Dumpster Diving

We had planned last week to post on GigaOM about Durham, North Carolina-based “iContact”:http://www.icontact.com/. The four-year old email marketing and blogging software startup closed a $5.35 million round of funding from “Updata Partners”:http://www.updatapartners.com/interior_portfoliocompanies_dev.asp and “IDEA Fund Partners”:http://www.ideafundpartners.com/ on June 29 — which is still news, especially in Durham. Then we met (virtually) the company’s 22-year-old founder and CEO, “Ryan Allis”:http://www.icontact.com/about/company. When we read a bit more about Allis’ tumultuous experiences as a founder–and the lengths he and his partner went to get their business off the ground–we determined iContact’s story would have more runway on Found|READ. So here it is. Read and Learn.

(What follows is an edited version of the original memo Allis drafted for Om.)

iContast is one of many in the growing ranks of Web 2.0 companies. Like most, we’re young: the company is run by a 22-year-old CEO (that’s me), and a 26-year old-Chairman. That’s my colleague, “Aaron Houghton”:http://www.icontact.com/about/company. But we are different from many. For starters, we waited until iContact was profitable, had nearly 12,000 customers, and was steadily growing before we sought a Series A round of funding.

When we started out we wanted iContact to be a Web 1.0 email marketing company. We began in July 2003 as a two-person start up in Chapel Hill, North Carolina. I and my co-founder, Aaron, were 18 and 22 at the time. We met in college at “University of North Carolina”:http://www.unc.edu/. We weren’t able to raise funding initially, probably due to our relative youth and the economic climate of the time; this was post-dotcom crash. With few other options, Aaron and I bootstrapped the business for the first three years, doing everything we had to do to keep our expenses low and grow revenue to a point where investors would take us seriously. It sort of goes without saying that we deferred our own salaries. We did. But we also employed a few other, rather more outrageous, tactics to help get iContact to the point at which we felt we could start looking for professional money. Here is a shortlist.

5 Things We Did to Bootstrap our Business:

1) Lived in our two-room office and slept on a futon for three months in 2003.

2) Cooked our meals on a “George Foreman Grill”:http://en.wikipedia.org/wiki/George_Foreman_Grill. (Test him on the cookbook, we dare you to.)

3) Jumped in a dumpster to get the proof-of-purchase tags off of an office supplies box once we realizing the tags were needed to get the $50 Staples rebate.

4) Extracted a $5,000 zero-interest loan from a friend — for which we had to give up equity (not the kind of thing one wants to have to do).

5) Convinced first employee to work for $1000 per month– of course, we added stock options, but this is still never an easy sell. (Can you live on $12k/year?)

You might wonder why we chose to raise professional money after being self-financed (and dramatically so) for so long. We chose to raise $500,000 from IDEA Fund Partners in May 2006 to help us migrate from Web 1.0 to Web 2.0 — by then a transition that the market clearly demanded. By focusing on our customer’s needs, we redesigned our application to be easier to use and added the ability to publish full-fledged social media channels.

Today iContact softare enables email, newsletters, blogs, RSS feeds, surveys, and autoresponders — all from a single web app. Our market remains mainly small businesses and non-profits, but we have a few blue-chip clients now as well, such as Bank of America, Symantec, International Paper, Ford, Re/Max, and Super 8 Motel.

iContact’s revenues have grown from $12,000 in 2003, to $296,000 in 2004; $1.3 million in 2005; and $2.9 million in 2006. We are on track for $6.5 million in 2007. We now have 58 employees! Thankfully, we no longer need to dumpster dive. We are very excited about the $5.35 million in funding from Updata Partners and IDEA Fund. We raised this additional capital so we can scale customer acquisition efforts aggressively, continue to build-out our “rockstar team”:http://www.icontact.com/about/company, and move forward more quickly to fulfill our mission of creating the easiest-to-use online communications web app. Here is to humble beginnings!