Why Did MailChimp Sell to Intuit for $12B?

After being sold to Intuit in a deal worth $12 billion, MailChimp has become one of the world’s most successful bootstrapped businesses.

With revenue for 2021 projected at $1 billion, one must ask why this successful email marketing company decided to sell at all?

Let’s break down this acquisition!

MailChimp Background

MailChimp was founded in 2001 in Atlanta by Ben Chestnut and Dan Kurzius, two experienced web designers. MailChimp initially started as a web design consultancy and was known as the Rocket Science Group.

During the process, Chestnut came up with the idea to tap into the email marketing domain and develop software to help their clients reach their customers effectively through emails. However, it wasn’t until 2007 that Chestnut and Kurzius decided to shut down their web consultancy to solely focus on MailChimp.

The primary idea behind MailChimp was to allow companies to send out automated emails to grow their business and connect with their customers. Mailchimp began by offering email marketing solutions and evolved into a global leader in customer engagement and marketing automation fueled by a powerful, cutting-edge AI-driven technology stack.

How Does MailChimp Make Money?

MailChimp is a marketing platform that gives people access to email automation. Basically, you can use the platform to send out powerful email campaigns, gain useful insights into your audience, and design personalized customer journeys.

While email marketing is MailChimp’s main focus, the company has also branched into further marketing products. This includes things like a landing page builder, website and online store builder, an appointment scheduling tool, digital ads plans, and more.

So, MailChimp makes money through monthly subscription plans that its customers pay. Their options range from a free plan to a premium plan starting at $299/month. With 800,000 paid customers, this adds up.

How MailChimp Bootstrapped Their Way to $12B

Because of the company’s consistent growth, Chestnut and Kurzius decided that they wouldn’t ask for any external funding and only use funds coming in from the sales they were making. So, while other startups were raising capital and pitching their ideas to investors, MailChimp was functioning through bootstrapping.

Right from the start, Chestnut and Kurzius knew that they could make enough revenue to keep the business up and running because of the market demand.

MailChimp has been profitable since day one, which is an incredible feat for a major tech startup. And 20 years later, the company still has no sign of eternal funding or any plans for an IPO.

To understand just how meaningful it is to bootstrap a business of this size, let’s compare the business to another popular tech startup: Slack. In 2019, the quarter before their Direct Public Offering (DPO) saw the company bring in around $130 million in revenue – and they still weren’t profitable. At this time, MailChimp was reaching $700 million in revenue – all without external funding.

Think about just how far a business like that needs to go before they reach the kind of position MailChimp is in.

At the time of the MailChimp acquisition, MailChimp employed about 700 people and was one of the fastest-growing businesses in the whole world, reporting a revenue of $800 million in 2020 and was expected to cross the $1 billion mark in 2021.

Their bootstrapping approach paid off in a big way, leading up to the whopping $12 billion sale. This just shows you that it’s possible to build a massive tech company outside of Silicone Valley without any external funding. Atlanta is proud.

How Did MailChimp Achieve This?

MailChimp was initially targeted towards small businesses that needed someone to handle their customer engagement and marketing. The company offered simple, powerful products, and tapped into the email market as it was starting to blow up.

MailChimp has grown into a profitable company with a total of 13 million users globally, 2.4 million monthly active users, and 800,000 paid customers, with 50 percent of customers outside of the U.S.

As MailChimp grew in popularity, they continued to roll out new products and features. In 2019, the business revealed its new marketing platform which was one of the biggest developments in MailChimp history.

This platform includes social media management services, ad retargeting for Instagram and Facebook, domain sales, web development templates, and business intelligence capabilities similar to those of a BI platform. This spreads the company pretty far from just its original email marketing tool. Clearly, there is still a lot of room yet for MailChimp to grow and develop.

Their approach of achieving all of this without external funding is certainly impressive, but it makes you wonder why they wanted to sell?

Why Did MailChimp Sell When They Were So Profitable?

MailChimp’s success certainly hasn’t gone unnoticed. The company has been approached by interested parties in the past looking for an acquisition. This includes private equity firms and big tech players. Yet, Chestnut and Kurzius wouldn’t budge.

Not very long ago, when Chestnut and Kurzius were asked if they were planning to let investors in, their answer was a clear no. Asked in a 2018 Forbes article if they would ever sell MailChimp, the founders looked incredulous. “To this day, it’s just a fun feeling that we can help,” Kurzius explained. Chestnut chimed in and said: “I want people to see that the past 17 years were just a warm-up.”

So, why did they end up selling everything to Intuit after turning down some of the biggest global tech players and equity firms from investing in the company?

According to Intuit’s current CEO Sasan K. Goodarzi, Intuit relied on a product partnership the companies had been pursuing. Intuit co-founder Scott Cook had also been helpful to Chestnut in the past in order to start the conversation of acquisition, with Chestnut saying that Cook “has given me invaluable advice” over the years.

Who Bought MailChimp?

So, who is the company that bought MailChimp? Intuit – a financial software company.

Intuit was established in 1983 by Scott Cook and Tom Proulx and has since become one of America’s software giants. The business is widely known for its ‘TurboTax’ software which lets individuals and businesses prepare and file their tax returns.

‘QuickBooks’ is another software by the company used by businesses to handle invoicing, accept payments and make business projections. Intuit went public in 1993, and today the company has over 10,000 employees and offices in nine locations worldwide.

Why MailChimp was Such a Major Acquisition

To this date, Intuit has acquired over 57 companies, with the biggest acquisitions being when the company purchased Mint.com – a leading personal financial service provider – for $170 million and Credit Karma – a company that helps you keep track of your credit score and provides you reports based on your spending – for $7.1 billion.

So, it comes as no surprise that Intuit was once again willing to spend billions of dollars to acquire MailChimp to help the software house expand its operations.

The acquisition of MailChimp is Intuit’s biggest and most expensive one to date, and the deal is expected to close by the second quarter of fiscal 2022. At the same time, because this is also the largest ever sale of a bootstrapped company, this acquisition is also a big deal for MailChimp.

Why Does the Sale Make Sense?

At first glance, the $12B sale price for this MailChimp acquisition seems a bit unreasonable. Why would a financial software company spend 12 billion in cash and stock on an email marketing platform?

Well, that’s just it. To understand why MailChimp was acquired for $12B, you have to realize that both companies have a lot more to offer than just QuickBooks, TurboTax, and digital marketing.

Intuit is shifting its services to focus more on small businesses. Instead of just seeing financial and email software, you should look at this deal as being a more complete package for small businesses. Intuit offers complete financial management tools, MailChimp offers marketing solutions. With MailChimp, Intuit can start to dominate the small business market.

The small business space is huge, and as small businesses begin to shift their operations online, this opens up plenty of opportunities for businesses to maximize on this potential. This is a high-growth market with a great deal of potential that Intuit sees.

Why Did Intuit Buy MailChimp?

Through this acquisition, Intuit wants to combine its financial services through QuickBooks with MailChimp’s marketing tools to create a one-stop-shop for small businesses.

QuickBook has stored a lot of data about its clients, their spending, and their savings. But, they don’t have a channel to use this information and create marketing strategies for their clients. This is where MailChimp comes in. QuickBooks’ integration with MailChimp will allow Intuit to harness all its data and initiate customer engagement.

Intuit’s current CEO Sasan K. Goodarzi believes that the acquisition will enable both companies to combine their tools and strategies to maximize returns for their clients. “We’re focused on powering prosperity around the world for consumers and small businesses. Together, Mailchimp and QuickBooks will help solve small and mid-market businesses’ biggest barriers to growth: getting and retaining customers,” says Goodarzi. Ben Chestnut – CEO of MailChimp – is expected to stay on board even after the acquisition to help his company grow consistently.

According to a press release by Intuit, the acquisition is their way of disrupting the small business industry and becoming the leading center for business development for all kinds of SMEs.

What Will Intuit Do With This Acquisition?

According to MailChimp’s website, the process will help their platform evolve from an email marketing tool to an overall marketing platform for small businesses, offering solutions like no other, especially combined with Intuit’s software backing and already existing customer base.

In a statement after the acquisition, Chestnut said that “over the past two decades, we’ve vastly expanded and evolved Mailchimp’s platform to help millions of small businesses around the world start and grow. With Intuit, we’ve found a shared passion for empowering small businesses. By joining forces with Intuit, we’ll take our offerings to the next level, leveraging Intuit’s AI-driven expert platform to deliver even better products and services to small businesses.”

With this merger, Intuit and MailChimp will enable their clients to get their businesses online, create and implement marketing plans, manage customer relationships, make payments and handle budgets, manage human capital while also providing help with accounting and compliance.

Intuit mentioned that this acquisition would allow it to “accelerate two of [Intuit’s] previously shared strategic Big Bets: to become the center of small business growth and to disrupt the small business midmarket.”

At the same time, the merger will allow MailChimp to analyze their clients through their financial data and then pick the right kind of marketing plan for them, directly increasing returns – making this acquisition a win-win for both parties.

Intuit’s Buying Spree

It’s interesting to note that Intuit’s CEO, Sasan Goodarzi, has been on a pretty serious buying spree since becoming the company’s CEO at the start of 2019.

Before Goodzari was appointed CEO, the company had only ever made one billion-dollar acquisition in its 36-year history. Now, Goodzari has completely reimagined the way Intuit operates. He’s made $20 billion worth of acquisitions over just two years – a bold move that has certainly brought Intuit a lot of attention.

According to Goodzari, the assets and capabilities that these acquisitions have provided have helped Intuit “leap forward five to ten years”. The two major tech deals (MailChimp and Credit Karma) are both in the top 10 biggest tech deals of their time.

Goodzari had put together a major expansion plan for Intuit prior to becoming CEO, and since he became CEO, he got straight to work. He mentioned how both Credit Karma and MailChimp were years ahead of Intuit, and that they just wouldn’t be able to compete. “For us, it’s all about time to market,” said Goodzari. According to him, customers just wouldn’t have time to wait.

Both companies will add a healthy dose of new revenue to Intuit. Before Intuit bought MailChimp, they factored Credit Karma into their revenue projection for 2022, which sat at $11.05 billion to $11.2 billion. With MailChimp now in the mix, this will go up significantly. Remember, MailChimp generated $800 million in 2020 sales.

Understanding the $12B Price

Going back to the sale of 12 billion in cash and stock, how exactly does this make sense? Sure, MailChimp is an attractive target for anyone looking for an acquisition. But $12B? This seems especially bold when you think about the fact that Intuit is spending 10% of its market capitalization on email software.

Because Chestnut and Kurzius decided to bootstrap their company, each of them holds a 50% stake in MailChimp. And because the two have stuck to their small business philosophy despite their massive growth, they have been able to keep the revenues coming in more effectively than most other companies that decide to take on more prominent clients.

This is why Intuit believes that MailChimp is well worth the $12 billion in terms of the potential that the company has. In an interview with the Financial Times, Chestnut said of the acquisition, “I kind of feel like I had my head down, tweaking things, improving things, and then I looked up and bam, it’s a $12bn company.”

And it’s not just about the revenue and profitability of MailChimp. It’s got a lot to do with the potential and future of the platform. As we’ve already established, Intuit has big plans for MailChimp, and the two companies will be able to offer a great deal more to their customers.

Where Will the $12B Go?

About $300 million will go into employee bonuses from the deal, and the remaining $11.7 billion, split between cash and Intuit Stock, will be divided evenly between the two MailChimp co-founders.

This deal will increase Chestnut and Kurzius’ net worth to about $5 billion each, which shows why they decided to let Intuit take over.

So, while the two founders each walk away with an attractive $5 billion, what are the MailChimp employees saying about this?

No Equity for MailChimp Employees

A bootstrapped business sounds amazing but there is one major benefit of working at a VC-backed started: equity stakes. Generally, employees at VC-backed startups get equity, so when the business is acquired or goes public, these employees can cash out big time.

With MailChimp being completely built up from the two founders without VC funding, there was no employee equity. As you can imagine, MailChimp employees were not happy about this.

According to a MailChimp correspondent, a lot of the employees felt that the move was hypocritical. MailChimp had an “egalitarian, little-guy image” and to just sell out like this didn’t seem to live up to this.

The founders can’t be blamed for “withholding equity” because they made it clear that they never actually offered this. However, employees have mentioned how they made a lot of noise about turning down offers and not selling out, but then they did exactly this seemingly out of nowhere.

However, one employee did make note of the great profit-sharing incentives that MailChimp offers. Saying that they have some of the best benefits for businesses in Atlanta.

Was the Acquisition a Surprise?

Conversations between Intuit and MailChimp started about a year before the news broke about the acquisition. Because there were no venture capitalists involved, Intuit relied on a product partnership the companies had been pursuing.

In the past, the co-founder of Intuit had been helpful to Ben Chestnut, which put the two companies on a good footing. Intuit seemed to get their foot in the door at just the right time.

Many people who have followed MailChimp’s journey were surprised by this sale, as it seemed like there was no chance anyone would get a way into acquiring the company. However, it seemed like Intuit had just the right offer and position.

When Intuit announced the acquisition, it seemed as though news about the sale had already leaked. Intuits stock price did not reflect any major change.

What Does the Future Look Like for MailChimp and Intuit?

This is one of the most exciting tech acquisition stories in a long time. So, what will the future of these companies look like?

Intuit will add about 1200 employees to MailChimp, a similar move that they made with Credit Karma. The company is looking to turn Atlanta, where MailChimp is based, into a new hub. Even though Intuit is looking towards a new hybrid work model, the company plans to invest heavily in Atlanta.

It seems that the MailChimp acquisition addressed the most important needs for Intuit at the moment. The company seems to be slowing down on its buying spree, being able to now focus on its new small business offerings. Although, we can never be too sure about what billion-dollar deal is waiting around the corner.

Wrapping Up

Both the companies have already started to lay down some integration plans between their platforms, and once the deal is finalized, there’s no stopping the kind of impact this merger will have on small businesses all over the world.

This is an interesting example of how the tech landscape and market are changing. Who knows what other acquisitions like this may come in the future.

What do you think of this move? Was it a good decision or one that’s bound to fail? Let us know in the comments below.

FAQs

How much is MailChimp worth?

MailChimp was acquired by Intuit for a valuation of approximately $12 billion in both cash and stock.

How does MailChimp make money?

MailChimp offers marketing software, most notably its email automation tool. MailChimp offers its software at different subscription prices.

Is MailChimp privately owned?

MailChimp has been privately held and profitable since 2001. MailChimp was owned by its two founders, Ben Chestnut and Dan Kurzius, until its recent sale to Intuit.

How much did MailChimp sell for?

MailChimp sold for a reported $12 billion in cash and stock.

Has MailChimp raised money?

MailChimp grew out of a discarded business and has been entirely owned by its co-founders up until the recent Intuit sale.

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