Email marketing is one of the oldest forms of digital marketing – 43 years old to be exact. And to this day, it still generates the highest ROI for marketers compared to all other channels. The market is full of email marketing platforms that help companies send email marketing messages to their customers.
While this is great for marketers, it’s almost impossible for newcomers to gain market share in the email industry. EmailOctopus found a way to carve out a niche for itself, even with all of the competition out there, and on a bootstrapped budget. Over the past five years, it’s grown from one person’s side project into a team of ten making $130,000 in monthly recurring revenue (MRR).
Necessity is the Mother of Invention
Thomas Evans started his career in a very different industry. He left school at 16 and went to India to learn how to make cricket bats. After that, he returned to the UK to work at a cricket company in London for four years. Unfortunately, that company didn’t do so well. “Selling cricket bats is a lot harder than selling software because there’s no recurring revenue,” says Thomas.
That’s when he became interested in what it takes to build a successful business. Thomas joined an early-stage startup called Secret Escapes, a UK-based travel website. “I was one of the first eight employees, working as a web designer. I didn’t have a background in web design, but I’d managed to teach myself enough to pass the interview stage. I ended up staying at that company for five years.”
Thomas transitioned from a web designer into a management role, first focusing on analytics and monetization for Secret Escapes, and then he became a product manager. “During the five years I was there, the company grew to over 600 employees. In 2016, I decided it was time to move on to something new, so I left the company,” he says.
One of Thomas’s friends, Jonathan Bull (co-founder and CEO of EmailOctopus), had been working on an email marketing tool for a couple of years as a side hustle during his evenings and weekends. “At the time, Jonathan wasn’t making much revenue. I told him that I was in-between jobs and could work on EmailOctopus three days a week to see where we could take it while Jonathan stayed at his full-time job.”
Thomas recounts how EmailOctopus first started: “Jonathan essentially created EmailOctopus to scratch his own itch. Similar to me, he had created several side projects in the past. One of them was an SMS platform that allowed you to prank your friends by sending messages to other people.”
Jonathan needed to send emails out to his customers. Existing platforms like MailChimp were all very expensive for a small business. So, he decided to build a simple email tool himself. This tool allowed him to upload a list of contacts through a CSV file and then just hit send – that was all he needed. It worked so well for Jonathan that he figured other companies would also be interested in using it, especially for an attractive price.
Standing Out in a Crowd of Email Platforms
EmailOctopus first launched as a free platform. Customers were able to send emails for free, regardless of the size of their subscriber list. Thomas says, “The strategy was to just get the word out, and then we would work out how to make money from it later. The monetization strategy for a SaaS product is quite simple. So for us, it was a case of getting people to use it and then introduce paid plans.”
EmailOctopus had about a thousand people using the free platform, at which point they decided to start charging for it. They introduced paid plans that followed a similar model to others in the email industry: customers get a free plan up to a certain number of subscribers and will then need to start paying. Three paid tiers then kicked in once the customer hit a threshold of 10,000, 100,000, and 250,000 subscribers.
Thomas says, “Our first goal was to get to a point where we could pay ourselves a small salary, enough to afford our mortgages or rent and live comfortably. We had a number in our heads for us both to be able to go full-time. We hit that goal within six months!”
In that short time, they managed to grow EmailOctopus to $10,000 in monthly recurring revenue. Thomas transitioned to a full-time employee and Jonathan quit his job so they could put all their effort into EmailOctopus.
Why did EmailOctopus do so well right off the bat? According to Thomas, “There was nothing on the market that was that affordable, so we managed to make a dent in the industry.” The prices for each tier were incredibly inexpensive compared to the competition: $12, $22, $42 respectively.
While the company did grow significantly with those prices, they realized that it wasn’t a sustainable business model. “It was difficult to grow a business by charging so little,” Thomas says. And it wasn’t just hard to make money, they were also struggling with the quality of their customers. “As you can imagine, when you allow people to send as many emails as they want for next to nothing, you get a lot of customers sending out questionable messages.”
This was a problem because it impacted EmailOctopus’s sender reputation. For email marketing platforms, having a good reputation is crucial. If the sender’s reputation goes below a certain score, the ISP (Internet Service Provider) will send messages to spam or even reject them outright. A high reputation score means it’s more likely emails will be delivered to the recipients’ inboxes.
“In the beginning, the number one obstacle was working out what was good growth and what was bad growth. In the world of email especially, you need to get the right kind of customer that will allow you to grow as a business. But we realized we didn’t need to be a tenth of the price of MailChimp, even just being half their price would allow us to grab a space in the market,” Thomas says.
EmailOctopus increased their prices to get a higher profit margin, as well as improve the standard of their customers to ensure future growth. Over time, they have grown their average revenue per customer from $20 in 2016 to $65 today. This means they not only acquired more customers but also larger accounts.
Marketing When You Have No Money
“In the initial stages, marketing is always difficult irrespective of whether you’re funded or not. But, of course, we had a very tight budget and for the first year we didn’t spend a single penny on advertising,” says Thomas. Instead, they used alternative channels, like Reddit and Quora, to drive organic traffic to their site and raise brand awareness for EmailOctopus.
Another of their early efforts in getting their name out there involved giving away more things for free. In 2016, they had coded and designed email templates for the EmailOctopus platform. But even at the time, email templates weren’t big news since most competitors offered something similar.
Thomas shares, “MailChimp’s been around 20 years and we weren’t doing anything unique or different. So, we decided to open source all of our email templates, which wasn’t something our competitors had done before.” They announced the free email templates on GitHub and Product Hunt and got a whopping 36,000 template downloads.
“Jonathan and I are nobodies in the tech world. We didn’t have that initial audience on social media as many successful founders have. Instead of spending two years building an audience by blogging regularly and sharing on social media, we built a product and then “hijacked” audiences from existing platforms,” says Thomas.
There is an art to using these online channels to build up brand awareness. “We paid special attention to doing everything with sensitivity. When you’re contributing to sites like Reddit, people will see through it immediately if you are just spamming your link everywhere. We took great care in the posts we crafted, making sure that we actually contributed value to those communities as well – instead of just giving a sales pitch. That’s how we were successful with it,” Thomas shares.
Food For Entrepreneurial Thought
Would everything have been easier for EmailOctopus if they had raised outside funding? Thomas says, “We never considered getting funding. It wasn’t even up for debate. The beauty of SaaS is that it allows you to predict how much money you are going to make every month. So you just need to make sure to spend less than you bring in.”
“It’s stress-inducing to spend more than you’re bringing in per month, using the investors’ money to try and grow the company – with no guarantees that it’s going to work. For us, it was fairly stress-free because, in the beginning, we were just trying to bring in enough to pay the bills and gain financial freedom,” Thomas shares.
“We were growing at a nice rate and continued to grow that way. Sure, we could have put more money into marketing and hiring people, but that carries new risks. It’s been quite satisfying to watch our company grow month over month, without external pressures from investors.”
But without outside funding, a lot of bootstrappers struggle with knowing when to go full-time on their side project. Thomas says, “When we went full-time, it allowed us to get a lot more done and grow more quickly as a result. So with the benefit of hindsight and having a successful business now, it’s easier to see that we should have gone all-in sooner. We waited until we were at this magical ARR mark, but realistically we could have hit that mark a lot quicker if we had been working full-time on reaching that goal.”
EmailOctopus is now a million-dollar business. And even though it’s grown exponentially over the past five years, Thomas says his favorite thing about being a bootstrapped company is flexibility. “It’s being able to run a business how you want to run it, which includes growing within our means, hiring people that work well with us, and taking as much of the stress out of it as we can. Also doing things that push us outside of our comfort zone, but having boundaries of how far we want to take things – not just growing the business at all costs.”
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