In this latest episode of The Peel, I talked to Tyler Denk, Co-founder and CEO of beehiiv.
Tyler talks us through the playbook used to scale beehiiv to $1.5m in monthly revenue.
We go inside beehiiv’s earliest days, including joining MorningBrew as the second employee, lessons scaling it to 3.5 million subscribers, the $75 million sale to Business Insider, and my embarrassing story of not investing in beehiiv despite being an early customer.
Tyler shares how they first positioned the product in a crowded market, how beehiiv ships so fast, overcoming a co-founder passing away less than one year into building the business, their two "no meeting" days, and the day GoDaddy took the entire beehiiv platform offline for 8 hours.
Timestamps to jump in:
1:36 Why Turner didn’t invest in beehiiv (twice)
03:04 Joining MorningBrew as the 2nd employee
15:28 Why newsletters are so powerful
19:40 Scaling MorningBrew to 3.5 million subs + exiting for $75m
23:14 Difference between startups and big companies
26:26 Why beehiiv has two days of no meetings
27:53 The initial insight to start beehiiv
35:39 Building a programmatic newsletter ad marketplace
39:52 Dissecting beehiiv’s nearly $20m rev run rate business model
45:21 Inside beehiiv’s first funding round
46:58 Where Turner’s reference check went wrong
50:45 Litquidity and beehiiv’s initial product positioning
52:59 How beehiiv builds in public
57:41 Banning meetings two days per week
1:00:13 Why the best remote teams always beat in-person
1:06:19 The impact of a co-founder dying one year into the business
1:11:50 Raising a Series A despite operating at breakeven
1:16:14 Why Tyler writes public investor updates
1:21:04 Moving fast, and “why perfect kills all momentum”
1:26:03 When GoDaddy took beehiiv down for 8 hours
1:29:57 Why Tyler writes a newsletter
1:32:21 His Big Desk Energy Spotify playlist
1:36:08 Why you never regret firing bad hires
1:39:53 Looking up to Elon and Brian Chesky
1:41:34 Monk mode in Columbia
Referenced:
beehiiv’s old investor updates
The Big Desk Energy Spotify Playlist
Find Tyler on Twitter, LinkedIn, and check out his newsletter, Big Desk Energy
👉 Find on Apple, Spotify, or YouTube
Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Tyler, welcome to the show.
Tyler Denk:
What up? Thanks for having me.
Turner Novak:
So the first question... The juiciest topic we could possibly talk about, you were raising money for beehiiv, and you talked to me, what happened?
Tyler Denk:
Yeah, well, not just once, but twice, I got a no from Turner Novak. I think for the seed round, which, granted, no hard feeling, seed rounds are tough, we were pre-product, pre-revenue, so I think the expectation is most conversations will lead to a no, so there's no real hard feelings.
But I think the seed plus or extension actually hurt more, because that was eight months later, I think we had $20k MRR, definitely product market fit, and it's like, "Oh, this company can get off the ground and have paying customers." And you were using it.
Turner Novak:
Yeah.
Tyler Denk:
And the no there I think actually hurt a lot more.
Turner Novak:
Yeah. Well, so the reason I didn't invest was... And I think it's a good lesson, it's good in retrospect for me, but then also for the audience, is usually what I do is, I just... If I know your prior employer, boss, co-workers, or sometimes I'll just kind of reach out, and just ask, "What do you think of Tyler? Are you investing?"
So your old boss at Morning Brew, he gave me a hard no, "Absolutely not. Do not do it." And I did not know the full story behind what was going on, but that's why I didn't invest, it was like, "All right..." I mean, I was pretty good friends with Austin, and he's like, "Don't invest." I was like, "All right, I won't do it."
Tyler Denk:
Yeah, I was going to say, and then he went on to invest. Not in that round, but a few rounds later.
Turner Novak:
Yeah, I know, and I was like... I think I literally said, "What the hell?" when I saw that.
So you were one of the first employees at Morning Brew, you kind of built their whole engineering side of the business. I'm not really sure what that all entails, it's a newsletter, it's a media company. But can you just talk about that journey, how you initially joined Morning Brew?
Tyler Denk:
Yeah. And Austin's obviously a pretty key part of that. And by the way, for the audience, me and Austin are totally boys now. He was our first advisor, he's also an investor, I'm also texting him yesterday. But I guess it could get you caught up to that point, where he told Turner to not invest.
Essentially in college, self-taught software developer, taught myself how to code. Me and two other students built this company, it's kind of a two-sided marketplace for startups and software developers. And the first lesson in entrepreneurship, one, two-sided marketplaces are incredibly difficult. We were also targeting college students, which is usually a terrible idea 'cause they have no money, but it taught me a ton of incredible things.
One, how to build something from scratch. So we were three students, self-taught coders, and got upwards of 10,000 users literally from word of mouth, blogging. We had no budget. So it was a very scrappy, which I think you can actually see a lot of that correlate to how we build beehiiv today. Very lean team, very scrappy, not spending a ton of money, not doing anything flashy, just putting our heads down and getting it done.
So fast-forward, graduated with a bunch of student debt, and that company didn't take off. So living in parents' basement with literally $2 to $3. I have a screenshot of my phone of my bank account of $2.50 in it.
Turner Novak:
I've definitely had that before. You've got nothing, you don't know what you're going to do. Any money is money, basically.
Tyler Denk:
I had literally all of my eggs in, "This company is going to be a multi-billion dollar company." 'Cause you kind of have to be delusional as a founder. And when it was not a multi-billion dollar company, and actually, I just forwent having an internship for the past three summers, in favor paying myself nothing. I was left with nothing, and fortunately in my parents' house building.
And so I started building Shopify stores, and random freelance gigs as a self-taught developer. And I got into a conversation with Austin, who was also from Baltimore. And at the time, Morning Brew was him, his co-founder, Alex, and a writer. And they had clear momentum, I think they probably had 50 to 60,000 subscribers, mostly college students.
Turner Novak:
This was 2017 or 2016?
Tyler Denk:
2016, 2017. Yeah.
Turner Novak:
Well, that was pretty big for a newsletter. Newsletter wasn't really a business that people knew about back then.
Tyler Denk:
theSkimm was kind of the trailblazer in the space, they've been around for a few years prior, they were a few million subscribers, and then there was Morning Brew trying to be theSkimm. I mean, a lot of our early days were just looking at theSkimm. What were they doing, their Skimm'bassador program, their referral program, the style of their newsletter. Axios was just coming in to launch right around that time as well, like 2016, 2017.
And I was on a phone call with Austin, driving home from D.C., and we were just brainstorming, he's like... One, he was fascinated with Barstool, and how a lot of the revenue came from Merch. And so that's where we were talking about, "Should we launch a Shopify and March store for Morning Brew? You have an avid fan base." And I was doing Shopify freelance gigs at the time, so that was an in.
And then at the time, it's common now, but at the bottom of every story, there's a share on Facebook, Twitter, LinkedIn, and Axios had that, theSkimm had that, Morning Brew didn't. And he was like, "Could you potentially build this?"
And straight-faced, I was like, "Yeah, absolutely. No problem." I have never touched WordPress before, I had no idea how to do it, but I had literally $2.50 in my bank account, and he offered I think three grand to do this.
Turner Novak:
Wow. Just to build a share button at the bottom of an email?
Tyler Denk:
It sounds crazy now, but I had never used their tech, I haven't gotten into the code. So there was a few week ramp up of, "What the hell is going on in this website? And how does it work in email? How does it tie it all together?" So there's a decent amount of ramp. And I think you're just at the point, he was like, "I just want this built."
So for two weeks, I stayed up 3:00 AAM every night trying to figure this out. And the funny thing is, I almost quit 4 or 5 times. WordPress is terrible. I just hated everything. Email, as anyone who's coded in email knows, nothing that you build looks the way it does in Yahoo, AOL, Outlook, Gmail, there's just so many variation, so I almost quit a ton, fortunately didn't.
And long story short, after building that, he's like, "So theSkimm has this referral program, could you build that too?" And now I'm kind of familiar with the code base, so “sure, I'll play around with that." For that summer, I just freelance and built things for 40, 50, 60 hours a week, until eventually he's like, "Do you just want to join us full-time up in New York?" Which was actually never my intention.
At the time, they were three people sending an email newsletter, and I had a mechanical engineering degree, self-taught developer, had my hand in entrepreneurship, I was looking for... I applied to SpaceX, so I flew out to California for the final round at SpaceX. I was looking into hard tech, and this was a cute newsletter thing that I was just doing for money, and had no real ambition.
What I think changed is – and you kind of have to as a small startup - they gave me full control to the inbox and everything that was going on. And every time we'd press send, we would get 500 replies of people being like, "I absolutely love this newsletter. I can't start my day without reading it."
And it was that reader feedback that gave me the buy-in that there's something here in terms of what you can do with a valuable audience, which I was very new to. You can sell education, you can do advertising, you can do events, there's so much opportunity if you have the attention of these people.
And so one thing led to another, I moved up to New York and joined them back in 2017.
Turner Novak:
And then what was the general business model at the time? It was just maybe a couple hundred thousand subs by then, it was basically sending people the daily news, so that's kind of what Morning Brew was. It was almost like CNBC in an email, like a five-minute email, and then you were sticking ads in?
Tyler Denk:
It was all ad-based. And at the time, it was Monday through Friday, a single newsletter to about 100,000, 150,000 people. He sold me... 'Cause again, very small... They didn't raise a ton of money, it was all friends and family. I think they raised five, $600,000 friends and family.
And I had a job offer, which, granted... A whole nother story, but I had a job offer for Deloitte as a technical consultant, which... Whatever. But very sure thing, I have $120,000 of student debt, I'm just out of college, I have $2 in my bank account, and a very sure thing, retirement account, can pay off debt, or joining a two-person newsletter in New York, that's obviously super expensive to live there. I'm getting paid an out of college post-grad, whatever.
And the business model was very unsure, he was like, "Hey, Discover just gave us a $100,000 check to advertise for the quarter." And for me, to see $100,000 come in from Discover, that was their first big win. But that was the ad model, it was, we're sending emails to 100 to 150,000 upwardly mobile people that live in New York, Miami, LA, disposable income, recent grads, and we'd show an advertisement at the time, just a single advertisement every day, and they pay us a few thousand dollars.
Turner Novak:
I think Austin said, or maybe you told me that Morning Brew used Sailthru I think it was called, is that the product?
Tyler Denk:
So we use a few different things.
When I first started, we used Mailchimp, 'cause that... I mean, for Mailchimp's credit, the $0 free plan up until 5,000 subscribers, which I think they've scaled back since, is brilliant. 'Cause Alex and Austin as a broke college student building a newsletter that's not even a business yet, $0 is the cost. It's Alex's time to write the newsletter, and there's no additional costs up until 5,000 subscribers. And then at 5,000 subscribers, you have some value, you can generate revenue if you wanted. Harder in those days, but still, there's value there. So Mailchimp hooked in tons and tons of newsletters early days, still does.
Scaled that up, then we moved to Campaign Monitor, which is kind of a more enterprise one. And then we eventually moved to Sailthru. And I kind of led the migration of all three, so very tough times. The biggest pain in the ass process you could possibly imagine, moving 100,000, and then 1.5 million emails from one service to another, but also a huge competitive advantage for what I do now, and actually living the process and move the emails over.
Turner Novak:
Yeah, 'cause I think I've signed up for beehiiv before, I've migrated my list over, pretty seamless. And this is a couple of years ago, this is three years ago, two years ago, I forget. But I mean, pretty seamless process, you guys definitely nailed it down.
And I still do when people ask, "What is the best newsletter product?" I usually give the nuance of, "It depends what you're looking for." But I think broadly, the answer is beehiiv. You guys have built a really, really good product. I really, really liked using it.
Just generally speaking, what is the business model of a newsletter today? How do people usually make money on them?
Tyler Denk:
Yeah, I can even complete the story in terms of what Morning Brew was, and what I had built there, and it goes right into beehiiv and everything else, but the value prop, or at the time, there's the website component. So everything from the New York Times, to CNN.com, to every blogger from the early 2000s, typically on WordPress, and now there's Wix, and Webflow, but content lives online. And so you post your content like a blog, that's where it lives.
Then with theSkimm, and Morning Brew, and these newsletters, basically they would then convert different types of content, and put it into an email, and they would send that usually with a Mailchimp. So now you have two different platforms, maybe integrated if you have engineers, otherwise you're copying and pasting.
And then there was a bunch of additional layers. So the referral program, one theSkimm and Morning Brew did it, a few other companies kind of white labeled and built their own third-party referral program tools. For ads, you can use different ad servers and drop in Pixels. But if you wanted to paywall your content, which a lot of large media companies do, you usually have to build them yourself, you integrate with Stripe, then you have user authentication.
And very quickly, you get into the game of, if I just want to write 'cause I love writing about sports, or politics, or tech, now I have to hire an engineering team, and piece together a WordPress site with Mailchimp, and then put on some paywall, and then drop ads in. It gets very complicated very quickly.
At Morning Brew, when I say I led the development of a lot of those things, the classic build versus buy decision that a lot of different teams make, I've always been - partially 'cause I guess self-taught and really scrappy - I just love the build side of things.
One, it's more enjoyable. But I've been in the buy situation, where it's like, "Hey, you really need this." And you're talking to an account manager who doesn't really give a shit, and they're like, "Okay, we can flag it to the product team, and maybe Q2 of next year we'll be able to build this." And I'm like, "Well, we kind of need it now. We have a business that has real needs, and we have a huge friction point, and it's actually entirely out of our hands, it's on your product that we're paying you for."
And there's just this breakdown of what we need as a business, and what they are willing to give us at the time, because they have tons of other customers, and either incorrectly or correctly, they are not prioritizing what we need.
So after running into that a few times, we built our own website. So like Ruby on Rails's backend, totally custom, so not like a WordPress website. We didn't build our own email sender, but the referral program, built in-house. The content management system, so what the writers were actually writing in, all built in-house.
Turner Novak:
It's Google Docs with superpowers, basically. It's just pretty simple interface, multiple people can use it, stuff like that?
Tyler Denk:
Right. And at Morning Brew, we looked at a bunch of other platforms and CMSes to use, but at the time, again, there was kind of newsletters that existed before, but it was kind of like Stratechery, theSkimm, and Axios, and us as the large... And The Hustle, was these large newsletter-first businesses.
So every vendor we looked at was web-first, it was, "Here's the SEO features, and this is how you publish it to your website." And we were like, "No, we don't need to publish it to our website, we need it to look great in Outlook, and Gmail, and Apple Mail." The product didn't exist in the market, and I was like, "We can just build this ourselves."
So the content management system, we built in-house, our writers created the newsletter, we've made it exactly custom fit to what Morning Brew is. You can drag and drop the stories around, there's What is Brewing story, there's the referral program, press send in one place, it goes to their, website, it goes to email.
And that was just a novel thing. So we could have pieced together and paid tens of thousands of dollars for off-the-shelf software, but I kind of took a risk for myself at the time, and was like, "I think I can just build this ourselves." And it ended up working out great.
Turner Novak:
And then why is email so important? Why is it so important to just have someone's email and show up in their inbox versus put it online?
Tyler Denk:
Yeah, so it actually kind of goes to what I was just talking about of, the blogger days of... Or going to CNN.com, or New York Times, there was a time in college where part of my routine, I'd go to TechCrunch.com, and just read 5 or 10 stories. So it's what we would call at Morning Brew the push first, pull, where the... It used to be, you have your eBaum's World, TechCrunch, whatever, you go to these different websites-
Turner Novak:
eBaum's World, that is a throwback, that's middle school.
Tyler Denk:
Right. But that's the contrast, there's a web destination that you'd go to.
And then you realize that everyone in the world is so busy, they have their jobs, they have their responsibilities, they have other things going on, but everyone kind of checks email. So rather than me having to remember to go to TechCrunch.com, I could sign up for their email newsletter. And in the normal routine of my day, I check my inbox, and there's the TechCrunch newsletter that they're sending me the top stories.
So it gets pushed to me, it's effortless for me as the consumer. Why it's valuable as a writer or a publisher is, the exact inverse. You're meeting people exactly where they are anyway, which is in their inbox, checking flight receipts, or responding to friends and family or whatever else.
And once you get that top of funnel, there is what you initially asked, which is the newsletter business, which is primarily still ad based, but you can do subscriptions as well where you charge... It's kind of like the Patreon, OnlyFans model, just charge your readers directly, and they have this relationship with you. They pay you $10 a month, and you get more content, or community, or whatever else. But it also just unlocks that top of funnel for whatever else you want to sell them.
My personal newsletter, I did a mastermind in Costa Rica, so events essentially, and I have the attention of 48,000 founders and startup people, and I sold them seven spots to a mastermind in Costa Rica. And that's how I generated revenue off my newsletter, because I'm in their inbox, and I built this relationship with them. So long way of saying there's a lot of ways to make money with email, but it's really just owning the relationship with the reader.
Turner Novak:
Yeah, it's like a daily touch point, or however often you send it, and whatever the percentage open rate is. Sometimes people don't open it every day, but just... You get in front of them consistently. Any kind of online business now is battling the algorithms, an email, there's no algorithm, at least not yet. It'll show up. Well, actually, I guess the algorithm is spam versus sub folder.
Tyler Denk:
That is kind of the thing no one talks about, it's a total own your audience.
The classic example that people love to give is, Facebook sold all of these brands and publishers and getting fans or likes on their pages, because as a business that sold umbrellas, if you get thousands of people to like your page, and then you post this new umbrella, maybe it was showing up 70% of your fans on their feed. And then all it took was a few product managers to realize they could make more money pushing native posts, or community, or something else, they changed the algorithm, and now when you're getting 70% of your audience, you might be getting 7% of your audience, and that's the helpless, you don't really own the algorithm or the distribution.
And so email really is... When I press send to the 45,000 people in my list, 45,000 people more or less get the email directly from me, regardless of what some feed does, with the caveat that you hit on, that there is spam, and that's a whole nother thing, and that does live in the hands of a few black box players, which is the shitty part of email. But it's a lot different of an algorithm. If you do the right things and follow best practices, you're usually pretty good there.
Turner Novak:
Yeah. And so I guess wrapping up the Morning Brew story, you had hired a couple of people that were on the engineering team. You guys had gotten fairly decent sized, packing a lot of pretty big punch, doing a lot at Morning Brew. What was the state of the business, when you left or today Morning Brew, and then the insight to then go start beehiiv?
Tyler Denk:
Yeah. I mean, I think it's a huge plus one for anyone who's debating large company workforce, or small startup, hustle, and learning a lot on the job. I owe Austin and Alex so much.
One is, they didn’t have the bandwidth to be able to micromanage me and tell me what to do, so they gave me all of the trust and faith of, "We trust you, we hired you, just figure out how to grow this newsletter and build this ecosystem." And so I was 22, building the core infrastructure of how we're sending emails, how our writers are using the platform, how our readers are interacting with our content, and a total, I don't have a boss, I don't have a mentor, it's just a figure it out situation, which is amazing.
So I did that when I was 22, 23 for three and a half years. I joined when we had about 100,000 subscribers. Left, the team was probably about 40 people, we were at 3.5 million subscribers on the main list, and then we had a few other verticals from emerging tech, and retail, and HR, so more like an established media business, but we were about 40 people doing probably $20 million in revenue in the year that I left.
Turner Novak:
And it was-
Tyler Denk:
2020.
Turner Novak:
Okay, 2020. Yeah, and then about six or something months later, I think it was acquired by Business Insider.
Tyler Denk:
Even funnier, I left on... So at least what we led with, Austin recommending you not to invest in beehiiv, I wouldn't say I was on bad terms. Because again, there was three of us in a closet-sized office for years, just kind of building this business. But in anything with startups and that type of culture, it's a lot of egos, and emotion, and there's a lot going on, and there's a lot of money on the line as well. They're entrepreneurs, they own most of this business.
There was a potential acquisition on the line, and at the time, not many people had left the business. It was a great place to work, I'm sure still it's a great place to work.
And I just kind of hit my limit of, I came in with pure white space, there was so much to build and three and a half years later, I kind of scratched that itch. We were optimizing the website, which is a little bit less exciting for me.
And of course, I have these broader ambitions, and an ego as well, of like, "Hey, I built all of this, I want to be paid a lot more. I want more equity." And Austin's very pragmatic, and he's like, "No, you're in New York, you're four years out of college. This is what the going rate is." So there was typical compensation friction, and also, where's value being created? And I was there for three and a half years.
So I kind of left, maybe not in the most mature terms. I didn't just pick up and leave, but I was like, "Yo, I've got a job at YouTube Music and I'm out in two weeks." And I was the first person, especially at the core, early team to kind of just peace out. So I think there was ego, and also you're not putting us in the amazing situation.
And then to make matters worse, I had no idea that they were in talks with Business Insider to get acquired. So I joined Google four weeks later, and literally, I think the second week on the job, I wake up one morning, and get a notification from 20 of my friends being like, "Yo, congrats. I can't believe Morning Brew just got bought." I had no idea about any of this.
So I think that also leads to the drama, and the emotion tied up. Austin, little do I know, is in hardcore negotiations to make millions and millions of dollars, and now a core person on his team is just kind of peacing out weeks before, and we're friends. It's a whole weird thing, but that's kind of what you get into with startups, and friends, and relationships.
Turner Novak:
Yeah, that makes sense. Then you're at YouTube for a little bit.
Tyler Denk:
YouTube is cool, because one, I joined YouTube in 2020 when they just went remote, and you still see the headlines now of the bloat of a massive business. For me, in my career trajectory, it was... I did my own startup in college, amazing experience. I did Morning Brew where I wasn't a co-founder, but I was the second employee, kind of got that co-founder experience. I saw it from three people to 40 people.
And then I was like, "The thing that I'm missing is this big tech company." And Google is obviously a behemoth, one of the most influential companies, and there's so much you can learn from being at a large company of, how is the sausage actually made at a company like a Google? And I also love music. I was actually on the YouTube music team.
So for me personally, it was, "I've seen small, let's do big." I knew I wasn't going to love big for all of the reasons that I love startups. It's a total contrast. But I thought there was some value to learn, just as like... I fell into the product role without even knowing what product was, and Google was the gold standard of product management.
So I went to Google, they had just gone remote for the first time from the pandemic, and definitely a clash of, they've been in-person their entire lives, and now there's a bunch of middle managers, 30s, 40s, 50s working remote. It's the summer, they're by the pool, they're hanging out with their kids, there's no real processes in terms of, how do you get things done in a remote culture so abruptly?
For beehiiv, we've been remote since day one. Everything we've ever done in our processes are async and remote. A company like Google at 150,000 people being in-person every day of their entire career most likely, and then going remote all of a sudden, I definitely felt like a lot of gaps.
I'd finished work at 11 AM and be like, "What do we do now?" 'Cause I was on the startup culture of just hustle. And I would say generally, at Google, they're not at the same pace. Which, one their... Who was it? Sergey just said it in an interview, and then walked it back?
Turner Novak:
Yeah, I think Eric Schmidt also, the old CEO, he... I think they deleted the video, where he... He definitely called them out.
Tyler Denk:
He just told the truth in that there are startups that move very quickly, and someone could probably go into Google and cut 40, 50% of the workforce, and they would crush it with earnings and bottom line, and probably have the same output. But that's what below and middle management does. I mean, Google's not the only one guilty of that.
Turner Novak:
Yeah, I think another example is, I don't know necessarily about boosting the bottom line, but Twitter, I mean, they cut 80% of the staff, and the company didn't die. Everyone's like, "Oh, the servers are going to blow up." Or whatever, and it's still there. I mean, different case on the business side.
Tyler Denk:
For sure. And they also decided to cut off revenue as well, but-
Turner Novak:
Yes.
Tyler Denk:
... they had the cost idea down pat. It was the revenue they didn’t quite get right.
I see it now too. We're 75 employees at beehiiv, and a lot of people come from larger companies, or they hit a threshold of, "This is all I can do." And I think the natural thing, partially ego, is, "Hey, I want to have a larger team." Partially is, "I'm maxed out on bandwidth." And I think it's really easy just to say, "Yes, let's just hire more people, let's add more processes."
But I've seen the flip side of how much that slows things down. I think it takes a lot of maturity to realize, yes, in your current role you can't do everything on your plate, but sometimes that's okay. Sometimes maybe we just do it 7 out of 10, and that's totally fine if it means we're saving a whole nother person's salary, benefits, processes, cross-functional meetings, or maybe that one thing that you can't do now is fine being done in a month.
But I think when you're in the startup hustle and culture, it's really easy to be like, "Oh, we want to do everything right now." And if we're blocked, the answer is just hire more people. I hate that answer. I push against it every week.
Turner Novak:
Yeah. One of the things that I think is always intriguing is, you said you just hate meetings, you just don't like meetings. I don't know if those are the exact words, but why is that?
Tyler Denk:
It kind of goes to the DNA of what beehiiv is. Me and my two co-founders are all engineers, and we identified a need in the very crowded market, and we had zero. So the only thing to do at the time was to put our heads down and build new features.
And then when we launched, we were the shittiest product in the market 'cause all of the competitors have been around for a decade plus, and we pieced together something over 10 months. Then you have users who are used to very polished products telling you, "Hey, this is cool, but you're missing 10 features that I absolutely need."
In that situation, there's not a need for financial projections and modeling and meetings. It's like, the users are telling us directly what we're missing and we just need to put our heads down and build it.
And so I think four of our first five employees were all engineers. So I think it comes from that culture and I still feel that hustle. Our competitors are still 5, 10, 15 years ahead of us or have been around longer and there's just so much to do and meetings are just sometimes necessary, but we're remote first.
We do a lot of things async. I feel most productive personally and I project it on the rest of the team when I can put in my headphones and here's the 10 things I need to do, and at the end of the day, those 10 things are done. Meetings are talking about doing things in a lot of cases without actually doing them.
Turner Novak:
Yeah, that's cool. I know you guys have a really interesting structure with remote, well maybe we'll get into it a little bit later because I want to make sure we get on. You had this insight to start beehiiv. You'd spent almost 4 years building Morning Brew. How did it all come together, starting the company?
Tyler Denk:
Yeah, probably two things.
One was just seeing the response in the inbox. It's a very tangible response of how people think about, one, mostly the content is 80% of the replies are political, hated that stance. But I'd say that we always got a few hundred responses each day being like, these emails are beautiful. They look amazing in Outlook. This referral program is so functional, I've referred it to 10 people. What software are you using? And a lot of the people responding either had their own newsletter or worked at a business or a company that had a company newsletter.
But Morning Brew became that North Star of a very well-run polished newsletter in the newsletter ecosystem. And in being the person who led the development and made a lot of the decisions of how it worked and functioned in that way, when people were like, hey, I really want to use this referral program. Is there a software you could recommend us off the shelf? The answer was, no. We built it in-house, so it didn't solve their problem. And it was also like, I also built that. I know exactly how it works.
And so it was pure demand validation and people were asking for the referral program, the CMS, and the total package of what we had built.
And then at the same time, Substack just raised 65 million. So this is dating it to 2020, 2021. They just raised 65 million at 650. And at the time Twitter was just a bunch of angry Substack users being like, hey, I can't do these 10 things that are so obvious and available in every other email platform.
So there wasn't huge user love, at least visibly from what you would see in the narratives. And I know what we built at Morning Brew was super powerful and we even had the case study that took us from 100K to three and a half million, arguably one of the most successful newsletters. And here's a competitor who raised money at nearly a billion dollar valuation and from the outside looking in, it looks like everyone doesn't like it.
And so that was the push I needed to say, I think there's something here, what I see more people adopting newsletters, when I feel like I'm in the 1% of people who really understand how to build the tech and the data and everything that it takes to build a successful newsletter, the stars just aligned, that pushed me over the edge there.
Turner Novak:
And so you started building it and you raised money as you were working on it. I can't remember what happened first if you officially launched or if you just did a small round first. What was the order?
Tyler Denk:
Yeah, the whole timeline's super funny. I left Morning Brew, I had my one-week in between Morning Brewing and Google. And I was going to go to San Diego and I got COVID. So I'm just trapped in my Brooklyn apartment with nothing to do, no plans. My plans just got canceled and I can't sit still.
So I'm sitting there and I think it took three days for me to call Ben, my now co-founder and he was the first engineer that I hired at Morning Brew. I was like, "Dude, what if we just built a Morning Brew in a box, like a Substack, but much more ambitious in terms of what the functionality is, like enterprise software meets Substack meets Morning Brew." And he's like, "Dude, that's a lot of work. We've been doing this for three and a half years and we're still not even there."
I didn't sit still on it. So I literally left Morning Brew and within a week I planted the seed of I think we could do this. It was convincing Ben and then Jake, the other co-founder, so it was us three and Jake was also a software engineer at Morning Brew.
And then we just after a little bit more buy-in like November of that year, so probably two months after I left Morning Brew, we just started building. We built up until the summer, which is when we started talking. I think I got in contact with you probably around July. So July of 2021 is when we had a functional prototype we could show people. No one was using it. I don't even think you could send emails at the time, but it existed. And that's when we raised money, closed our seed round somewhere around August, September, so about three years ago and then went full time in November.
Turner Novak:
I think a pretty common reason to not invest at the time was probably just super crowded market. You didn't have barely any features anyone else had. And then also the market seemed small probably too to some people, like how do you actually make money here? Was that a good summary of the reasons people didn't invest?
Tyler Denk:
Yeah, I'd say it was like a bloodbath of competition. So you have the incumbents of Mailchimp just got bought for $13 billion or whatever by Intuit a few years earlier.
Turner Novak:
That was around then too. Okay.
Tyler Denk:
I think this was probably two or three years earlier, but it showed... Well, it was both a good and bad thing.
Turner Novak:
Yeah, $13 billion. I forgot it was that big. Yeah, that's a massive number.
Tyler Denk:
Might be $11. But yeah, it was definitely a like, oh, you could build a successful email-first platform and there are no shortage of people who want to send emails in this world to the extent of $13 billion.
But then you also had ActiveCampaign, AWeber Campaign Monitor... I could rattle off two dozen email providers that are legacy tech. So those have existed. They're all very successful multi-million dollar businesses.
Then you had this new wave of Substack, which just raised at nearly a billion dollar valuation. And then Facebook announced Bulletin, which was a really half-assed effort to, I think it was like Malcolm Gladwell. They had a bunch of huge names to launch a newsletter product. So they got the newsletter bug. And then Twitter had just bought Revue, which was one of the competitors. But it made it super easy to have sign up to my newsletter in the bio of your Twitter profile.
And this was back when Twitter was still really crushing it, at least from the outward looking in. So bloodbath of competition, a lot of established players, a lot of flashy players, big techs getting into it.
And then I think people hear newsletter and they think of theSkimm, The Hustle, Morning Brew, Axios, and they're like, how are you going to build a business? I can name five newsletters. It's like, how are you going to build a business that has a large exit opportunity with a handful of newsletters? It did feel like a very small space. I think it's still underrated for how many people could launch an email, one newsletter, just email as a medium and the channel in itself. But yeah, those were definitely the big pushbacks.
Turner Novak:
I think if you talk to any VC, they're like, oh, media businesses suck. They're not good businesses. That's a little bit of a loaded opinion though, because VCs probably shouldn't be investing in media businesses most of the time, the traditional model. Or at least, there's a graveyard of all these venture-backed media companies, but they're actually pretty good businesses. They have really good margins if you grow them in the right way.
Tyler Denk:
And we're not a media business. We're a SaaS platform for sure, but we serve media businesses.
I think you also in those days too, again, we are pre-product launching. Pre-revenue, pre-users. There's definitely a balance when raising money for the first time of selling the vision of what you think this can be, but then you also get the syndrome of trying to be everything to everyone. At that point you really can. You haven't proven any concept, you don't have any traction.
And so being on the other side of the table as an investor, I think you're looking for some very narrow focus. And our narrow focus at the time was we can do email newsletters better than anyone else. We just built Morning Brew. Substack has proven there's a market here, but the long-term vision is much bigger than just email newsletters.
We have an ad network, we have other monetization channels. I'd love to be able to sell into publishers and businesses. We sell into VC companies that send their customers and portfolio company comms all through our channel and platform.
So the market's just anyone who sends email, but if you say that pre-product, pre-user you sound very scatterbrained, so there's definitely a fine line of focus and go-to-market with a clear path to expanding and it's definitely difficult to do as a founder.
Turner Novak:
And I remember too, the thing I thought was really interesting, which I wasn't sure if it would work or not, but I thought it was an interesting pitch, was you wanted to build this newsletter ad marketplace. Like, a programmatic one, because you had all the data on the backend.
I remember, I think that was the reason I was really considering it. I was like, man, that's huge. If you can figure that out. Faraz at Lightspeed who led your Series A, maybe we'll talk about that later, but he's like, you got to get him to talk about this thing. So what is that? How exactly is that or will that work?
Tyler Denk:
Yeah, I'd say two things just jumped out. One is I think why I keep... One, I'm super competitive and one reason why I keep track of everyone who said no in the early days is it actually is you're so early. It's not like I don't believe, the numbers don't make sense to me, as in you're not showing the right traction or ROAS. It's like a I don't believe in you, which I always find is that is what seed investing is, right? You are betting on the team, which is why I have all of our seed investors get included on our monthly investor updates. It is more of a personal thing.
Turner Novak:
Yeah, they're good updates.
Tyler Denk:
We were just talking about seed rounds, but yeah, to answer your actual question around the ad network, I saw firsthand.
So again, going back to Morning Brew, the largest team at the time when I was there at Morning Brew was the ad sales team, or our brand partnerships, which is basically building relationships with different brands and advertisers. Next was a copywriting team, which would then... Discover signs a big deal with Morning Brew. They give us $500,000 to run five ads in the newsletter.
We take their talking points, we converted into bite size at native ad placements with their copywriting team. We put it into the newsletter and then after the placements go after a bunch of testing and sign-offs, we then report the results of how many people saw the ad, how many people clicked on the ad. They tell us their conversion. And again, we're just like an advertising channel or a medium, us being Morning Brew in this use case.
But there's a lot of steps to that process. There's one, you pick the brand relationships, there's networking, there's sales, there's understanding who your audience is. There's being able to tell an advertiser that can spend money on Facebook or Google or Instagram that their money is better spent to get in front of their target audience because you have a very niche engaged audience that trusts your recommendations and they should give you money to put an ad in your newsletter.
And so the business model works really well. It's how The Hustle sold, how Axios sold, how Morning Brew sold. But those were massive teams and massive processes.
So in seeing that from the inside out, my bet was, one, these brands are having tremendous success in email newsletter advertising, but outside of the big few that you go to, there's a huge long tail of newsletters. And if I'm a growth marketer at Brooklinen, does it make sense for me to reach out to a newsletter that has 5,000 subscribers? Because at a 50% open rate, that's 2,500 impressions and I can get that by putting $20 into Facebook.
So it's just like the juice isn't worth the squeeze for these brand marketers to get in front of this long tail of newsletters. But that long tail newsletter has a very trusted audience of people who like their recommendations, very highly engaged audiences, you just can't get there and vice versa, those people can't get in front of these brands.
So the thesis was can we build an ad network that takes the top brands who want to advertise? So right now we have Netflix, we have HubSpot, we have Betterment, we have BetterHealth, we have Monday.com, very large advertisers who are diversifying away from all of their money being in Facebook and Google and getting in front of these very niche audiences ranging from a few hundred thousand subscribers down to like a thousand.
And on the flip side, as a publisher, I am writing my newsletter that I was going to write anyway and I'm getting an opportunity from Netflix to pay me a $2, $3 cost per click. I get the brand validation of having Netflix logo at the top of my newsletter. I did no selling, no testing, no copywriting, no reporting and money is deposited into my account just from accepting the ad. So it really is like a win-win situation. And once you start using a ton of first party data, we have machine learning engineers building all of these different models, it actually becomes extremely performant and basically tapping into untapped inventory that would've went unsold previously.
Turner Novak:
And to your point, you just continue to run your newsletter however you might've done it, and its just free money as long as you are hitting all the thresholds and delivering on providing a good product. So it's a win-win. And a triple win, win-win-win, because beehiiv makes money too.
Tyler Denk:
And really for us, what makes us different is there have been decades of email service providers where it's a cost of doing business. You pay Mailchimp $700 a month to send emails.
Where I think we have a very interesting opportunity is you might pay us 2, $300 a month, but we may be paying you 2 to $3,000 in earnings from our ad network and our other features. So when you go to just pure SaaS business and stickiness and churn, not only is all of your data and processes built on our platform that's extremely robust, but by churning off of our platform and having to migrate to another one, you're also leaving your primary revenue stream behind. It becomes extremely sticky to turn off that product and we're starting to see a lot of signs of that as well.
Turner Novak:
And you do something else I think that you guys also make money from. Boosts is what you call it? I think that's the current name? Can you describe how that works and then how do you and the publications make money?
Tyler Denk:
Yeah, so it's basically a paid recommendation network. And again, a lot of our roadmap comes back to experiences that we had at Morning Brew.
At Morning Brew we saw, yes, we put a ton of money into Facebook and Instagram and Google and Snapchat, but one of the highest quality readers, again for us, our North Star was we want to convert new readers to the newsletter that have a high likelihood of opening, reading and clicking on different content or ads. So we're looking for quality readers who are engaged. And it makes perfect sense that the most quality readers who would be interested in our newsletter are probably opening their email and reading other email newsletters.
So one of our largest acquisition strategies became, can we find other newsletters that are not competing with us but tangential that are our target audience and advertising them? So we would do co-registrations, we'd swap recommendations, we'd give them a free shout-out, they'd give us a free shout-out.
But that was a home run in terms of acquisition. So that was a known fact going into the beehiiv experience that enabling newsletters to find other non-competing newsletters and promote their product in there was a winning strategy to grow.
And then we'd also have a ton of large newsletters like the Milk Road or other larger media businesses that were on the blitz scale, like we need to grow as quickly as possible path to scaling a email newsletter. And they would come to me and say, we're spending $15,000 a month on Facebook ads and we're starting to see diminishing returns. Is there anywhere else you'd recommend where we could spend money?
So there was a clear use case for these newsletters to want to grow quicker. They were already doing Google and Facebook, but they wanted to tap into new channels. And I already knew that newsletters were a very high quality, high conversion channel.
So that makes perfect sense as it's another way to grow faster. And then where it's smart is on the flip side of that, newsletters are making 2, 3, $4 per lead simply by recommending other newsletters. So you have one side of the two-sided marketplace growing faster, which they wanted to do anyway, and paying competitive rates, you name your own price and you have the other side just simply using our product and being a part of the ecosystem, making money, also something they previously weren't making money passively.
And then we take a 20% to answer your question as far as the business model.
Turner Novak:
Interesting, yeah. So you make money from people, just from the core SaaS fee. I think you have different packages, I forget what the pricing is, but it's below a hundred and then a hundred or a couple of hundred a month for different packages.
You then also make money from the ad network, which it seems like that's, I don't think I remember your latest investor update, but it's decent size, it's starting to work.
And then Boosts also you make money from that, from new recommendations.
Tyler Denk:
I'm extremely transparent on all of our numbers, both on Twitter and updates everywhere. So by the time this is released, we'll probably be at a million dollars MRR, and that's the pure SaaS business. The ad network is probably about a half a million a month right now in terms of revenue, ad sales around 600, $800,000 a month. So that is dollars coming in from a Netflix, from a HubSpot, from whatever else.
Turner Novak:
And that's your cut or that's the total transaction volume?
Tyler Denk:
Technically from the accounting basis, revenue is... There's the revenue which is dollars moving from brand to us and the publisher and then we take a cut of that. So the profit would vary between 10% and 20% is typically what we're taking depending on supply and demand.
So Netflix, everyone wants Netflix ads, so there's higher demand there. We can take a slightly larger cut. For other advertisers that are less known, we take a smaller cut. But totally fluid marketplace essentially. And then Boosts is a million-dollar business per year right now, and that's purely our cut. That's not like top line.
Turner Novak:
Got it. Okay. So if people are paying you about a million a month for software, it sounds like maybe on ad share you're paying out about $500k roughly. Maybe I'm missing this. And then on the Boosts also maybe a little bit smaller, but it sounds like you're almost basically paying out what you're charging your customers for the software.
Tyler Denk:
It really is our North Star. There is how many people are paying us, which is the classic SaaS North Star.
And for us, where I think it's interesting is how many people are actually making more of revenue through our tools than they are paying us. Because that, one, that gives you a ton of pricing power to increase prices, as long as there's a delta, but not even increasing prices, just as far as reducing churn, tons of stickiness in terms of being able to pay out more than what you're paying us.
Turner Novak:
Yeah, interesting.
Okay, so I don't know if we ever actually finished this. So you closed out the seed round. How did that go? I know it sounds like it took a while just based on the time. It took a couple of months. How did the seed round go?
Tyler Denk:
It's funny because it was time boxed. I lived in LA for the summer. I was living in New York at the time and me and some friends got like a Hamptons house. We got a Venice house in Los Angeles, and so it was like six of us living in this house for the month of July in 2021.
So very easy for me. I came in with the goal of I need to raise money this month. My top focus is raising money and we left the month with a term sheet from social leverage. So it was about a month process. So I guess all things being considered fairly fast but feels like hell in the moment as anyone can relate that's raising money of just repeating yourself. Also, just a funny time waste in my life where I'm living with my six best friends in this house. I have a job, full-time job at Google.
Every waking free moment that I have, I'm just repeating myself in this living room for all my friends.
Turner Novak:
They're like, shut up, quit. I don't want to hear this anymore.
Tyler Denk:
But it's just funny how it works out that it was a month's lease that we had and the goal for me was let's raise money in this month and we hit it. So that was the timeline.
The money hit our bank sometime in August. We went full-time. I went full-time immediately and then my two co-founders joined probably a month later. This was back in the walking on eggshells with Alex and Austin time where I was like, hey, we raised money. They're my co-founders. We need to start building this thing. And give a little bit, get a little bit. We gave them an extra six weeks to work at Morning Brew to make the transition smoother.
Turner Novak:
And I definitely remember, like I said, it was just Austin was like, don't invest. And I mean I'm not going to pretend like I was going to invest 100% anyways, but it was just like that was the hard. It was like, all right, I mean he knows he's still the boss. He's saying don't do it.
And I think we mentioned earlier it's just like I think the power of checking references, it is super important to get the feedback on the people who worked with them previously for three and a half years. But I didn't know the full story around everything that was going on. Maybe if I would've known the full story, I would've maybe poked a little harder. But I don't know. Big mistake.
Tyler Denk:
I really just wrote a newsletter on the pre-launch days because the amount of anxiety I lived with day to day, right? One, I just have, you have your full-time job, which takes up a decent amount of your time. And then I have this vision of like, hey, I actually think... I love startups.
I've always wanted to build my own company. I've obsessed with this. And I see an opportunity of like, hey, I think there's a real shot. Put our heads down, build something, compete and build a successful business. But those opportunities don't last forever and it's a shifting market. So what we went to market with as counter positioning was we have a referral program built into your newsletter program.
Turner Novak:
So that was the initial sticky thing.
Tyler Denk:
It was a very competitive space. And for us, Substack didn't offer it. All the traditional ESPs don't even think about growth. They just allow you to send emails. Everything outside of sending an email is outside of their wheelhouse. For us it was we can do what Substack does out of the box, you have a website, you have a newsletter, but our kicker is we're going to ride the momentum of Morning Brew success and you are going to have a referral program built into it.
Again, now it's a bit more commoditized, but that was our counter positioning. But if you can imagine the stress of 10 months of building this at glacier speed, because it's nights and weekend for me and my co-founders, and then there's Substack who just raised $65 million who sees the success of Morning Brew and the Hustle, these other growth-driven newsletter companies.
And in the back of my mind I'm thinking they're going to launch a referral program and that goes our entire go-to-market counter positioning. So the amount of anxiety of building something very slowly against a fully funded full-time team.
And I'm battling egos with Alex and Austin who are my good friends and former bosses at Morning Brew, but I'm also taking two of their four engineers to co-found this company with me, and there's legal implications. I don't know if I'm waking up with a non-compete or a non-solicit. And there's just a lot going on while having a full-time job, while falling behind in this market, while also having this dream vision of I think we could do this and pull it off and build a business, but each day that we're not full-time heads down on this is like we're getting further and further away from being able to compete. And it's just a ball of 10 months of anxiety.
Turner Novak:
And then you did launch. What happened with the launch? How'd it go?
Tyler Denk:
Good. So one of the things when we raised our seed round, so for anyone listening who raises money pre-product, I tipped our hand on Twitter and was like, hey, I was previously built this at Morning Brew, we're building a product that does Morning Brew in a box. If you have any interest in this, and this is people shitting on Substack at the time on Twitter, where I was like, just put your email in, collect a little bit of information.
So I had a wait list and we got 450 people on the wait list from that tweet. So that's what I went to investors with. I was like, it's not the biggest thing. It's not like a trillion dollar market in my hand, but 450 people that have showed some level of interest in wanting to use this product. And I had 2,000 followers at the time, so decent conversion there.
So when we launched we contacted all 450 of them. Obviously conversion was super low. They were interested at the time, but picking up and moving their email list.
The other cheat code that we did for growth, which I'm surprised more people don't do more of, is one of the reasons why we had the conversation too, our seed investors and angels all had newsletters, or most of them did. So for example, Litquidity, the meme account on Instagram and Twitter had his Exec Sum newsletter that was using a random email provider. And when we raised money and the first ask is like, look, we just started, we need a little bit of momentum here. Plus we're a very consumer facing product. We have the logo and the footer of built on beehiiv both in the email and website.
So there is network effects of getting large users. It's like the other growth hack is when we convert someone to move over to our platform and they're sending to a hundred thousand readers, that's a hundred thousand people that see our logo at the bottom of their footer. So there's natural network effects in the business in itself, which works in our favor.
And then we had probably two dozen angel investors that had a newsletter of some sort, some put up a little bit of a fight and we're righteously, I have a full business that works on this platform and you just launched a week ago, I'm not sure if I'm going to move my entire business that's generating revenue for me into your platform.
That's why I always give a huge shout-out to Litquidity. No hesitations asked. Our product is so janky at this point, we just launched. He picks up a hundred thousand emails and just drops it right in. We had no idea what we were doing with deliverability, scalability, we've never even sent that many emails and he just starts sending 100K out every day.
Turner Novak:
So he was the big first customer.
Tyler Denk:
He was definitely our biggest first customer. So I always love to give shout-outs because looking back now, there's so many people that stuck their neck out and took a chance. So if something that from a business sense from where they sat did not make sense whatsoever when you're accounting for the risk, but they did it and they put their money where their mouth is and moved over. I also say that because some investors actually didn't, and it pisses me off that we're fighting tooth and nail for market share.
I say now there's a little bit more competition around. Allocation at the time, I would've taken any dollar so whatever, but they had a spot on the cap table and they didn't help support us when we needed it the most. So that's always tough.
But anyway, what I'm trying to get at is for anyone listening, the whole finding who your target user is and having them invest so they have an actual financial incentive to use your product and promote it and you're getting beta users who can then give you feedback and make the product better. Some combination of that with the referral program was our go to market strategy.
Turner Novak:
Yeah, what I think you've done a really good job at is building in public and you've done a really good job of building brand affinity, employee and customer affinity around the product. What do you think you did right there?
Tyler Denk:
A lot of it comes from the insecurities of being a very new product and needing to build whatever narrative that you can that people are actually using this product.
So going back to Litquidity example, he says, hey, I just moved over to beehiiv. It's going great. It's the cheapest retweet you could possibly get from me. I'm like, dude, obviously do that.
And then people start seeing like, okay, I not super happy with Mailchimp or whatever I'm using. I'll try beehiiv. Then we are very design forward and user focused. They have a good experience. They tweet about it, hey, I just moved over to beehiiv, it's so much better than what I was using previously. The easiest retweet of all time from me.
And so you start doing that and it reinforces itself of people moving over, having a good experience, sharing it, knowing they're going to get a retweet from me, my co-founders, our house account. And then it builds this narrative on social media that as an innocent bystander scrolling through your feed, you see seven people just moved over to beehiiv and it kind of sets in like, oh, it looks like everyone's moving. It just creates a narrative, the successful product that we're doing.
Turner Novak:
Yeah, even if it was only seven people, but if all seven of those are elevated, people are going to be like, "Holy shit, beehiiv must be amazing. Everyone's talking about it."
Tyler Denk:
And especially at the time. I have noticed, Twitter's definitely changed a bit in probably the past year in terms of engagement and whatever, but like early days, it was hot and we just very easily created this narrative of everyone and your mother was moving their newsletter over to beehiiv and having a tremendous success. And we would fuel that. So that's part of it.
Part it is, we ship a lot of new features and that comes from like the insecurities of, yes, we launched. But we are missing 20 of the largest features that every other competitor has in this market.
So the only way to be able to communicate that we are working on it is, we ship as quickly as we possibly can. We send an email to all of our users that says like, "Hey, we just launched this feature," but it's custom fields or automation.
So it sends a signal to users who probably were aware that you were missing that. Like "Hey, you don't need to churn, we now offer this.” It kind of reassures the existing users, but then we promote it on social, have a bunch of people share it, and it becomes like now, people who are looking at our product, they're like, "Oh, they don't have automation yet, so I can't possibly move my email program over, that's very dependent on automation."
Now, that we've projected into the broader ecosystem that we do offer that, now it's a lot of people being like, "Oh, they just launched something that was the blocker for me, so now I can move over."
So it's like churn reduction and then also just top of funnel awareness. But then when you start shipping features, two to three new features every single week and you keep doing that, then the narrative shifts from like, yes, they're still missing 10 things, but they ship so many features that by the time I migrate over, they'll probably have already addressed those 10 things. And they're very aware that they are missing things and they're addressing them as quickly as possible.
So a lot of it's like psychology and narrative and just building that type of momentum. A lot of it is trying to convince people not to churn because we are listening to them and building things and then trying to convince more people who were blocked that we're totally aware and prioritizing things that they were previously blocked on.
And then I guess like the last element of building in public of everything from sharing like different milestones and hiring strategies and our philosophies is, if I only tweeted about email newsletters all day, that is like a very small segment of the world who actually gives a shit, about like how to grow your newsletters quickly as possible or the best growth strategies.
But if I expand to like this is how we hire, this is like our onboarding philosophy, here's like the milestones, here's like the difficult decisions we've made of how we've structured our team, that now appeals to a very large base of people who are just generally interested in entrepreneurship, startups business, and that's a much, much bigger market.
And so if I can win the ear of someone who's just interested in startups and entrepreneurship, because they don't give a shit about emails, but they're very interested in how we run this remote first company, then like I have a fan in them. And when they're at a dinner and someone talks about their email newsletter, they can easily be like, "Hey, I follow this guy, Tyler. He runs this company, beehiiv. It seems like they have this whole product roadmap development thing down. I think you should give them a shot." It's really just kind of spreading and expanding like the luck surface area of people who could potentially follow you to potentially be a future user.
Turner Novak:
Well, yeah, that's another thing I remember seeing in the updates you send out. Because you have your investor updates that you send, which I think is a private list, but you have your public public email. Big Desk Energy I think is what you call it. It's kind of its own media company.
One of the things I think you've said in there is like you don't do meetings on, I think it's Tuesday and Thursday. How do you guys structure your weeks and just product development process and all that stuff with these hardcore no meeting days?
Tyler Denk:
I've definitely taken bits and pieces from my time at Google and applied lessons from Morning Brew and Google into what we do today. In the peak of COVID at Google, I think Sundar one day did like a mental health and wellness day. Which was like, one random Friday, three-day weekend, and everyone thought that was the coolest thing ever to be appreciated for working hard and having an extra day off. So we adopted.
We do that every single month at Beehive. We have the third Friday of every month like wellness day, so guaranteed three-day week every single month. And then there was another thing of like no meetings where a lot of it comes from the early DNA of the company of just being engineers who needed to build. We didn't need meetings. But eventually we hired someone on support and community and growth.
There needed to be a little bit of meetings and you like very quickly realize how context switching totally kills all productivity within a small business. So we did no meetings on Wednesday. And we would always leave Wednesdays, and people would look around and be like, "Dude, I just got so much done. Everything I was building up from Monday and Tuesday, now that we didn't have six meetings to jump into and discuss all these things, like entirely cleared my plate on Wednesday." And one day someone's like, "Dude, I wish I had Wednesday but like twice a week." And no hesitation, done.
At this point, we're 50 people, so it's kind of hard to change it.
Turner Novak:
Wow. Yeah.
Tyler Denk:
I listen to that and I go, "Dude, say no more. Tuesday, Thursdays, focus days." And I made sure everyone moved all of their meetings around.
So there was absolutely zero meetings on Tuesday and Thursday, and it's still not enough. If I could do five days a week no meetings, we would be so productive. But then you start to really play with, we're entirely remote. We have meetings where we have a very light fun culture. People get to know each other, and it's very limited in the ways that you can get to connect with your co-workers when you are entirely remote across 10, 12 different countries.
So when you pull all of that fabric away, it's like what's left here just on your computer coding. Maybe you're the most productive person in the world, but you have no idea about anyone else in the team. So I'd say that's a delicate balance. But yeah, right now, on Tuesday, Thursday is no meetings.
Turner Novak:
So this is just broadly a question from a mutual friend. He's an investor in beehiiv, Sasha Kaletsky at Creator Ventures, on just the thread of remote work. You have made it work and I think it's your opinion a well-run remote team will beat an in-person team, 10 out of 10 times. Why do you think that that's kind of a hot take now? We've kind of shifted back and then how do you do it? What's the secret of a well-run remote team?
Tyler Denk:
I don't know if I'd say 10 out of 10 times. There's definitely something amazing about being with other people and we do our annual off-site. It's incredible to chat with other people.
I think when I say would win 10 out 10 times, it's not like maybe the best performing, but if you're going to consider the broader scale of retention and employee happiness and morale, if you were to say that I had to show up in an office nine to five and commute 30 minutes both ways, that sounds so horrible than like building my own schedule. We have an engineer right now that has been in Switzerland for the past two weeks and now, he's surfing in the north shore of Spain, shows up to meetings, gets everything done perfectly fine. It's an outcome-based business, but he has the freedom and flexibility to travel to spend time where he wants, with who he wants without being tied down to a location.
So I think that's one element of just like lifestyle. We attract people who want to work autonomously and care a lot about their work and don't need someone over their shoulder to make sure that work is getting done. And I think that's like the type of people you kind of want to build a business with.
But there's also just the talent pool aspect. Like, if I were to hire our entire team within a thirty-mile radius of Los Angeles, this company would've failed three years ago. This is like so hard to find talent density, right? But the total opposite of that is we open up a product designer role, and we hired someone in India who's remarkable. She was the best person for the job. And thinking through where do they live is such a distant and archaic way of thinking about like how do we get the best person on our team contributing to what we want to do.
So I think it's some combination of lifestyle, happiness, retention, and then also just finding the best available talent regardless of where they live. How we do it is like, there's a lot of subtle psychological things and ways to format the company. Again, going back to the fact that one-third of our team is engineers. Engineering is so output-driven. It is, here's the four features that we're launching next Thursday. Here's the six engineers in charge of that. And it either gets done or it doesn't. But there's nowhere to hide.
I don't care if you watch movies all day, if you could get your work done. Like it's an output-based business. Can say the same with support, right, both quantitatively and qualitatively. We have, how many tickets are you responding to and then your CSAT score, our big quality responses. And then for growth and marketing, there's like we need to grow faster. Here are our sales objectives and output. And are you delivering or are you not?
So without micromanaging, it's just like shit either gets done or it doesn't. And if you aren't going to get it done well, we will find someone who can get it done well. I think that is just like this shared attitude.
But then on the flip side, everyone at the company has equity in the company. Everyone's a shareholder. I've run the business incredibly transparently. Everyone knows how much money we're making, everyone knows how much money we're burning, everyone knows the bank account. I don't hide when there's things that aren't working. It's not like, oh, this might hurt morale.
I send a weekly email to the team and there's probably more complaints in there than positivity. But I want everyone to know exactly like what is not working at the business because we hired really smart people and we hired them and trust them to help solve these problems, not to hide and shield them from them.
So, kind of a long-winded rant of, one we’re very outcome driven. Two, everyone is extremely bought in and those are the people we're looking for. Everyone's a shareholder in the business.
And so part of the storytelling is, I think, we can build a multi-billion dollar business and you own 1% of that business. So like even selfishly for yourself, what does that mean for you financially? And it's kind of a lot of being a founder, just storytelling.
And I've been saying that this is a multi-billion dollar business back when there was five of us, and I don't think anyone outside of myself believed that. Now, as of like April, May, we're a quarter of the way to a billion dollar valuation. So it's a bit more believable, but some combination of all of those things.
Turner Novak:
So it sounds like just hiring the best people for the job is just a key part of that. Just so that you know you can shift from like, an ass in seat model, like a nine to five model, to an outcome-based.
How do you hire people? What are you looking for and what's the process?
Tyler Denk:
I think anyone who listened to my rant there of like the type of work culture we're looking for, it either repels you as in, "I want to do nine to five, I don't want to be held accountable for the outcomes of the quality of my work." Not in a bad way, but some people just want to plug in. Work is not the most important thing.
But some people hear that and say that... Like we hired someone out of college who is 20 years old, and he was shipping production code that was like touching tens of thousands of paying users and making a huge difference, like within weeks. And if you want that type of autonomy and impact, that is kind of what we're selling.
Another example, we have an engineer who spent three weeks building a PWA feature, so basically turning your newsletter and website into a mobile app. And we launched it, and probably 500 people on Twitter are boasting about how awesome it is.
And the CEO and founder of Vercel is like, this is an excellent example of like PWA being used smartly.
And here's this engineer, just spent three weeks building this feature, and is being praised and recognized by CEOs of other multi-billion dollar tech companies.
And so it attracts the type of person who wants to take control over what they're building, wants to make an impact and wants to be praised for the work that they do. And some people love that and thrive and there's enough of them. Some people don't want the accountability and they're probably just not a great fit for the business. And that's totally fine.
Turner Novak:
So one thing, I think, that you obviously care a lot about the team, you super passionate about making sure everybody is successful to join to beehiiv. You're incentivizing people, giving them equity in the business. I think a really, just crucial compelling part of the story of beehiiv is your co-founder, Andrew, can you tell us what happened there?
Tyler Denk:
Yeah, I can add a bit more context too about who Andrew was because I mentioned two co-founders. So Ben and Jake were two engineers I hired at Morning Brew. Software engineers. Incredible. They were like the OG, us three.
And then somewhere in that weird period of stress and anxiety of 10 months of building, there's like, oh, there's so much to build, and Ben and Jake are married. They're going on vacations. I have my own full-time job and you don't want to lose the magic of, we need momentum to build things.
And so I reached out to this guy, Andrew Platkin, who was my advisor at Morning Brew. I guess even to take a step back, when I was saying I'm 22 years old at Morning Brew, just making all of these decisions. One, awesome, but also Austin is smart enough to recognize, maybe we should get like a technical advisor where Tyler can ask questions and figure out that this 22-year-old is making engineering decisions as a self-taught developer, doesn't destroy our $20 million business.
So Austin reached out to his investors, introduced us to Andrew, who was basically my unofficial technical advisor. He didn't get paid, but he was kind of a person I could reach out to and be like, "I have no idea if decision A or decision B is the right decision. I'm 23, building this on the fly."
And he'd be like, "This is how you do it." He also was exceptional at having zero context. And on a Tuesday afternoon, I'd be like, "I think I just broke everything." And he would drop what he's doing at his full-time job in Chicago and fix pretty much everything that I messed up, probably a handful of times.
So I had already proven to me like 10 out of 10 engineer, unbelievably smart, talented, ambitious. And so in the 10 months as we were building beehiiv as a side project, just kind reached out to him with like, "Hey, would you be interested in building this company with us?"
And at the time, he had an opportunity to work as a CTO. That fell through. And it was very interesting because Ben and Jake, again both married, basically both selling them the vision of, we're about to be our own boss and you guys are co-CTOs.
And then all of a sudden, I introduced this Andrew guy and I'm like, "But this guy, Andrew was so smart," and I think it was kind of a somewhat fucked up move on my point, but I kind of pull him over. But Ben and Jake, we worked together throughout that summer. Andrew's like, "I don't want to take any salary. You don't have any money to pay me, but let's see if it's a good fit."
And immediately, Ben and Jake started messaging me like, "This Andrew guy's the smartest person I've ever worked with, like a 10x unicorn engineer." So he ended up being the CTO and we launched November of 2021, built the product, raised our seed round in that summer.
And so Andrew in May, beginning of May, ended up passing away. So May of 2022. At the time I think we were six employees. So to put a time and a place and a feeling into, it was, one, it's so hard to build a startup and here we just raised two and a half million dollars. We have product market fit, we have like $20k MRR. There's a path forward of momentum. And granted, selfishly, my entire livelihood and wealth is tied into this business, and we have something here that's magical and working.
And then Andrew passed away in the beginning of May of 2022, and that was like a huge gut check. One like, the bus factor quite literally. He was owning shit that no one else knew how to build. We also just had hit our first scaling issues ever as a company when that happened.
And then we also just were riding such momentum, but everyone knows how fragile the company is. At almost $2 million a month, I still feel like the company is incredibly fragile. I think you kind of feel that way up until acquisition or you're so 10 years into the business.
Turner Novak:
Yeah, you're the chairman instead of the CEO or something.
Tyler Denk:
There's always tons of anxiety around just building a business and the fragility of it. and losing someone like Andrew was, one, again, a 12 out of 10 engineer.
But I think there's a lot of what we do really well that kind of shines through from that experience. One, going through something as absolutely terrible as that. Nothing else in comparison feels like a huge problem, I'd say.
Two, like to have four engineers quickly teach themselves new coding languages in all of the contexts while we're having scaling issues, while all of our users are completely just complaining about lack of functionality or whatever else is going on, huge gut check in the business.
And so you can tell that it is harder for me to talk about it. Whenever I bring up Andrew, it's still very, very top of mind and a difficult thing to chat about.
And I think what you wanted to get to, after he passed away, we gave him, he had a sizable chunk of the business, but because he, typical founding vesting schedule, the one-year cliff, four year vesting, he actually wasn't with us for a full year, just from when he signed on full time. And so we actually ended up accelerating his vesting and then giving it to his mother. So that's a part of the company. She's a shareholder in the business, which is great and super motivating.
But obviously, by far the worst thing that's ever happened both in my life and for the company, so.
Turner Novak:
Yeah, I mean it's a good thing to reflect on.
Getting into maybe a little bit a different topic, so I know that you never really wanted to raise more money. You were just kind of like, or break even, business is in a good spot, don't need to rely on VCs, but then you ended up raising a Series A, pretty quickly. What's the story there?
Tyler Denk:
Yeah, so a lot of things there. One, I respect a hell out of businesses that are bootstrapped. I think, again kind of goes in line with the no meeting, kind of no bullshit, just like get things done. Not that investors cause a lot of bullshit, but there's more processes, there's more expectation, there's more seats at the table. And so if we could have built the business bootstrap, we would have.
But day one, we're 26 years old and we have to pay vendors 50, $60,000 a year upfront. So raising the Seed round kind of had to happen. We had to hire other people.
Fast-forward, we do an extension round in 2022, and then for the Series A, we had a million and a half in the bank. We were spending about $300,000 a month, but we were also making around $300,000 a month. So we were kind of break even.
And then I think our first time we've ever shot ourselves in the foot, we did something with deliverability or IP, whatever, and basically deliverability dropped for a subset of our users, very noticeably for like two weeks. And they were obviously super pissed off. And it wasn't just like band-aid fix it. It was like, you just kind of have to let it play out for two weeks. It was just two weeks of people just bitching at you every single day. And they happen to be our most valuable users.
And I think it was at that moment, it was a real wake-up call. It was like we have $1.5 million in the bank and we're spending what? 20% of that every single month. Granted, we're also making the same amount, but that's making the assumption that you're going to continue to make $300,000 a month.
If you saw a huge wave of churn, which didn't happen in this situation but very well could have, it kind of showed the fragility of the business. I was like, my job of CEO is to ensure we have enough money to keep building and if worst case scenario this fails, we have enough money to keep pivoting and trying different things because we have smart people. And it was a real oh shit moment of like, we are much more fragile than I think we are.
And then at the same time some other competitors in the space we're reaching out to our top users and offering the $10,000 advances to move to their platform.
And it was at that moment where I was like, oh, shit, we're under capitalized.
We could have the better team and the better product, but we can just get run over by the competition who's been around for 10+ years or has tens of millions of dollars in their back pocket and just pluck off our top users and have us die a slow death.
And it was at that realization, I was like, we're way too vulnerable from where we are. So that's what led to us raising $12.5 million in 2023, I believe.
Turner Novak:
Yeah, so it was really a function of, it was good for the business. It was a net good.
Obviously, you have to sell some of the company away. You own a little bit less, and to your point of, you maybe have to have a little bit more structure. You have to do board meetings and the less fun stuff. But hopefully, increases the chances of success and what the outcome looks like at the end of the day.
Tyler Denk:
In retrospect, it was a no-brainer. And because I do send this monthly investor update and we have about 250 people on this, including investors who pass, including our current investors, friends, colleagues, I'm constantly projecting our milestones, our revenue, our growth, these big users who are signing on. Which obviously leads to a lot of people reaching out, being like, "Hey, we'd love to lead your Series A," or like, "We'd love to invest in the business."
So I had been fighting off investors for months. It sounds like it's a good problem to have, right, but investors would come in now and be like, "Hey, we'd love to lead a Series A." And for me, it's like, I don't want more dilution. I don't want more seats at the table. I don't want this. I think we're break even now, and I can see a path forward where slow and steady, we continue to hire one person, scale revenue, higher person, scale revenue and build this business sustainably.
And then you get punched in the gut and you're like, you know what? It's honestly just not... We have such a good thing going with very smart people and an amazing product, I'd hate for a bad month or a black swan event of some AI feature, this totally changes the Gmail algorithm. And now, we're like shit out of luck finding a new product and pivoting with two months of runway.
Turner Novak:
Well, so you talk about the importance of the investor updates, but I know you also think it's kind of not a good use of time to build all these investor relationships. How do those go hand in hand?
Tyler Denk:
Yeah, I guess to clarify, I do the investor updates for me. The first investor update ever was kind of like, oh, we just got two and a half million dollars. I almost felt like I owed them something as an acknowledgement.
I've invested in a few small companies and when they take the money, I just never hear from them in six months. I'm always like a little confused like, well, is it working? There's like a seed round. You have users yet.
And so after raising the round, I was like, I think I owe them an update of here's the roadmap, here's the game. Basically, they're on our team now and here's the plan of how we're going to figure the fuck out and grow this business. And so that was the epitaph for it and I sat down and wrote it.
I realized my brain is firing in so many different directions at all times. It's really hard to keep track of like what are our priorities? How are we being held accountable? What did we build last month? What are we building this month?
So I found the exercise of writing the investor update to be very helpful in formulating my thoughts, but then I also send it to the entire team. Again, going to the transparency thing, right now, all 75 employees know everything about our business. They get the investor update as well. So one, it just aligns priorities from everyone at the business. This is what we're focusing on, this is how we did, this is how we're going to do it next month.
And then also keeping the investors updated. Because it also, to your point, allows me to brush off investors very easily as well. If I get introduced to someone, they're like, "Hey, would love to raise or lead your Series A”. Honestly, we're not raising a SeriesA. Not really interested. But I'm not going to keep you updated one off. I'll just add you.
It's like, honestly, she could have saved me my time. I just add them to the investor update and now at the end of every month, they have full transparency and understanding of exactly how our business is doing. So I don't need to do a one-off coffee chat with them. So it's kind of like a cheat code.
I think I learned it even at Morning Brew. At Morning Brew, when we would get dozens of people reaching out, being like, "Hey, how'd you build this referral program?"
For the first 15 times, I would schedule an hour call and just walk them through how we built this, because I thought it was cool to share that type of thing. And then I was like, dude, I've wasted 15 hours talking to these random people about how to build this. So I spent 10 hours, I wrote a blog post of exactly how we did it. I published it. Anytime someone came to me, send them to the blog post.
So kind of the same philosophy. Anytime someone wants to build the relationship or learn about the business, you can learn about the business through the investor update. I'm just going to keep building the business.
Turner Novak:
Is there a link to sign up for the investor update anywhere? We'll throw it in the show notes.
Tyler Denk:
Yes and no. So I now open... The live investor updates that I send to our list of 250, that's private, but I have in sourced the old one so you can sign up and receive it each month.
I think as a startup nerd, I think it's the coolest thing ever. You put in your email and you get like month one, September 2021 of what we did, revenue, what our focus is, and then every single month after that, you get October, November, December, January. So you actually do get a monthly update. It's just two years delayed.
So it kind of protects us. We're not sharing the secrets in real time, but it's almost as if you invested in our seed round and are kind of following the journey.
Turner Novak:
Interesting. Okay, cool. Well, yeah, we'll throw a link in the show notes for people to sign up. And that is, I'm assuming built on some of the automation on beehiiv.
Tyler Denk:
Entirely on beehiiv. I think that kind of gets into like the whole building in public on my product.
So it's the most meta thing ever. I'm not just like building in public and sharing like, oh, this is how we're building this business and how we're hiring and everything. It's like I'm doing that on beehiiv. So I'm sending a weekly news letter out. I'm open sourcing and sharing our investor updates. Literally, I copy and paste it from like... I love it. I copy and paste the exact thing that I sent at that month into this automation that you get each month.
And so for example, I just moved over August of 2022 the other day. So two years ago, basically to the day I sent this email. It was three months after Andrew passed away. The company was in flux and in the update it takes you back into the moment.
It's very nostalgic. We just hired a new CTO. We hired a chief of staff. Both are with us today. We launched five product updates in a single month, which we've never done before. We had four engineers and we launched five huge updates in a single month.
So I think one, it's super nostalgic. Two, it shows a lot of resiliency like three months after Andrew passing away that we were able to have that output. It's really cool to see, like that was like a huge inflection point of the business. And there's also a gut check now. We probably launched two big product updates per month. It's still a lot, but it's like we have 75 people now.
Turner Novak:
You're slowing down. Yeah.
Tyler Denk:
There's actually just like more process and when we launch something, it impacts 20,000, 30,000 active users. So you have to be very considerate of how does it impact the 40 other things that we built previously.
In those days, it was the Wild West. But it is a gut check to be like, Hey, people complain now that we're moving too fast or whatever internally. Back then, we moved 10 times as fast. I was answering support tickets and we still figured it out.
Turner Novak:
So what is the secret to moving fast? How do you stay nimble even, I mean, some people might say beehiiv's small, some people might say it's big depending on what perspective you have. But how do you stay moving fast?
Tyler Denk:
There's a lot of different things that we do. One is that, again, the core team was me and two engineers, so three engineers to start. So when you say moving fast, I think ultimately what you're saying is we launch products and features very quickly.
We listen to customer feedback. We run a very tight agile process and that's because one-third of the team is engineers. It's always been that way. The DNA is like a ship and the DNA is always the urgency that I saw in the 10 months leading up to launch is we're putting in 10 hours a week and there's companies that have $65 million in their bank account full-time. We are so behind and we have so much to do. So there's a sense of urgency that I think percolates through me of, until we own a lot more of this market share, there is so much more to build.
There is cheat codes like we only typically hire full stack engineers. So I think depending where you come from, if you come from a large company, when I was at Google, there was a front end engineer, there's a backend team, there's a designer somewhere, there's a QA person. And so now the backend team's waiting on mockups from the front end team and the front end team's waiting on mockups and wire frames from the designer. And then we're not launching, because the QA team guys on like PTO and there's just so many handoffs and meetings and the meetings add up so quickly.
So I'm very fortunate that both my co-founders and all of our early engineers both had an amazing product sense. So I didn't need to break down this is how the user would use it. It's like they get it, they see the feedback from our users, they have intuition about how to build it, and they did front end and they did backend and they wrote test and they QA'd.
So if you can find I guess what you would call a unicorn engineer, but someone who's front end backend and somewhat design and product focused, which is again, difficult to find. We were very lucky that two of my co-founders are that exact thing, that saves you so much meetings and hiring and process and back and forth.
And when you have a very high bar for hiring, in the early days, again, I have the anxiety that we are so far behind and have so much to build. So I just want to hire more engineers and maintaining a high bar of the quality of engineer that you're extending that offer to was also probably one of the most difficult but biggest cheat codes.
There were times where I was like, "Hey, this person seems great." We have so much to build, we can't get feedback fast enough. Everyone is just responding with everything that they want built in this product. And we have four engineers. This person seems pretty smart. They come from a good startup.
And the amount of times that either Andrew or our most recent CTO, Noah, would be like, "Honestly, just not a perfect fit for what we're doing." It's really hard to hear that, but as I've seen it play out, when you do find that 10x engineer that you finally extend the offer to, it's such a level up and worth waiting to find the right person. So those are a few of the cheat codes I'd say.
Also, I think there's also a philosophy of perfect kills all momentum. And the classic, I think I just put in my newsletter of the Reid Hoffman quote of “if it's perfect, you shipped it way too late.”
Unless it's touching money or something that's very fragile, we knowingly ship things probably 80, 85% done. Not blatantly missing something, but not entirely polished because the last 10% can take so much time with guessing of how would a user use this? Or what do you think they want to do?
Where you can actually just short circuit all that by getting it in their hands and they'll tell you right away. We launched our product today, we did four days of QA, I think it's pretty polished. And immediately 10 people say the thing that we weren't even thinking about is actually what we're missing. And so now we're testing it today and tomorrow and it'll be there. But we could have spent another three weeks trying to guess that and not got to the same conclusion.
So I think there's an acceptance with good enough and getting in the user's hands where a lot of founders are scared of negative criticism. I send these product updates, I get 40 people telling me what's wrong with the feature, and rather than that hurting my ego, I just synthesize it, put it into a doc and send it to the engineers and they fix it. And a week later I respond to them being like, "Hey, we addressed all those things." It actually adds a lot more user loyalty and openness to listen to their feedback and it got us to a better product in a quicker amount of time.
Turner Novak:
Yeah, that makes sense. So one thing I think you're known for is never taking days off. But there's one time you did take a day off. What happened that day?
Tyler Denk:
I actually don't never... One thing I do, I mean, I'm super into my work and love what I do, but I also get my eight hours of sleep. I surf, do yoga, take care of myself. So I definitely try to... It could be misconstrued that we are so output driven, we ship so much, we're looking for this certain type of person and the founder never takes days off, that it seems like a terrible of a place to work, which is not the case.
But in this story, I went to a bachelor party. This is the classic, the infamous GoDaddy story, which is also I think an amazing lesson in understanding where your weaknesses or vulnerabilities are as a business. You should know any day that you wake up, if Stripe goes down, you're not accepting payments unless you have a fallback. But I think every founder should know there are blind spots and what if goes wrong or a certainty that you thought was certain suddenly becomes uncertain that the business would run into a shit ton of problems.
And for us, which we learned the hard way was we previously purchased beehiiv through the DNS of GoDaddy and we had them hosting our DNS services and whatnot. I go to a bachelor party in Cabo, don't check my emails for eight hours.
Apparently one of our users was a malicious user, and sent a phishing link that got rerouted to our server, which got rerouted to our web hosting, which was GoDaddy and their security team flagged it. And they gave me a heads up, a 24 hour heads up, which I missed traveling, and then they just shut down our DNS beehiiv.com working as an email or not even as an email, as a website.
Turner Novak:
So the entire product just did not work?
Tyler Denk:
So slowly, again, I'm playing beer pong, I'm drunk in Cabo with my friends, I'm kind of checking in on Slack, because I can never totally detach. And the engineers are kind of like, "Hey, we got 10 reports of users websites just coming down."
So it was actually happening, not even just our platform, which had been easier to identify, but because a lot of people host their website on the beehiiv sub domain, our users' websites with their users and readers were unreachable. They were slowly shutting down. But the way that I guess the web propagates, it's not all at once. It would be a random subset of people in, I don't know, Washington state.
And so we're trying to debug it, but we haven't pushed any code in 24 hours, so we couldn't figure it out. And slowly everyone's websites started to fall down, including our app and here I am, it's like a Thursday night at maybe 11:00 PM and GoDaddy obviously, if we had an account manager, this would've never happened.
But trying to get in contact with their support and escalate it through their overseas chat support in Indonesia to save the business essentially. And I went full nuclear, I'm tweeting out, I sent a code red to all investors and our investor update. I'm tweeting the whole story of them taking over our account or shutting it down. I'm pleading with this person on chat support in Indonesia like, "If you don't fix this, this entire business is going to go under." I was like, "We have 10 employees and they will be unemployed next week if we cannot get our users websites up, our website up."
And through pleading and finding the emails and phone numbers of every exact person at GoDaddy, finally got the account back in good standing and then moved off GoDaddy the next day. And now I'm very vocal, absolutely hate GoDaddy.
Turner Novak:
Wow, okay. Yeah, because I remember what happened. I either got the email or saw the tweets and I remember I was like, oh shit, this isn't good. But I remember, I think you figured it out within eight hours or something like that. It took a while.
Tyler Denk:
Probably eight hours, but the worst eight hours. I'm also at a bachelor party. I'm drunk, I try to be a good friend, but they all go out to dinner and go out to the club and I'm stressed, shirtless, sweating, confused in this house, trying to get in contact with the overseas chat team. Honestly terrible, but an amazing, amazing reminder of, now we use Cloudflare. I know all of our vendors. We have an account manager with all of them. I know if Stripe goes down that causes these problems, we're aware of them, we can make the trade offs of having backups. But very tough lesson to learn, but very important one.
Turner Novak:
Yeah, jeez. One thing that was from, I think it was Dan Atilla one of the beehiiv investors who's like, "You got to remember to ask Tyler about that story."
So one other thing I wanted to hit on, you've got this, you've kind of talked about your newsletter that you have, Big Desk Energy is the name of it. Why are you writing a newsletter if you have the startup?
Tyler Denk:
Yeah, so it's definitely not my next venture business whatsoever. From day one, well, I think as soon I made the decision that I'm going to build in public and share the story, I've kind of done that through LinkedIn and Twitter and through different mediums, through the investor update. And I always wanted to, we literally have the publications called Building beehiiv.
From day one I was going to send a newsletter weekly, kind of the behind the scenes, it's just building in public on steroids basically is what Big Desk Energy is.
But then you realize as a three person company who's fighting for market share and has a million dollars, there's so much more important things than to write a weekly newsletter about everything that's not working at the business. So I basically punted it for two years and then last November I think I got tricked by the holidays, it kind of slows down a little bit or I don't know, it seemed less stressful and I was like, I have a few extra hours, I'll start this newsletter.
So that was the impetus for it. Now, I love doing it. Saturday mornings I write two to three hours, but for me it's one dogfooding. So it's all built on beehiiv, and I have direct access to the product team and the engineering team, and they typically take my recommendations pretty seriously.
Also makes it so much real. I'll hear on Twitter somebody be like, "Hey, this feature doesn't work super well." We take all of our feedback super seriously, we put it into a doc, we synthesize it. But when I'm trying to do something and it's not working well, I'm super pissed off. So I go, I hit up the engineers, I'm like, "Yo, this feature's build is this, it's supposed to work like this and it's so janky right now." So I think there's a huge difference and a lot of our employees do actually send a team end of week update and end of month update.
A lot of our employees actually have their own personal newsletters as side projects. I think it's such a cheat code to have your employees actually be users of the product, because they can relate to it so much more. Our onboarding experience is actually, every new hire goes through the process of building their newsletter on the platform, with all of the bells and whistles. Some actually continue it, some just do it as the onboarding and that's it. But for me, I get to dogfood the product by building in public.
It's also another success story. So we're almost at 50,000 subscribers in nine months. It's been super fun to use Boost, use the ad network, to use these lead gen, the lead magnets like everything else. And also, I'm super opinionated when something doesn't work, I like to let people know about it. So it's been great.
Turner Novak:
And you have a pretty popular Spotify playlist. I think you started this back in the Morning Brew days.
Tyler Denk:
That's the cheat code that no one knows. Everyone's like, how do you have, I think it's like 20,000 likes on this playlist?
I listen to music all day long when I work. So I created this playlist of songs I want to listen to while I work back in the Morning Brew days. And Neil the managing editor, was like, "Dude, I'll throw it in the newsletter." So that was the cheat code from going from zero to 6,000 likes on the Spotify playlist. Morning Brew being sent to a million people helps that a lot. And then from there it's just kind of grown into its own where people recommend it and now I have the newsletter driving it.
I'm probably the only person dumb enough to have a newsletter built on a Spotify playlist. Very unique for sure.
Turner Novak:
Any new bangers that you've added in the past couple of days, couple of weeks?
Tyler Denk:
Always. People always ask me, how often do you listen to the playlist? And the answer is never. I'm always listening to new music. I'm always doing like R&D for the playlist.
Turner Novak:
Okay, you don't listen to the playlist, but you add stuff all the time.
Tyler Denk:
I'm deep in finding new music and then Spotify, I mean, 95% of the credit goes to Spotify. Their algorithms are amazing. So you go down a rabbit hole of good similar sounding music, you use their radio feature and I'll just find banger after banger, and I'll just add it to the playlist.
So the only time I've really listened to the playlist is on flights, because I have it downloaded and so it's easy to listen to, but outside of that, I'm recruiting for new music out there.
Turner Novak:
Okay, cool. We'll throw a link to that in the show notes too if people want to check it out. What kind of stuff is it? Is it like EDM, rap, country? What's the vibe?
Tyler Denk:
Not rap or country, probably skews more EDM. I call it chillDM. Basically it should be lively enough to keep you focused, awake, and attentive, but not super word heavy or aggressive where it's very distracting. So it's kind of a fine line between that is how I'd describe it.
Turner Novak:
Interesting. So then just generally speaking, going back early days of beehiiv or recent, anything you wish you did differently? You probably hit on some stuff. Maybe we can just pull some prior examples, but what if you could go back to day one, what would you do different?
Tyler Denk:
It's such a shitty answer and reflection and I'm sure I've made dozens and dozens of mistakes, but in talking to other people in the startup ecosystem of how many times they've pivoted or made an assumption and had to backtrack, maybe it's because we came from the Morning Brew days where we've already made those mistakes that Morning Brew and I've had a very clear roadmap of this is what it takes to build a successful newsletter. These are the features, these are the data, this is how users are using it, because this is how we used it. I've kind of had a pretty clear vision for what the product would be.
I'm sure I've made personnel decision. The classic example I think everyone gives is not hiring soon enough and obviously everyone repeats that. There's definitely been a few people where there's a little bit of friction in the early days. And you just hope magically they are going to be a 180 different person start contributing and caring more and working harder. And that never happens and it's always a morale drainer in the sense of keeping them around for too long.
When you are so good at bringing on A players, you actually discredit how annoying it is for them to have to put up with someone who's putting in a C+, B- effort because they care about their work, they're pushing forward 100 miles per hour, and there's always someone who's doing a little bit less. And it's very insidious, but it really kills the momentum and drive of your other A players on the team.
I love the book No Rules Rules. It's like the Netflix book. Very rarely do I recommend, I try not to read so many business books, and some of them are a little cliche. I think the No Rules Rules book, my team makes fun of me, because I always quote it. But I read every chapter and I go, this is the way.
But it just is like, if you do hire the right people and you give them the autonomy and trust and space to do what they do best, those types of people get really annoyed when they're surrounded by people who are not trying as hard as they are. And so you're doing yourself such a disservice by keeping them around.
And I'm a people person. It sucks firing people. It sucks admitting that you were wrong and then also ruining someone else's week, month, career trajectory. It's a really thing to do and definitely the downside of being in this position. But every time I've done it, the amount of DMs I'd get immediately asked being like, "Thank God." It's quiet and insidious, but it's best for everyone and probably for them too.
Turner Novak:
Interesting. Okay, so I mean, it comes back to the talent thing. You got to have the right team in place, people that all have the same priorities and ambition and everyone's aligned.
Tyler Denk:
I mean, that's kind of the realization with raising the Series A as well. It's like, what if AI totally wipes out newsletters and if something happens with Gmail, we have such a talented group of people that with $10 million in the bank, we could figure out something else to do.
But it always comes down to like do you have people who are smart, talented, bought in, and take pride in their work, and that they're enjoyable to work with? I think if you have that as a nucleus, it's hard to do anything without that.
Turner Novak:
Wait, so there's people that think AI is going to eliminate email or what?
Tyler Denk:
I have no idea. I'm just using the Black Swan and no one knows what the Black Swan is before it's the Black Swan. But I at least want to be in a situation where it is so hard... Again, we're across 12 different countries. So the fact that we've created this group of talented people who we're so amazing to work with and so smart and driven shouldn't be taken for granted and to have that go to waste because I mismanaged capital or didn't foresee something that's unforeseeable, which is really what led myself to raising the series A.
Turner Novak:
Yeah, that makes sense. And you raised a series B also a couple months ago, I think you mentioned.
Tyler Denk:
Yeah, the decision with that was actually more difficult.
We had $10 million in the bank still and we were burning about three, $400,000, maybe $500,000 a month. And it became this classic fork in the road where again, my gut is like I love the bootstrap, just slow and steady.
But then you start to realize, oh, we could actually ramp up. The paid spend is working, we could ramp this up and get more market share. We've actually ignited a lot of competitors into space to pick up their pace and work harder. And it's getting actually harder and there's a very path forward of yes, we could inch it out and burn four or $500,000 a month, and we'll close those margins, we'll work towards breakeven. Or we could really step on the gas and really try to win and dominate in this market.
And I think that's the classic tale of VC in general, but it was a very real, I saw both paths and I thought either one could have been the best path forward, but ultimately I think we're just super competitive. We have a ton of conviction in what we're building and I wanted to be empowered to accelerate market share, not the slow and steady and kind of a more heated and contested space.
Turner Novak:
Yeah, I was going to say, knowing you, you're pretty competitive. So if one of the options is like, go harder and win faster, that maybe sounds like what you pick.
Tyler Denk:
There's also a quality of life element too. At the end of the day, everyone on the team is a human that has emotions and other hobbies and things to do and there's friction. And yes, I love the fact that we're very lean. We work really hard, everyone puts a ton of time and effort into it.
But if there's a way where I could have a little bit more confidence, because we have more capital to hire three people that would then remove something off of either my plate or someone else's plate, that makes my life better, makes their life better, and we're probably actually doing that thing better at the end of the day, that's the benefit of being able to spread bandwidth. And if everyone's just working 60, 80 hour weeks and burnt out, that's also not a recipe for success. So there's definitely trade-offs.
Turner Novak:
Yeah, that's fair. Actually, I have one more question. Do you have a favorite founder, or CEO, or just business example from history? You can go back like prehistoric times through today, anyone that you're usually drawn to as like, man, I've learned so much from that?
Tyler Denk:
Probably two who jump out immediately. One is more controversial now, which would be Elon. So I don't know if there's a recent before Twitter Elon and after Twitter Elon, but what he was able to accomplish and his sense of building these businesses.
Anyone who's read the books, character aside, from a peer business acumen, it's hard to refute that what Elon has been able to accomplish is absolutely crazy, totally redefining industries, making it normal to go up to space, making it normal that people drive electric cars when that's been tried so many times before.
The other one, I think Brian Chesky from Airbnb is a total role model CEO. Stand up person, very thoughtful. Going back to the COVID days when he had to do the mass lay off and then created a page on his website on Airbnb of everyone they laid off with their resume and a recommendation of why they should work somewhere else.
I think as far as I love traveling, Airbnb is a beautifully polished product, so I'm a huge fan of the product in itself. But the way that he has built the business and conducts himself, I think is a total class act. And so I think tho balance that Elon answer in terms of new Elon, Brian Chesky, I think is an absolute stud of a CEO and a really product design driven person. That's another thing that's very unique about Airbnb.
Turner Novak:
Yeah, I think you have an interesting way you like to do where you go in the winter. Do you take advantage of Airbnb when you go down there?
Tyler Denk:
Yeah, so I've spent the past two winters in Medellin, Colombia. It's funny because I have such little balance in my life. The way of where I find balance isn't like, oh, maybe I'll end work at 6:00pm on a Thursday and go out to dinner. It's, let me pick up and move to an entirely different continent and kind immerse myself there. And that is how I've been able to find a bit of balance. And I'm also learning Spanish.
But yeah, I've done Airbnbs down in Columbia. It's just a nice, I hate the cold and sounds funny living in LA, but it gets little chilly in the winter.
Turner Novak:
What? Okay.
Tyler Denk:
And a total different culture ordeal to be down in Columbia, learn a different language, meet different people.
Turner Novak:
Yeah, I mean, you realize you're talking to a Canadian and I also live in Michigan, so I'm pretty cold most of the time. For me, LA is pretty good.
Tyler Denk:
That's why I moved out of New York, I just absolutely hate the cold. But it's also, in a way, I was actually thinking about this this morning. When I go to Columbia, it's focused to the max in a way of, I get all of these invites of, "Hey, do you want to come to this standard? Do you want to do this coffee chat? Do you want to talk to this conference?"
And for the four months that I'm in Columbia, it's like default, "No." I'm in a totally different continent. It's not worth the 18 hours of travel to go up to Boston and go to this conference. I'm just not doing it. I'm trying to formulate a post now and just the power of saying no, obviously it's a known thing of focus, but it's one of the hardest things to do, especially as someone who likes people and wants to build relationships.
I understand the value of relationships and I understand when people ask me to do shit and I say no immediately all the time. I'm definitely not the most fun person to invite to shit when I'm always going to say no.
But as far as prioritizing when I'm prioritizing, building this business is by far the most important thing for me. And me going to a dinner or networking event or thinking that meeting this one person's going to be that silver bullet unlocked to get us over the hump is unrealistic. And what I think a lot of founders kind of hang their hat up on is, if I can get an in at this one company and then they promote us on their landing page or do this partnership, that'll be the inflection point.
I think there's a one in 100 chance that every now and then there's a perfect partnership that works for both businesses. But what I've seen that works best is take control of the business and kind of do what you can do and not leave it up to third party integration, partnerships, networking events, and just do the work. And that's worked pretty well for us so far.
Turner Novak:
Yeah, just do the work. The Columbia, it's almost like you're in monk mode. You're just, you go to a different spot, you hole down, remove yourself from the world, no distractions.
Tyler Denk:
It's also just great of it's me embodying why I think it's so amazing to have a remote first company. It's like, now I'm not single, but was single 29, 30 years old, and I can just pick up and live in Columbia for four months, still work the same amount of hours and work on the same projects, but have such a different life experience. I think I know that's not going to last forever. Like five, six years, I have family, kids responsibilities, whatever it is, I can't just pick up and live in a remote country. So really just taking advantage of that.
Turner Novak:
Yeah, you hit this point. I mean, my kids are almost four and eight. I think next summer we're going to try to do some kind of spending a little bit of time somewhere else in the summer when they don't have school. But I mean, there's so much. You've got dance classes, you've got sports, school schedules, after school, your schedule gets really constricted and you can't move. Your kids are in school. You're like, "I'm going to move from this city to this city." It's a big deal. You got to pick your shot.
Tyler Denk:
I think it was just very realistic that this doesn't last forever. I have a bit of disposable income. I work at a remote company and I can pick up and live without kids, family, whatever, wherever as long as the time zone's easy.
Turner Novak:
Yeah, makes sense. Well, this has been a lot of fun. I know we kind of went way over on time, but hopefully people liked it and thanks for coming on the show.
Tyler Denk:
Yeah, thanks for having me. This was great.
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🎧🍌 Inside the beehiiv Playbook with Tyler Denk, Co-founder and CEO