Earlier today, financial software maker Intuit agreed to purchase email marketing company Mailchimp in a $12 billion cash-and-stock deal. This acquisition, which is the company's largest purchase so far, stands out on several counts.
Largest-ever acquisition of a bootstrapped tech firm
Founded in 2001, Mailchimp was a privately held bootstrapped firm and it has not taken any outside funding since its inception.
The company claims to have 2.4 million monthly active users and an overall 13 million users across the world. 800,000 of them are paid customers, of which 50 percent customers are outside the United States.
Other key acquisitions of bootstrapped tech firms include Microsoft's $2.5 billion purchase of Minecraft maker Mojang in 2014 and Prudential Financial's $2.35 billion purchase of insurance tech startup Assurance IQ in 2019.
Intuit's Mailchimp acquisition comes more than a year after it purchased Credit Karma for $7.1 billion in February last year. It has made a total of around 25 acquisitions so far.
Mailchimp employees: No equity but profit-sharing
Unlike other startups, Mailchimp doesn't offer its employees any stock options but instead opts for profit-sharing bonuses based on the company's performance. Mailchimp claims to be profitable from day one and had clocked $800 million in revenue in 2020, a 20 percent increase year on year.
"As a profitable, privately held company, we have the flexibility to structure our profit sharing any way we want. This approach makes sense for our business, and it shows our employees how valued they are. Our employees get to share in the success of Mailchimp as we go, and that feels good," the company had said in an earlier blogpost.
As part of this deal, Intuit will be offering Mailchimp employees around $300 million in restricted stock units over three years. After the deal closes, Intuit will also issue $200 million of restricted stock units to Mailchimp employees, of which $60 will be done over six months and the remaining $140 million will be issued over four years. The deal is expected to close by the second quarter of fiscal 2022.
Major payday for Mailchimp founders
Due to its unique employee pay structure, Mailchimp is a 100 percent founder-owned company, with cofounders Ben Chestnut and Dan Kurzius each holding about 50 percent stake in the company. This essentially means that both the founders will equally share the remaining $11.7 billion in cash and stock.
Web design roots
Mailchimp started off as a web design agency called the Rocket Science Group, targeting big corporate clients. However, they also created an email marketing service for small businesses on the side, as an "alternative to the oversized, expensive email software of the early 2000s". This offering later became the key focus of the company.
The company has about 73 percent market share in email marketing, according to Datanyze, a data provider for B2B companies. Its closest competitor is Constant Contact that has 5.38 percent share. Mailchimp had claimed a 60.51 percent market share in the email marketing industry in its annual report last year.
Over the last couple of years, Mailchimp has introduced several new functionalities including social posting digital ads, a marketing CRM, shoppable landing pages, postcards, websites, smart content tools, and advanced automations among others.
What does this deal mean?
The acquisition is expected to boost the offerings of Intuit's accounting product QuickBooks, targeted mainly toward small and medium-sized businesses.
Intuit said it will work with Mailchimp to develop an end-to-end customer growth platform for small and mid-market businesses, allowing them to get their business online, market their business, manage customer relationships, benefit from insights and analytics, get paid, access capital, pay employees, and optimise cash flow among others.
"Small and mid-market businesses will have the power to combine their customer data from Mailchimp and QuickBooks’ purchase data to get the actionable insights they need to grow and run their businesses with confidence," the company said.
Intuit has been offering its accounting product QuickBooks in India from 2012 and had rolled out a GST-compliant version in 2017. It also offers an online practice management solution for chartered accountants called QuickBooks Online Accountant. Intuit currently has over 1,000 employees in India.