DURHAM, N.C. — Ryan Allis and Aaron Houghton, the co-founders of fast-growing iContact, see an opportunity to grow their e-mail marketing software firm even as the economy heads south. So don’t expect the young entrepreneurs to slow down as a potential nuclear winter for startups seems to approach.
The two announced this week that iContact had secured $5 million in debt financing on what company spokesperson Chuck Hester described as favorable terms. Approached by North Atlantic Capital with an offer that they apparently couldn’t refuse, Allis and Houghton “grabbed it,” in Hester’s words.
By getting money on favorable terms and without having to dilute their ownership, the duo now is planning to – egad! – hire people, bump up marketing efforts and perhaps even make an acquisition.
iContact’s headcount stands at 125, but could add between 80 and 100 employees over the next year, Allis told The Skinny. The firm needs more people to support its swelling customer base, which Allis said now tops 35,000. That’s up 20,000 over the past 12 months and is the reason why iContact is an Inc. 500 member. (They also are co-entrepreneurs of the year in the Carolinas, as picked by Ernst & Young.)
The Skinny asked Allis why they sought the additional funding in such a glum environment, where credit is supposedly tight and the global economy is slowing.
“We’re currently the fastest growing e-mail marketing service for small and mid-sized businesses (SMBs),” he explained. “Now we’re working on becoming the largest e-mail marketing service for SMBs in the world. We’d like to create a large sustainable company here in North Carolina. We are rapidly scaling our customer acquisition, and there is an upfront cost to adding a new customer.”
An existing partner “introduced us” to the new backers, Allis said. And with the new funding, he acknowledged iContact is considering acquisition as a means of growth.
When so many companies are looking to scale back, iContact can’t afford to because of growth, he added.
“We’re rapidly adding new customers,” Allis said. “We’ve grown new customer acquisition by 110 percent since January. We’re constantly reviewing our plan to ensure we beat forecasts. So far, we’re not seeing an impact from a slower economy.”
Allis also stressed a point that too many business people at all sizes of companies overlook: Customer care.
“It seems in a slower economy, small businesses are realizing they have to stay in touch with their customers more than ever,” he said. “Small businesses are spending less on advertising to get new leads, but more on e-mail marketing to market to existing leads and customers.
“We have not seen a drop-off in activity, as it is so inexpensive ($10/month) to send out e-mails to your customer base,” Allis added. “There’s such a high return on investment with e-mail marketing, as you’re e-mailing people who have purchased from you before. On average, for every $1 you spend doing e-mail marketing, you get $15.50 in sales back. That ROI is huge for any small-business owner in a difficult time. We’ve seen a 12 percent pickup in e-mail volume in October versus September alone.”
If business continues to grow, iContact may step up its expansion plans even further next year.
“Yes,” Allis said, “we may choose to raise additional equity capital in 2009.”