Jul 6, 2021 · 1h 3m · top-founders
ConvertKit Raising at $196m Valuation?
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
ConvertKit founder and CEO Nathan Berry joins Nathan Latka to break down the strategies behind scaling a bootstrapped SaaS company to $25 million ARR, sharing in-depth insights into compound growth, multi-channel marketing flywheels, transparent profit sharing, and platform leverage.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 24.6% of the talking time here. How this is scored →
Nathan as informed peer 6.4 Guest teaching 5.0 Guest disagreement 1.1 Nathan pushing back 3.6
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:01:38 Berry refuses to disclose LOI target
Latka attempts to extract confidential acquisition details by asking which company received an LOI that morning, which Berry flatly dismisses.
Hardest push from Nathan ▶ 45:00 Latka challenges impossible affiliate expense mathLatka immediately identifies that Berry's off-the-cuff estimate of 100 affiliates earning over $10k per month would represent an implausibly high percentage of ConvertKit's cost structure.
Biggest teaching moment ▶ 46:40 Ben Chestnut's counter-intuitive freemium dynamicsBerry explains how freemium serves as a stealth pipeline for high-value enterprise accounts when junior employees transition into larger corporate roles.
Nathan holds their own ▶ 45:02 Latka calculates affiliate revenue math on the flyLatka demonstrates deep financial acumen by running mental math on commission rates and cost bases to force a clean reconciliation of affiliate data.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| ConvertKit's Early Financial Squeeze and DDoS Attack | 6 | 5 | 1 | 4 | Latka presses Berry on ConvertKit's early cash squeeze, drilling into gross vs net burn figures during rapid growth. Berry explains how they narrowly avoided raising venture capital and navigated a major DDoS crisis during their team retreat. | |
| ConvertKit's Current Financial Benchmarks and Profit Margins | 7 | 3 | 1 | 3 | Latka immediately seeks clarity on ARR, profit margins, and EBITDA definitions before pivoting into Berry's early entrepreneurial upbringing. Berry openly shares the company's financial benchmarks and his door-to-door woodworking roots in Idaho. | |
| Accelerated Homeschooling, Design Career, and Dropping Out | 5 | 4 | 1 | 2 | Latka investigates Berry's accelerated high school graduation at 15 and dropping out of college at 17. Berry explains treating school as a checklist of tasks to fast-track entering the workforce. | |
| Ladders of Wealth Creation and Long-Term Compounding | 6 | 6 | 2 | 4 | Latka probes the inflection point between 2013 and 2015 when ConvertKit shifted from stagnation to rapid scale. Berry details his Ladders of Wealth Creation framework and explains compounding returns, comparing ConvertKit's trajectory favorably against MailChimp's 19-year timeline. | |
| Capitalizing on Platform Leverage with ConvertKit Commerce | 6 | 4 | 1 | 3 | Latka examines the concept of capital and distribution leverage, asking why Berry continues building rather than exiting. Berry explains that having 250k built-in users gives immense distribution advantage for new products like ConvertKit Commerce. | |
| Tracking Creator GMV and Balancing Strategic OKRs | 6 | 6 | 1 | 3 | Latka asks about GMV processing targets for ConvertKit Commerce, prompting Berry to candidly admit initial traction was slower than anticipated. Berry explains balancing high-volume creator GMV goals with long-tail adoption using counterbalanced OKRs. | |
| Viral Freemium Loops and High-Authority Backlink Strategies | 7 | 6 | 1 | 3 | Latka cites specific SEO data and domain metrics from Ahrefs to analyze ConvertKit's customer acquisition mix. Berry reveals a creative link-building tactic using Unsplash photo collections from customer photoshoot stories. | |
| Sponsor Segment: Recovering Startup Tax Credits with Main Street | 6 | 4 | 0 | 2 | Following a sponsor read, Latka digs into the operational cost and flywheel mechanics of ConvertKit's storytelling team. Berry outlines how COO Barrett Brooks and their storyteller build reusable assets across marketing channels. | |
| Evaluating Creator Marketplaces and External Discovery Loops | 6 | 5 | 1 | 3 | Latka inquires whether ConvertKit will launch a centralized creator marketplace or talent agency. Berry explains prioritizing external viral distribution loops over internal discovery until platform scale expands. | |
| Affiliate Program Economics and Channel Maturation | 8 | 5 | 2 | 7 | Latka performs live unit economic calculations on Berry's affiliate claims, catching a numerical contradiction and pushing Berry to correct his affiliate payout numbers. Berry acknowledges the estimation mistake and breaks down the exact $250k/mo commission volume. | |
| Embracing Freemium and Insights from MailChimp's Founder | 6 | 6 | 1 | 3 | Latka asks for unshared growth flywheels, leading Berry to discuss his conversation with MailChimp CEO Ben Chestnut regarding freemium adoption. Berry outlines beating their free-to-paid conversion forecast at 5%. | |
| Designing a Sustainable Employee Profit Sharing Framework | 7 | 6 | 1 | 4 | Latka examines how to structure a low-overhead profit-sharing framework without high legal bills. Berry shares their exact 75/25 split formula and explains aligning short-term profit sharing with long-term equity incentives. | |
| Scaling Paid Media and High-Production Brand Campaigns | 6 | 5 | 1 | 4 | Latka notices an increase in paid search keywords on Ahrefs and asks Berry about ad spending and brand agency production. Berry discusses investing $400k/mo on paid acquisition and the economics of high-leverage business scaling. | |
| Accelerating Roadmap Velocity Through Software Acquisitions | 7 | 5 | 2 | 5 | Latka asks Berry to reveal the target of a recently submitted LOI, but Berry deflects the name. Berry then details their strategic M&A criteria for acquiring software tools to compress engineering roadmaps. |
Statements from this episode (28)
ConvertKit grew from $2,000 to $100,000 MRR in 12 months
“So January, 2016, the previous 12 months, we'd grown from 2000 in MRR to a 100,000 in MRR.”
ConvertKit achieved 50% profit margins five months after locking expenses
“We basically locked expenses and then grew our way out of it. And we grew our way from like barely break even to five months later, we had 60%, sorry, 50% profit margins, three months of expenses in the bank.”
ConvertKit reached $25 million in annual recurring revenue
“Yeah, so we're at twenty five million ARR right now.”
ConvertKit's profit margin dropped to 5% amid aggressive spending
“Yeah we've been spending a little more aggressively this year, so we're doing about five percent profit. And then but at the beginning of the year, we're closer to 20, 23%.”
Content marketing is a hard way to bootstrap early SaaS
“For trying to grow a SAS business content, by the way, is a really hard way to grow a business. Like go from zero to one and like basic, like no traction to simple traction. And that's what I was trying to do. But if you don't have the community already, it's …”
ConvertKit's first eight years of revenue grew faster than Mailchimp's
“When I look at the curve that I'm on with ConvertKit, and if, and the curve that MailChimp did, if we were to overlay those two, ConvertKit is far ahead. Like if we put the start date of the two of them, ConvertKit is far ahead on that curve than MailChimp was…”
ConvertKit will not sell early, targeting a decade of further compounding
“We're eight years in and like selling and being done now is just way too early. And so it's really like, if I want to build a MailChimp level company or a Stripe level company or something like that, then it's like, great show up for another decade.”
ConvertKit reached 250,000 active users
“But like now for ConvertKit, it's like, oh, we have 250,000 users.”
ConvertKit passed $1 billion in aggregated creator earnings in January 2021
“January of this year, we passed a billion dollars earned by creators on ConvertKit or... Through the aggregation.”
ConvertKit Commerce processed nearly $500,000 natively in its first year
“So we're at almost half a million in GMV.”
Pair GMV objectives with counterbalancing adoption metrics for long-term growth
“What I look for is the key metric, which is GMV and then the counterbalancing metric. And so in this case, we're looking to drive the most GMB. That's the main thing. Small creators, big creators all contribute to that, but obviously the big creators drive far…”
ConvertKit freemium tier boosted "Powered by" traffic to 15,000 weekly visitors
“Prior to this year so last year, maybe we were driving two to 3000 visitors a week through powered by links. And then after launching freemium, scaling that up, we're now driving 14, 15,000 visitors a week from powered by links.”
Organic search drives 40% of ConvertKit's new user accounts
“Search is really like just that anchor that we've, I don't know, gradually invested in over time. And now it pays off in a big way... Yeah, so it drives about 40% of all of our new accounts. Is from search.”
Releasing creator photos on Unsplash drives high-authority SEO backlinks
“We have this unsplash collection of creator photos. If you'd like, we'll release those. You know, if you sign off on it and you're up for it, we'll release those photos on unsplash as part of our convert kit, you know, creator collection. And that has, like, t…”
ConvertKit spends up to $1,000 per week on customer photoshoots
“I'd say 500 to a thousand dollars per shoot somewhere in there, and then maybe one shoot per week.”
ConvertKit plans to launch a creator digital product marketplace
“You're definitely going to see it down the road from a marketplace perspective of here are featured products to buy. And, you know, here's the best the best eBooks the best photography resources, you know, all of those sorts of things as we're driving the”
Platforms should build external discovery loops before internal marketplace discovery
“So it's basically external discovery first, and then later do the internal once the platform is bigger.”
ConvertKit's affiliate revenue share dropped from over 30% to roughly 20%
“And at one point affiliates we're driving a little over 30% of all of our revenue. That's probably dropped into the 20, 20% range as like the”
ConvertKit pays out roughly $250,000 per month in affiliate commissions
“So we're paying out About 250, we can figure this out, about 250,000 a month to affiliates and paying a 30% commission.”
ConvertKit generates $830,000 per month from its affiliate program
“Yeah, so we divided that out. We're at about 830,000 in monthly like top line revenue driven by affiliates.”
ConvertKit achieved a 5% free-to-paid conversion rate
“We, in our models, we expected a three percent free to paid conversion rate. We came in at a five percent rate and we're like, that's fantastic.”
ConvertKit launched profit sharing in 2016 with a $100,000 payout
“We launched profit sharing at our very first team retreat... Summer 2016. And we had grown from 100 K to 300 K in monthly revenue. We'd saved up three months of expenses in the bank. We'd gotten to 50% profit margins through like the team being really lean. An…”
ConvertKit's profit sharing is 75% equal and 25% weighted by tenure
“So in that pool it is. 75% based on you're just a team member and everybody participates equally. And then 25% is based on time with the company.”
ConvertKit removed individual performance scores from its profit-sharing model
“We used to have something in there where we had another score for individual performance. And we took that out. We basically decided we're going to set a high bar for performance, just like to work at this company and everyone wins and loses together.”
Berry frames startup compensation across guaranteed, performance, short, and long-term
“So I think of short-term versus long-term compensation, and I think of guaranteed versus performance-based. So short-term guaranteed is salary. Long-term guaranteed is like for one K match, you know, retirement short-term performance-based is profit sharing an…”
Nathan Berry retained 90% ownership of ConvertKit at $25M ARR
“Yeah, so I own 90% and the team pool is 10%, of which seven percent is currently allocated.”
Adding enterprise value to high-momentum SaaS beats outside real estate investments
“What it takes to add an additional million dollars in Value in the enterprise value for ConvertKit versus what it takes to go make a million dollars somewhere else. And it's just an order of magnitude more effort to do it in real estate investing or something …”