Jonathan:
He was like, Jonathan, you really need to start charging for this. This is madness. You're working so hard on it. So we did, and we lost almost every one of those free users overnight.

James:
Hello and welcome back to Indie Bites, the podcast writing you stories, the fellow Indie Hackers in 15 minutes or less. Today I'm joined by Tom Evans and Jonathan Bull from EmailOctopus, a low cost email platform who have bootstrapped over 3 million ARRs since they were founded in 2014. They've been battling in a crowded and competitive market with some huge funded companies to contend with, but they've made it work in an indie way.
In this episode, we talk about how they lost 99% of their users overnight. Why they've chosen to compete on price rather than in a niche, and the reasoning behind staying bootstrapped for so long. Now, regular listeners know that EmailOctopus are a longtime sponsor of the show, and they kindly let me use this episode as part of my sponsorship allocation.
But in their own right, they're a very successful bootstrap company with a great story and lots of insights to pass to Indie Hackers like yourself. So that being said, if you're inspired by this conversation and are looking for an email platform that's focused on affordability and ease of use, I suggest checking them out at emailoctopus.com, where you can contact up to 2,500 subscribers for free or hit the link in the show notes.
There's also a 30-minute version of this conversation available on the Indie Bites membership, where we discuss topics like how to make co-founder relationships work successfully. You can access for that for $60 a year at indiebites.com/membership. Let's get into it.
Jon, Tom, welcome to the pod.

Jonathan:
Thank you James.

James:
I want to dive in a little bit to the background of EmailOctopus, for those that don't know. Jon, you did an episode of the Indie Hackers Pod with your brother Gareth three years after the company was launched. But take us back. How did EmailOctopus come about for you?

Jonathan:
Sure. Well, I'll tell you way back to when I was 14. I was obsessed with the internet. I was obsessed with practical jokes, and I created a website in my first business, which allowed people to send anonymous SMS and emails. And at the time, it was a hilarious joke and it got me into a lot of trouble, eventually. When I ran this business, I found I wanted to use email marketing, and I had absolutely no money as a 14, 15-year-old. So I ended up writing a script I did it myself, and that script was a wild success, and I suddenly realized how powerful email marketing was. So four or five years later, I come back to it and I realize there's probably a business in an email marketing platform that is low cost and affordable for other Indie Hackers.

James:
And you started this with your brother as well. How did that come about? Because, he was a little bit more entrepreneurial, I guess. Was he sort of pushing you to do this or was this something that you sort of wanted to do?

Jonathan:
He wasn't pushing me to do it, but he found himself in exactly the same problem I had five years previous. He was running an SEO agency with around 30 staff, very slim margins, as you may imagine, and wanted to do email marketing. But again, there was no tool that he could do it in an affordable way. I think it took probably six to nine months in total. We launch, we launch as a completely free product, which in hindsight was kind of madness, but it meant we got a lot of customers quite easily to begin with.

James:
Why did you decide to launch it free? That sounds absolutely absurd now to me thinking about it as was it something you didn't want to make money of or you thought, let's get loads of free customers in and then down the line we'll turn the money on?

Jonathan:
At the time, I had a fairly good job and making money wasn't my main motivation. I just wanted to build things that people use, and the easiest way of doing that was to give it away for free. It turned out to be a fantastic marketing tactic, but yeah, long-term it's never going to work. But it got me those initial customers. I may have lost motivation without that, and Gareth, the co-founder was the main reason we turned on price and he was like, "Jonathan, you really need to start changing for this. This is madness. You're working so hard on it." So we did, and we lost almost every one of those free users overnight.

James:
That's crazy. How much was it costing you when you were?

Jonathan:
In terms of my time? Many thousands of pounds. But this is the advantage of being a developer and an Indie Hacker. I was paying for server fees, which was $50 to a $100 a month.

James:
In hindsight and retrospect, your advice to other founders. Do you think that was a good idea to start it free?

Jonathan:
I don't think I'd necessarily advise someone to do it for free, but I think, and I still think... And I know it is controversial among other entrepreneurs, but I still think that low cost and affordability is a great marketing tactic, especially when you start out and you're in a position as an Indie Hacker to really cut the price.

James:
So when you lost all of that 99% of your users overnight, that 1% of users, how much revenue did that turn it into?

Jonathan:
I think it was like 200 to $300 a month. It was nothing. But it was enough. I'd validated that there was a business in it. I knew that people wanted to use our pretty crap product to do their email marketing. Even though it was free, they're still using it. Right? It is still usable.

James:
So probably a good time to bring you in, Tom. Jon, you grew it to around 3k MRR, and at this point, were you planning on keeping that as a side project? Where does Tom come into the mix joining you on this journey?

Jonathan:
I always wanted to go full-time in it. That was my dream, like many Indie Hackers, but I honestly didn't want to hire anyone. I no longer wanted to work because I wanted to get away from that stuff. All I wanted to do was just sit on my laptop, build stuff, make money. That'd be my life. But it was Gareth again who pushed us to hire.

James:
And what convinced you to hire Tom?

Jonathan:
Well, firstly, it was quite a low risk decision. Tom started out with us as a contractor, and I think it was revenue based.

Tom:
Yeah. I wasn't paid much. The flat fee I was paid was £900 a month. And then it was 25% of all revenue made.

James:
25% of all revenue made?

Tom:
Sadly, that agreement no longer stands, otherwise I'd be on a beach somewhere.

James:
So when you come in, what changes are you making to help grow email experts?

Tom:
So first thing I do is look through Jonathan's emails, and there was probably a hundred emails from customers that just hadn't been responded to. So it was just pretty...

James:
So why wouldn't you respond to customers?

Tom:
He just [inaudible 00:06:33]. Well, he had a full-time job at this point. So the customers are getting in touch on a Tuesday at 3:00 PM and Jon's doing his day job, so it gets forgotten about.
And so first thing I do is put in place a support system that goes in place. We then begin to go through what the customer feedback was because all these customers who'd been in touch, there was a lot of questions, a lot of feedback that they had, and it was about putting those into action.
So yeah, it was just a better idea of what we're building and who we're building it for and giving good customer service to those people. And then that very quickly translated into more and more revenue.

James:
What did you do for growth?

Tom:
So super early stages. Probably one of the most valuable things we did was we gave away templates for free. So, we didn't have a drag and drop editor when we first built EmailOctopus, but as we built that, we needed to build templates for it. So one of the ideas I had at the time was, we're building these templates anyway. Why not give them away for free as well? I was like, okay, well we'll make some templates. We'll make them free and we'll slap our logo on them.
And that had 40,000 people download those templates. And I think that's probably the number one way we grew in the early days.

James:
And you are entering a hugely competitive market, email marketing. You've got some huge VC funded companies. What did you do to set yourself apart in such a crowded market?

Tom:
Simplicity and price. The simplicity was kind of forced upon us because we were limited in team. And if you've got a simple products, then make it affordable. So we went for the simple approach of allowing people to very quickly send emails, I guess kind of like the Ryanair of email marketing, take away all the extras and keep it simple, solve the problem that actually most people want to do.
Most people just want to fly from A to B. They're not too worried about whether they get a glass of champagne on arrival. With email marketing, there's a massive amount of people that just want to send out an email. They don't need all of these exotic automations, which was what a lot of the VC backed to businesses were doing at the time.

James:
I like that. Exotic automations.

Tom:
We now have added them and we begin to go upstream, but in the early days, it was very much about we have a simple product, let's keep the pricing low as well.

Jonathan:
Yeah, I mean, conventional wisdom for a lot of Indie and bootstrap style sub founders is not to go with this low price approach. And if you are not wanting to build something huge, which I know at the start, it's not, you just wanted a slice of this market, build a better lifestyle for yourself. And often a better way to do that is to go niche. Do email marketing for bakeries or email marketing specifically for Indie Hackers. That would potentially be a smarter way to do it. I would start by saying we didn't really go... Or me and my brother didn't really start email out to us with much of a strategy other than we can do email marketing, we can do it for free or a hundredth of the price of Mailchimp, and we want everyone who uses Mailchimp to eventually be able to use EmailOctopus.
Maybe in hindsight, we should have gone more niche, but we now have a huge amount of potential customers we can market to.

Tom:
Yeah, I mean you say email marketing for bakeries or email marketing for Indie Hackers. If the product would still be the same, it's just the marketing that would change because at the end of the day, a bakery needs the same features as an Indie Hacker largely. So rather than just going for that product marketing strategy, we just went for the affordable one. It was the logical thing to do at the time. I think I do look back and be like, okay, if we'd have gone after or marketed slightly differently, you look at ConvertKit, right? They launched a year or two before us and they're now a lot bigger than us. So there is an element of what could have been, but at the end of the day, it's a pretty successful business in its own right.
And if we'd have gone too niche or didn't understand the market very well, we didn't really understand the market that well at the time, did we? We wouldn't have known who to have built for.

Jonathan:
You've got to compete on some level. You've got to have some level. If some people might differentiate on niche and charge a premium for it or another vector is differentiating on price.

Tom:
I think if you know the niche very well and you know how to market that niche, then it's easier. Nathan Barry is a big blogger, so he knew the blog market very well. We came from a background with very little email marketing experience, so we didn't really know what niche or direction to go to, but we knew that if you made something cheaper, despite everyone's advice, people will switch across.

James:
And not raising from VC, being bootstrap means you can choose to go low price and you not having to answer to investors who might push you in one way or the other. Have you thought about raising?

Tom:
We have thought about raising. We've thought about selling. We've thought about a lot of things over our... We've been doing this now for seven or eight years together. The conversations we've ever had about raising and selling have been really useful for us. I think as a Bootstrapper, you're on a treadmill of ticking off certain milestones. It's okay, I need to get my first customer, now I need to get to a hundred MRR, now I need to get to Ram and profitability. Then I need to get to a million ARR.
And then at that point, it's kind of what's next, right? You've got successful business, you can pay yourself. You've got quite a nice life. The questions are then what do we do next? And we found ourselves in that situation, I'd say about two years ago, and we looked at it, we spoke to investors, we spoke to potential buyers as well.
The conversations never went really that far, but what it did help us do is kind of work out what that next step was for us. We went out of those meetings and we're like, why are we doing this? Let's just do these things for ourselves and let's actually grow EmailOctopus a little bit further and see what it can become. And that's kind of why a year and a half ago when we had these discussions, we were at 1.2, 1.3 million ARR. We've now more than doubled in those 18 months and we're growing faster than ever. They've really helped us work out where we want to go and build a successful business.

James:
And this goes back to one of the comments that you guys were making about this vision or end goal as Bootstrappers, what do you want when you're starting out? It's okay to change it right? I guess.

Tom:
It has to change.

James:
It has to change.

Tom:
Day one, your vision is how do I get someone using my product? Day two, it's kind of how do I make some money from it? Day three, how do I make enough money so I can quit my job? So your vision and goals, because you're not going into a meeting pitching to investors, you don't have that grand vision a lot of the time. I know, certainly we didn't and we've had to develop that over time and that has had to change.

James:
Do you feel like you've just booked yourself jobs now that are more risky and have certain stresses that other jobs wouldn't have?

Jonathan:
In a way, I don't think there's much risk associated with our jobs anymore.

Tom:
Not anymore. No.

Jonathan:
We've created the best job in the world for ourselves.

James:
You think?

Jonathan:
Yeah, genuinely. There's more stress now.

Tom:
I don't know how Jon feels, but I feel not very stressed.

James:
Do you feel stressed?

Jonathan:
I think there have been points where I've felt very stressed and very responsible for mainly the uptime of the platform, but we just hired our way out of that. And I don't know about you, Tom but, I've found that as time goes on with EmailOctopus is quite easy for it to get less exciting. So you start with that first customer. I don't think I've ever been as excited as that. And then like you say, the 1K, being able to quit your job. All of these milestones are fun, but if you're lucky enough to get to one more ARR, then everything after that isn't hugely life-changing. The challenges that we have to create now in the businesses for ourselves, right? Five years ago, the challenges were obvious, apparent and we'd have to solve them.
We now have to create challenges for ourselves, and that is essentially hiring people. And that's not to say people are a challenge, but they bring new ideas, they push us further. They're more intelligent than us a lot of the time. It gives us people to learn from and that reignites that excitement for us a lot of the time.

James:
And a final question for you, Jon, as a Software Developer, someone that likes the building stuff, I guess you don't get into the code base that often anymore? Do you have that urge to sort of build stuff and how do you fulfill that?

Jonathan:
I still do get into the code base. I think Tom would say way more than I should.

Tom:
Yeah, you've got better.
There was one time that he broke the website because he uploaded the new Favicon. It was at that point I was like, "Jon, you need to step away from the code base."

Jonathan:
I think, yeah, I risk sometimes being in that really annoying position where you don't know the code base well enough anymore, but you still want to tinker. No one likes that guy. But ultimately, coding and building things gives me a lot of energy and it's what I enjoy in the business. And there are ways you can do that without necessarily coding. So Tom and I have been working a lot with designers recently. Tom mentioned we're hiring a Product Designer. Having those chats gives me that sort of similar buzz that I get from coding and building things.

James:
You guys have been fantastic guests, a great partner and sponsor of the show. I'm very grateful for that. I end every episode on three recommendations. We'll go book, book, podcast, podcast, Indie Hacker, Indie Hacker.

Jonathan:
Book, rework. 4,000 weeks, podcast. The woman that's got Rory Stewart on, can't remember what it's called, something about politics.

Tom:
I only listened to this podcast January.

James:
That's great. No, I'm very happy with that. Then Indie Hacker, entrepreneur?

Jonathan:
Levels.

Tom:
Jeff Bun.

Jonathan:
Chaps, thank you so much for coming on this episode of Indie Bites.

Tom:
Thanks, James.

Jonathan:
Thank you very much.

Tom:
Thank you for listening to this episode of Indie Bites with Jon and Tom from EmailOctopus. If you enjoyed that and want to hear more, a reminder, the full 30-minute conversation is available on the Indie Bites membership. You can access that indiebites.com/membership. And if you want to hear more from the pod, including the breakdown of the insights and takeaways from these conversations, subscribe to my newsletter, The Indie Bite. Links in the show notes. That's all from me. See you next week.