's so good that everyone starts there? And you gotta have good triggers to go to paid later on. Like, there, You know, we don't have the same like team versus not dynamic, but it's still interesting.

Now, why give away more for free?

I think it's a short-term versus a long-term optimization. I think if you give more away for free, it becomes more of a no-brainer to start on your product versus something else. It also gets a higher likelihood. Well, we're talking about reducing friction. There's friction of like, how do I do this? What makes sense? You know, how do I actually accomplish my goal? Another friction is like, oh, do I have to pay for this? And so there's all these people who, you know, I'm like, oh, I'm gonna start a podcast. I need a landing page. I need email, right? Some of these early things. And then maybe they get to something they have to pay for, they start paying for it, and then 2 or 3 months later they're like, oh, I've been paying $15 a month for this and that, you know, and they shut it down. And then they might move it to something that's free. And so this is just removing friction, like continue to move friction until after you've delivered value. And it's such a trade-off because you could really screw up your business if you do this wrong. But like releasing more and more for free is getting that growth side of the product-led growth of basically people saying, wow, this is so good. Why would you use anything else? Getting it, it spread all the way around. I don't know. I go back and forth on this stuff so much of like where that line is. Our low-end customers, right? Paying $9, $15, $30 a month. Drive a lot of revenue for us. And so if you're like, hey, automations are now in our free plan, you know, then it's like, it might cost you a lot. And so you gotta make sure that you can make up for it in like the word of mouth growth and the, the, the free user growth that'll eventually turn into paid customers.

And I've seen also like examples too where like they just decide, hey, like instead of charging based on like features and different things like that, it's like, we're just gonna charge based on contacts and like You know, giveaway, um, whatever, all the, the advanced stuff for those people. And then when they hit the, you know, 300 contacts or 1,000 contacts, you get charged more. But how do you decide we're going to charge based on what you're using here, or like charge based on these features or this amount of contacts? What's your strategy as far as pricing and how you approach it?

So I've gotten a lot of advice from the, on this from like people like Keaton Shaw over the years. In the early days of ConvertKit, I was tiering the price based on like 3 or 4 different things. And he was like, look, keep it simple. That's when we switched to just contacts. And so we said unlimited landing pages, unlimited forms, you know, and you just pay for contacts. A lot of it depends on the, on the industry, right? And your competitors. And so in our case, MailChimp already clearly, like clearly said, this is the way the pricing works. You either need to completely disrupt that. Or you need to anchor to it and be somewhere in that, that ballpark. So you could disrupt it where like Substack does, right? Where they're saying, hey, subscribers are free, we just take a cut of revenue. Or you anchor to it, which is what we've done where we're like directionally the same. And you get, there's all sorts of pros and cons, right? Like Substack is paying to send emails on behalf of people who have large lists who don't sell products through Substack. And that's why they get mad and like ban someone when they're like making money, like linking off to another product or something and specifically not using Substack's payment processing because that's the only way that they make money. Yeah, so I think the pricing is largely set by the industry. Uh, and either it's broken and can be disrupted or it's generally pretty good and you've got to decide you're going to match it or undercut it. We never wanted to compete on price. And so we deliberately went like the same price as Mailchimp or slightly higher, but I never wanted to get into this price war of like gradually lowering prices. Now, at the same time, you know, you see companies now increasing prices. You're like talking about inflation and increasing prices and all that. I don't think we're in a position to do that because we're in such a competitive market. Like, I just think that that's not, not worthwhile.

And I mean, over time too, it's inflation. It's probably going to just go back to one of your previous points, is making your product even more accessible because technically the price gets better every year. Right.

Pretty soon, uh, you know, the, our cheapest plan at $9 a month is gonna be the equivalent of a cup of coffee. You know, I'm, I'm now paying $6 for a cup of coffee. You know, soon it'll be $9. I always joke that we're on, this is one of those jokes that's like only funny because it's depressing. That like our goal is $100 million in revenue for ConvertKit. We're at $31 right now, but at the rate of inflation, like that'll just help us get there on its own. You know?

Yeah. One way or another.

Yeah. Yeah, exactly. You know, it'll be one of those things where people, you know, years later, like being a millionaire or something like really meant something now, kind of like then, kind of, you mean something now, but you're not like set for life. Retired, you know, in 10 years and be like, millionaire. Great. How do you, you know, I don't know. That's just depressing. We don't need to go there.

What do you, what do you say are like some of the biggest challenges that product-led companies face?

Well, I think it takes a ton of time to get to the point that you can really be product-led. You either have to narrow your product so much that you can be great in this narrow feature set. Um, in which case you probably need good integrations and you probably need, um, all of that. Like you're, you can't solve all the value, so you need to partner with other people, other products that can, or you go somewhat wide and, and it's just gonna take you a ton of time to build that out. And so you think about your time to revenue or time to value is really, really long. And so you have to augment it with other things. In the early days of ConvertKit, we used direct sales. And something we called concierge migrations where we do the whole switch for you for free, right? These are very like sales-heavy tactics and we were doing it on a $50 a month product. So we're just losing money like crazy, right? Luckily founders, a founder's time is not worth anything. And so you can like claim you're the CEO of a business. This is an event. You're like, I think that was $3 an hour that we're making. My job at Wendy's in high school made me more money than this. So basically you, you bandaid over your lack of product-led abilities, right? And the quality of your product with a high-touch sales and onboarding environment. And that buys you the time and the learnings for your product to get better. Because otherwise you're stuck in this, like, I think the hardest thing, you know, is, is that cold start problem of like, you don't have enough resources or customers to know what to build and build it, and any— you don't have momentum, like none of it works. And so I think you have to start. You either do something simple and free and viral, like lightning in a bottle kind of thing, of like, oh yeah, let's just, uh, like be the next Linktree. And it's like, uh-huh, good luck with that. Or you kickstart this product-led flywheel with a lot of sales effort and a lot of, you know, like concierge onboarding. If someone was starting out now, like I would onboard the first 100 customers yourself, like just get momentum, uh, whatever possible. And that's probably less time than designing the perfect onboarding flow that you realize right after you ship it isn't the right thing. You need to rebuild it or go a different direction because of the pace that you're iterating.

I'm all for do things manually until you're like, okay, we finally have heard this enough. We know the problem and let's, let's automate some of this. Yeah. A tool that I love, you know, in the product world is called CommandBar.

I gotta give them lots of shoutouts 'cause they've just been great. And for anyone who doesn't know, that's like a Command-K menu. So you can open it up in the app and like have instant search keyboard shortcuts, like jump to anything that you want. And we were gonna build this in ConvertKit, and then I came across CommandBar and was like, wait, we can just pay you guys and you'll have like a giant team of developers working on this one thing and like maintain it forever. And they had their implementations team and they were like, we'll do it for you. Yeah, I think they said $100 an hour for their time. And so it'd be like $2 grand or something. And like they did a shared Slack channel with us and they're like, here, here are ideas, here's, and like their implementations was so good. And now we're going to pay them, you know, whatever, $1,000 or, um, I don't know. I don't know what the pricing is, $1,000, $2,000 a month for our user base size forever. And it's because they dropped it, jumped in and made it a great experience and and made it a really compelling purchase. But someone could be like, well, that's not product-led because like an implementation team was on it. And they're like, ah, no, that was brilliantly executed. And they're going to be one of the best product-led growth companies, I think. But they got the early momentum going with, with people.

Awesome. I know that's the great way to approach it. And now I know some people are like, is it a recession we're headed into or what is it?

Who knows?

I'm not going to be the judge on this, but like, what do you think are the biggest opportunities for product companies right now, given the current like market we're in?

I'm a bit of a contrarian in the, I'm like, be profitable, right? You're playing a long game. And so if you're in this cycle between funding and like, can we last long enough and either be profitable or have a really low burn, because know that you're playing a game that's going to take a long time. And so if you're in this environment of like, oh, we've got to unlock growth in the next 12 months, otherwise none of this works, then it's probably not gonna work. And so the things in your control are, you know, how much you talk to customers, how fast your iterations are of like the customer feedback, the learnings into actually getting it fixed. You can create that environment of someone bringing something up and you're like, the next day you're like, it's fixed. Like then people are like, whoa. And they'll, right, they'll tell someone else. That's pro— that's a version of product-led growth. They're like, oh man, Bart, Exactly. And so I, I think that being conservative on your expenses makes a really big difference and it buys you that runway and you know, okay, we're not doing this for 18 months, maybe we can make it. It's like, no, this is gonna be a 5-year, 10-year process. And that's when you start to see these companies get crazy results. I think Figma, if we go back in 2018, I think Figma was like $2 or $3 million a year in revenue. Right. That's 4 years ago, you know, and now they have like a $10 billion valuation and, and revenue is growing like crazy. And now you get into maybe their valuation's too high or whatever, but like based on their execution and growth in the market, like they will do so, so well. But they were founded in 2012. And so if you think like 20, 20, like 6 years to, and I don't know the exact numbers, but it's something like 6 years to like a couple million ARR and then explosive from there. So it's like you're playing a long game. And so be really conservative with resources so that you can buy yourself that time.

Yeah. And don't believe the overnight success hype. Now I know people can find out more about you at ConvertKit.com. I have actually signed up for, I'm going to mention that newsletter of yours at, is it NathanBarry.com?

Yeah, it's NathanBarry.com. You can get on my public newsletter and then I think you would have probably mentioned my private newsletter.

Yes, the private one's worth paying for the one-time fee. It's brilliant. It kind of goes through how other, uh, CEOs can like basically invest their money from their company as well and do some really fun stuff. So thank you so much for coming on, Nathan. It's been a blast. I loved hearing your insights.

Yeah, for sure. Thanks for having me.

No worries. Well, look forward to our next chat next time. Have a great day.

You too.

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