Mailchimp employees are furious after the company’s founders promised to never sell, withheld equity, and then sold it for $12 billion

347

When employees were recruited to work at Mailchimp there was a common refrain from hiring managers: No, you are not going to get equity, but you will get to be part of a scrappy company that fights for the little guy and we will never be acquired or go public.

The founders told anyone who would listen they would own Mailchimp until they died and bragged about turning down multiple offers.

“It was part of the company lore that they would never sell,” said a former Mailchimp employee, who like others interviewed for this story were granted anonymity because they were unauthorized to discuss sensitive internal matters. “Employees were indoctrinated with this narrative.”

The two founders did sell. Intuit, the financial software giant that makes TurboTax, announced Monday it was buying Mailchimp for around $12 billion in stock and cash. The cofounders cemented their status as two of the richest people in America.

Employees reacted with shock and anger over text, Slackand Twitter to the deal. They described feelings of betrayal and a cash windfall that seemed to only benefit those at the very top of the 20-year-old company. 

This account is based on conversations with half a dozen current and former employees; the former employees all left Mailchimp within the last year.

“I was so mad,” said one employee who recently left the company. “I can safely say my texts blew up and so did the Slack channel of former Mailchimp people. I think for anyone who was there for a long time and worked hard to build the company to what it is today that was a really tough pill to swallow.”

While there is a wide gulf in paydays at every startup that goes public or gets acquired, employees say the chasm at Mailchimp is particularly striking, especially given the egalitarian ethos the founders tried so hard to project.

“It’s so hypocritical,” another former employee said. “You don’t get a company to $12 billion dollars without the labor of a lot of people, but most of us will never see anything from it.” 

Cofounders Ben Chestnut and Dan Kurzius started Mailchimp in 2001 as the offshoot of a web design business that was mainly intended to service corporate clients. Mailchimp, which its mission to help “underdog” small businesses with email marketing, proved to be far more successful and when it hit 10,000 users in 2007 the founders abandoned the corporate business.

Founded in the wreckage of the dotcom bust, Chestnut and Kurzius prided themselves on being “un Silicon Valley.”

Mailchimp, which has around 1,200 employees, has always been based in Atlanta, where it will still be based as part of Intuit. In a far cry from most tech companies these days that are flooded with venture dollars, Mailchimp emphasized profitability over growth and never took outside funding.

As a result, the two cofounders own almost the entire company, meaning they stand to make about $5 billion each on the deal. 

“Mailchimp has a motto: ’empower the underdog,'” said a former employee. “But it really sounds like we were empowering Ben and Dan the whole time.”

Some employees said they were particularly incensed that financial services giant Intuit was the company buying Mailchimp; Intuit CEO Susan Goodarzi hosted a Zoom town hall with Chestnut and Kurzius on Wednesday afternoon to try to allay employees’ concerns.

“Mailchimp has had a company culture for years that has had an underdog spirit and now they are being bought by a company that’s lobbied the American government to make taxes impossible to file for free for 20 years,” said a former employees. “But I get it. I guess everyone has their price.”

Some also said they were frustrated by Chestnut’s statements after the sale was announced, which they saw as disingenuous.

“That was really tone deaf,” a former employee said. “It’s a bad look.”

In a statement sent to Insider, Mailchimp disputed employees have been unfairly compensated. 

“We’ve invested millions into our employees’ 401(k)s, contributing up to the 25% max annually in immediate payouts for the last 9 years,” a spokesperson said in an email. 

The spokesperson also pointed out Intuit will issue $200 million of restricted stock units to Mailchimp employees and the deal includes approximately $300 million worth of bonuses, distributed over three years.

But the many employees who have left Mailchimp in recent years are excluded and for current employees the bonuses account for only about 2.5% of the total deal’s value and work out to just $83,000 per employee per year.

It is certainly a meaningful amount but a pittance compared to the life-changing paydays early employees at many venture-backed startups have received. For instance, when Twitter bought the ad tech platform MoPub for $350 million in 2013, 36 out of 100 employees became overnight millionaires. 

Mailchimp employees throughout the years were awarded other pay benefits. Rather than stock options, employees were entitled to profit sharing that included not only maxing out the company’s 401(k) match but also a cash “pizza bonus” of between 10-15% of their base salary when they met certain performance targets. 

“Having that guaranteed amount of money in my 401k every year was really nice,” said a former employee. “I have worked at other startups before where the equity ends up being zero.”

These bonuses were not without criticism. Executives pitched bonuses to employees as the product of the founders’ largesse rather than as a reward for hard work.

“I’ve been amazed at the company’s generosity from day one,” wrote Farrah Kennedy, who was Mailchimp’s chief operating officer from 2014 until last year, in a company blog post detailing profit sharing in 2015. “Knowing that this is literally our co-founders’ (Ben and Dan) money, and that they share it so generously, is remarkable.”

Employee who spoke with Insider said they would not have stayed at the company so long had they known it was going to be sold.

“If people had the sense they wanted to sell the company they would have been out of there,” a former employee said. “Why would I be working without equity if I knew they were going to sell the company for a boatload of money?”

Equity for some

Adding to the sense of unfairness is the impression of many employees that there was a hush-hush policy at the top of Mailchimp to offer equity to vice presidents and above, which would include several dozen senior staffers.

Whitney Homans, who held senior roles at Mailchimp until she joined Instacart in March, tweeted Monday that some employees were given equity.

Reached by Insider, Homans declined to comment. A Mailchimp spokesperson said only the founders have equity, and that executives participate in a standard deferred cash compensation plan.

There is also lingering resentment among employees for the “mass exodus” of women and people of color at Mailchimp that Insider reported on earlier this year. Since the start of last year, Mailchimp has lost many of its highest ranking women and people of color: two women in C-level executive roles, its chief information security officer, one female vice president, and at least eight women or people of color at the director or senior director level.

“This is all coming on the heels of a crisis of culture six months ago where some of those executives were literally named in articles for their bad behavior,” said a former employee. “There were no consequences.”

Source: https://www.businessinsider.com/