Announcing iContact’s Series B Investment

Eight years ago when Aaron Houghton and I met at UNC, we never fathomed we’d have the opportunity to build the nascent iContact into a great global company based here in North Carolina. As iContact passes 225 employees and $40M in annualized sales, we see an opportunity to do something rare—to build a venture-backed IT company here in the Triangle from start-up to IPO. Today, we’re announcing a critical milestone on our journey.

I’m thrilled to share the wonderful news that iContact has closed on $40 million of Series B venture capital funding from JMI Equity of Baltimore, Maryland. We worked with Allen & Company out of New York as our investment bank advisor in this round.
This $40M comes in addition to the $13.3M we’ve raised so far from our investors IDEA Fund Partners, Updata Partners, and North Atlantic Capital.

We’ll be using these new funds to make significant investments in sales and marketing, back-end technology, our product features and usability, global expansion, and of course our people that drive all of our success.

Over the past eight years we have been on a growth spurt, increasing from $2M in annual sales when we raised our first round of funding in May 2006 from IDEA Fund Partners in Durham to $40M in annual sales today four years later. We have been fortunate to find great people to join us at iContact as employees and investors. We would not have been able to get to this point without the amazing team that is with us.

For us, this is just the beginning of building a company that will be here in North Carolina for many decades to come. iContact’s vision is to “build a great global company, based here in North Carolina, for our customers, employees, and community.”

Building a Unique Company, For the Long Term

We are working on building a unique company, one that sees social and environmental responsibility as additive to success not counter to it, one that invests heavily in building a fun and creative place to work, and one that cares about maximizing value created in the long term not profits generated in the short term.

Our business philosophy says “The purpose of business is to solve human problems and that if we focus on creating positive value for our customers, employees, and community we will maximize financial return for our investors and shareholders.”

We will use these new funds to invest in building iContact into a customer-focused socially responsible high-growth company with a wonderful work environment and company culture. We are glad to be part of the conscious capitalism movement that the B Corporation community is forwarding and wish to provide another example for what a socially responsible company with a great employee culture can become.

Our Three Promises

These new investment dollars will enable us to better fulfill what we call our Three Promises. Our Customer Promise is to “help SMBs succeed and grow.” Our Employee Promise is to “create a wonderful work environment that attracts A+ talent.” Our Community Promise is to “make a positive wake in our local and global communities.”

Our Customer Promise
Working toward our Customer Promise, we have recently rolled out our brand new MessageBuilder to our 65,000 customers and 700,000 users that has been under development for the last year. MessageBuilder makes it extremely easy for anyone to create a beautiful, professional, effective communication. We currently have 110 templates with the new MessageBuilder and will have hundreds more by year end.

We will also be rolling out the brand-new iContact for Salesforce next week, which has been in limited release for the last six months. We acquired Ettend.com in April to enable added event marketing capability for our customers. These product investments are in addition to an upgraded back-end infrastructure, an expanded QA team, and a six person in-house User Experience Team who talk to customers and users to help us design extremely easy to use features and functionality.

Our Employee Promise
Working toward our Employee Promise, we will be moving to brand new company headquarters on October 24th in Morrisville, North Carolina in Perimeter Park within the Lenovo Campus that will allow us to expand to 550 team members.
We have recently implemented on-site monthly massages to add to our list of unique employee benefits like on-site car washes, Bagel Mondays, monthly lunches, unlimited free sodas, and a culture that encourages Nerf gun battles, dressing up in drag, and creative expression.

Our Community Promise
Working toward our Community Promise, we rolled out our 4-1s Corporate Social Responsibility Program which includes giving 1% of payroll, 1% of product, 1% of equity, and 1% of time back to the community.

For 1% of payroll we will contribute $150,000 in 2010 to 501(c)(3) non-profit organizations. For 1% of product, iContact is now free of charge to any North Carolina non-profit to send newsletters up to 10,000 subscribers. For 1% of equity, we have committed 1% of the equity in iContact to the iContact Foundation to endow the foundation with funds to expand our ability to give back permanently.

For 1% of time, we have provided each employee 2.5 additional days off per year to volunteer in the community during business hours. When we started the year, I set a goal of 1000 hours of community service in our first year. iContact employees have already completed 1200 community volunteer hours and it is only August!

Special Thanks

We worked with Brad Wolosen, Jit Sinha, Bob Nye, and Krishna Potarazu from JMI Equity’s Baltimore Office on this fundraise. Brad and Jit will be joining Aaron, myself, and Carter Griffin from Updata on our Board of Directors.

We used Allen & Company to represent iContact as our investment bankers on this transaction, working with John Griffin, Dave Wehner, Kemp Webber, and Michael Melnitzky.

We worked with Joey Silver and Sarah Loya out of DLA Piper’s Atlanta office and Neil Bagchi of Bagchi Law, with Mark Burnett, Kathy Fields, and Maggie Wong representing JMI at Goodwin Proctor.

Special thanks go to our internal deal team of Tim Oakley, Ben Redding, Bryan Conner, Robert Plumley, and Susan Harrison and to our full Senior Leadership Team who endured two months of due diligence requests while still getting their day jobs done.

Our goal is simple—build a financially successful socially responsible company based right here in the Triangle that becomes the global leader in email marketing software and services for SMBs.

Thank you to all of our customers, employees, investors, mentors, advisors, and supporters who have helped us get iContact to this point and here’s to the road ahead!

How Do iContact Employees Describe Our Culture?

In my post Friday on the most important business lessons I’ve learned at iContact, lesson ten was:

“10. If you create a great culture (a fun work environment filled with people who are high performers and who care about their work and their impact on the world) you will be able to attract and retain better people who will be much more engaged and productive and create a much more financially successful company.”

Recently I’ve been reading four wonderful books that have helped me ‘go to school’ on the tremendous value of building company culture and the revenue growth than can be achieved when you can align profit, purpose, and meaning for your team. These are:

• Peak: How Great Companies Get their Mojo from Maslow by Chip Conley
• Firms of Endearment: How World Class Companies Profit from Passion and Purpose by Raj Sisodia, Jag Sheth, and David Wolfe
• The Dream Manager by Matthew Kelly
• The Future of Management by Gary Hamel

This post is to share a bit about what the iContact Culture is like today, in the words of our current employees. In future posts I’ll describe an effort we’re about to embark on to make the iContact Culture a core part of what differentiates our company, with the help these authors, many of which Tony Hsieh of Zappos turned me on to.

How iContact Employees Describe Our Current Culture

Last week we held our first ever Culture Committee Meeting at iContact over lunch one day. I started off by asking the group to write down words that described our culture.

The words that came up more than once from the group were:

1. Fun
2. Creative
3. Community-oriented
4. Energetic
5. Challenging

These were pretty powerful words.

Other words mentioned by employees to describe the iContact culture were:

Dynamic	Respectful	Socially Responsible	Diverse	Casual
Optimistic	Open	Service-oriented	Unique	Sustainable
Inclusive	Engaging	Encouraging	Ever-changing	Family-like
Motivated	Fast-moving	Compassionate	Growing	Helpful
Mission-focused	Intellectual	Professional yet wacky	Agile	Thoughtful

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How Would You Describe the iContact Culture In a Sentence to a Friend?

I then asked the group to write a sentence they’d use to describe iContact Culture to a friend. Recently I’ve been describing the culture as a “high energy performance based culture that cares.” The group wrote:

• iContact is an open, supportive, and respectful place where employees can make their setting their own and have a say in influencing their own experience
• iContact is an organization that is driving forward the deliverance of a product surrounded by a team that shares their personal excellence with the world
• iContact is a diverse group of individuals from all walks of life that come together as a team to both achieve and help others succeed
• iContact is a company that consciously seeks uniqueness
• iContact is a dynamic team-centric company that effectively balances customers, employees, and the world
• iContact has a fun atmosphere where each individuals ideas and work are recognized
• iContact is comprised of interdependent teams working to solve problems together
• iContact is an exciting place to work due to the energy put forth by each employee every day
• iContact understands that individual and team growth equals company growth

What Makes the iContact Culture Unique?

I then asked the group to share some of the things they felt made iContact unique as a company. They wrote:

• We are fast-growing while becoming open and more agile as we grow
• We believe in what we say and we act based on that belief
• We practice openness
  
• We have a holistic approach to business in terms of our impact on all stakeholders
• We are a socially responsible company
  
• We are transparent and have lots of giving back opportunities and a comfortable dress code
• We have unique wall murals
• We do business differently, our employees are empowered, we work hard and play hard, and we are actively committed to helping others
• We interview candidates to determine not if they are the best individual candidate but whether someone is going to fit in the team
• We have a commitment to the community and the 4-1s CSR program
• We have unique benefits like free unlimited sodas, monthly massages, annual car washes, Monday bagels, monthly lunches, monthly birthday cakes
• We produce a monthly YouTube company news video featuring sword fights between bees and knights, dancing, rapping, chocolate grasshopper eating, Batmen superhero fights, iron chef competitions, parades, and cross-dressing
• We have smoke machines and disco lights at monthly company meetings
• Our CFO has dressed up like a cheerleader and Michael Jackson
• Our CEO has shaved his head when we hit
  
• We have big anniversary celebrations with hot air balloons, dunk tanks, bouncy castles, inflatable slides, fire eaters, magicians, bluegrass music, and Carolina BBQ
  
• We go to the Durham Bulls baseball and Carolina Hurricanes hockey games as a company
• We have pot luck lunches, waffle and pancake parties, 3am code deploys, lots of plants and balloons, new hire donuts in technology, and Finance/HR annual ice cream socials, and summer picnics

So it’s fair to say we have a rather unique culture at iContact already.

But iContact is about to move into a new home in Morrisville, NC on October 23rd. We can use this opportunity to do even better.

I’ll be writing more about our company culture and our journey in the coming days and months.

Videos of the iContact Culture

Here are some of the videos that have been part of defining our unique culture over time, from the iContactTV YouTube Channel…

How We Do Meetings at iContact

Celebrating our 7th Anniversary at iContact

Celebrating 5th Anniversary at iContact

50,000 Customer Celebration Parade

Dressing Up as Tina Turner and Michael Jackson to Celebrate $2M in Monthly Sales

iNews Digital Short: Chocolate Covered Grasshoppers

July 2010 iContact iNews

The 10 Most Important Business Lessons I’ve Learned

Here are the most important business lessons I’ve learned building iContact from 2 to 220 employees over the last eight years.

1. Just get started, have a bias toward action, and don’t get stuck in analysis paralysis.
2. To grow your sales, it is critical to calculate the lifetime value of an average customer, calculate what you’re currently paying to acquire an average customer (total monthly ad spend divided by customers acquired in that month), determine the maximum you’re willing to pay to acquire an average customer, and scale your marketing scientifically by testing relentlessly and finding the channels in which you can acquire customers for less than your maximum acceptable customer acquisition cost and then growing spend within those channels.
3. Never raise more equity capital than 1x your current annualized revenue (monthly revenue x 12). If you raise too much money too soon you’ll give up too much ownership and control of your company and be tempted to spend the money in ways that aren’t carefully controlled. Wait to raise a large round until you have proven mathematically than $X amount of additional spending with generate $Y amount of additional revenue. (once you figure out #2 this is easy).
4. If you choose to raise money, raise it from investors you like and get along with well. You’ll have to hang out with these people for the next 3-7 years, make sure you enjoy spending time with them.
5. After the first year or two, your success is determined by the people you hire, not by you. Stop trying to do everything yourself. Scale yourself by hiring people more experienced than you in their field as soon as you can afford to.
6. Every member of the team should have a significant portion of their compensation based on the company’s success and their department’s success, quantified and communicated clearly in advance.
7. Your job as CEO is not to micromanage/tell your team members what to do, but rather to hire experienced people who can do their jobs better than you could, collaboratively set numerical goals, and hold your direct reports accountable for their performance individually and as a team.
8. Once you get past the start-up phase when you’re responsible for everything, the five parts of a CEOs role are 1) Set strategy and vision 2) Manage the senior team 3) Communicate with stakeholders 4) Oversee resource allocation and 5) Build the Culture.
9. It is possible to become more socially and environmentally responsible and increase your financial returns at the same time
10. If you create a great culture (a fun work environment filled with people who are high performers and who care about their work and their impact on the world) you will be able to attract and retain better people who will be much more engaged and productive and create a much more financially successful company.

I’ll be writing more about building a great company culture in the next post.

What lessons have you learned over the years in business? What do you think about these lessons?