Apr 7, 2021 · 1h 4m · top-founders
ConvertKit's Shocking Growth to $25m Revenue, Power of Creator Economy
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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 breaks down the growth mechanisms, marketing flywheels, and compensation structures behind scaling his bootstrapped SaaS company to $25 million in annual recurring revenue. Through detailed tactical examples, Berry shares insights on customer acquisition, enterprise valuation leverage, profit-sharing models, and long-term business compounding.
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 25.5% of the talking time here. How this is scored →
Nathan as informed peer 5.3 Guest teaching 4.4 Guest disagreement 1.1 Nathan pushing back 3.1
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:02:35 Berry stone-walls Latka on LOI recipient
When Latka directly presses Berry on which company he submitted an LOI to that morning, Berry firmly shuts down the inquiry with a blunt 'Can't tell you.'
Hardest push from Nathan ▶ 46:05 Latka challenges Berry's affiliate payout estimatesLatka refuses to accept Berry's stated estimate of 100 affiliates earning over $10k/month, calling out that such math would exceed 60% of the firm's cost structure.
Biggest teaching moment ▶ 47:40 Berry recounts Ben Chestnut freemium lessonBerry educates Latka on the counterintuitive power of freemium, recounting MailChimp CEO Ben Chestnut's insight that small free accounts graduate into major enterprise accounts unnoticed.
Nathan holds their own ▶ 46:05 Latka computes live unit economics to correct guest mathLatka performs instant mental accounting on 30% commissions against $250k monthly payouts to correct Berry's estimate of top-tier affiliate concentration down to actual figures.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| Welcoming Nathan Berry to the Show | 5 | 3 | 0 | 2 | Latka introduces Berry and brings up his real estate investment in the Cerro Gordo ghost town. Berry shares the background and story behind the purchase and the fire setback. | |
| ConvertKit's 2016 Retreat and Malicious DDoS Attack | 6 | 4 | 1 | 4 | Latka presses on gross vs. net burn figures during ConvertKit's early days. Berry explains their bootstrap cash crunch and navigating a major DDoS attack during their first retreat. | |
| Financial Metrics: $25 Million ARR and Profit Sharing | 6 | 3 | 0 | 3 | Latka drills into top line ARR, profit margins, and Berry's early entrepreneurial upbringing doing door-to-door woodworking sales in Boise. | |
| Homeschool Acceleration, Web Design, and Dropping Out | 4 | 4 | 0 | 2 | Berry explains his accelerated homeschooling graduation at age 15 and dropping out of college at 17 after securing a $10,000 web design contract. | |
| The Ladders of Wealth and Moving Away from Hourly Billing | 6 | 5 | 1 | 3 | Latka references Berry's 'Ladders of Wealth' framework, exploring the shift from selling hourly time to bundling productized outcomes and software leverage. | |
| The Power of Compounding and MailChimp Comparison | 6 | 6 | 2 | 4 | Berry details the role of compounding and direct sales in getting past early plateaus, comparing ConvertKit's 8-year trajectory favorably against MailChimp's 19-year history. | |
| Platform Leverage and ConvertKit Commerce | 5 | 5 | 1 | 3 | Berry discusses ConvertKit Commerce, GMV metrics, and counterbalancing OKRs between high-earning top creators and empowering long-tail first-time earners. | |
| Sponsor Segment: R&D Tax Credits with MainStreet | 0 | 0 | 0 | 0 | Host sponsor read and monologue regarding MainStreet R&D tax credit software. | |
| The Unsplash SEO and Backlink Flywheel | 6 | 6 | 0 | 2 | Berry shares a tactical SEO flywheel: hiring local photographers for customer profiles, uploading the shots to Unsplash, and converting photo usage into high-authority backlinks. | |
| Internal Content Flywheels and Systematic Storytelling | 4 | 5 | 0 | 1 | Berry details internal content flywheels managed by their COO and in-house storyteller, creating a centralized database of creator anecdotes for multi-purpose marketing. | |
| Marketplace Strategy: External vs. Internal Discovery | 5 | 5 | 1 | 3 | Berry explains why ConvertKit prioritized external discovery mechanisms and automated social sharing loops over building an internal marketplace prematurely. | |
| Affiliate Program Economics and Revenue Share | 8 | 4 | 3 | 8 | Latka spots a mathematical discrepancy in Berry's affiliate payout estimates and calculates the real figures live on air, forcing Berry to quickly recalculate and correct himself. | |
| Freemium Conversion Insights from MailChimp's CEO | 5 | 7 | 1 | 2 | Berry shares crucial advice from MailChimp CEO Ben Chestnut about how freemium tiers secretly drive enterprise conversions through bottom-up user adoption. | |
| Transparent Profit Sharing and Compensation Quadrants | 5 | 6 | 1 | 4 | Berry breaks down ConvertKit's semi-annual profit-sharing formula, tenure-weighting, and his four-quadrant compensation framework balancing salary, 401(k), bonuses, and equity. | |
| Cap Table Ownership, Paid Media, and Video Branding | 7 | 3 | 1 | 4 | Latka checks Ahrefs data during the interview to question Berry's 4x surge in paid search bidding and plans for high-production brand advertising agencies. | |
| Capital Leverage, PE Approaches, and Minority Investing | 6 | 5 | 2 | 3 | Berry discusses minority stake investing in businesses like Harkla and SparkLoop, contrasting the return on effort of side projects versus doubling down on ConvertKit's enterprise value. | |
| Software M&A Strategy to Bypass Engineering Constraints | 7 | 4 | 4 | 5 | Berry deflects naming the target of his latest LOI, then explains how ConvertKit uses software acquisitions to bypass internal engineering bandwidth bottlenecks. |
Statements from this episode (31)
Nathan Berry co-invested with Ryan Holiday to buy Cerro Gordo ghost town
“And I had known Brent Underwood from, cause he has an agency with Ryan and they run the website daily stoic together, which is a ConvertKit customer. And so I'd known him somewhat, you know but Ryan was the one that kind of pulled me in and it was just this th…”
ConvertKit grew monthly recurring revenue from $2K to $100K in 12 months
“So January, 2016, the previous 12 months, we'd grown from 2000 in MRR to a 100,000 in MRR.”
Berry: ConvertKit reached 50% profit margins within five months in 2016
“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 aggressively cut profit margins to 5% to fuel faster growth
“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%.”
Berry: ConvertKit will return to a 20% profit margin next year
“And so next year, we'll return to the 20% mark.”
Berry: Content is a hard way to grow SaaS from zero to one
“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 …”
Berry: ConvertKit is far ahead of Mailchimp's eight-year growth curve
“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…”
Berry: Private equity firms show up nonstop to buy ConvertKit
“We haven't had like a crisp, you know, like here's the offer on the table, but like the private equity people show up nonstop, you know? And I just always like saying no thanks before it gets to”
ConvertKit has reached a milestone of 250,000 total users
“But like, now for ConvertKit, it's like, oh, we have 250,000 users, and so let's just tell them to use this new thing.”
ConvertKit Passed $1B in Aggregated Creator Earnings by January 2021
“January of this year, we passed a billion dollars earned by creators on ConvertKit or, Through, like, other platforms.”
ConvertKit Commerce Reached Nearly $500K GMV Following Mid-2020 Launch
“So we're at almost half a million in GMV.”
Nathan Berry balances primary growth OKRs with protective counter-metrics
“And so 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 GMV. That's the main thing. Small creators, big creators all contribute to that, but obviously the big creators dr…”
ConvertKit's viral badge drove 3,000 weekly pre-freemium visits
“Prior to this year so last year, maybe we were driving two to 3000 visitors a week through powered by links.”
ConvertKit's viral referral traffic converts significantly lower than baseline channels
“Now, powered by traffic converts a lot lower than other traffic. I don't have the exact numbers in front of me, but if a visitor to conversion, visitor to free account conversion rate is seven or eight percent, like in other channels, Powered by traffic might …”
Nathan Berry: Organic search drives about 40% of new ConvertKit accounts
“Yeah, so it drives about 40% of all of our new accounts.
[2106] Nathan Latka: Wow.
[2107] Nathan Berry: Is from search.”
Nathan Berry: ConvertKit marketplace is probably a couple years away
“It's probably a couple of years off.”
Nathan Berry: Creator platforms must build external discovery before internal networks
“So it's basically external discovery first, and then later do the internal once the platform is bigger.”
Berry: ConvertKit 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”
Berry: ConvertKit pays about $250k monthly in affiliate commissions
“So we're paying out About 250, we can figure this out, about 250,000 a month to affiliates.”
ConvertKit generates $830K in monthly top-line revenue through affiliate referrals
“Yeah, so we divided that out, we're at about 830,000 in monthly like top line revenue driven by affiliates.”
ConvertKit's free-to-paid tier conversion rate reached 5%, beating 3% forecast
“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 splits profit sharing 75% equally and 25% by employee 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.”
Berry: ConvertKit removed individual performance metrics from profit sharing
“We used to have something in there where we had another score for individual performance. And we took that out and we basically decided we're going to set a high bar for performance, just like to work at this company default and everyone wins and loses togethe…”
Nathan Berry uses a strict two-by-two quadrant model for employee compensation
“So I think of compensation in two different ways that kind of makes a quadrant. 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…”
Nathan Berry owns 90% of ConvertKit with a 10% team pool
“Yeah, so I own 90%, and the team pool is 10%, of which seven percent is currently allocated.”
Nathan Berry shifts investment strategy to acquiring 10% to 20% minority stakes
“What I'm trying to do more of now would be inspired by like what Andrew is doing or Warren Buffett style of like, great, can I buy 10% of a company?”
Nathan Berry discloses acquiring minority stake in SparkLoop
“We acquired a minority share of a company called spark loop.”
Growing existing SaaS value is 10x easier than chasing outside investments
“Then you're looking at 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 …”