Ryan Allis, co-founder of iContact, has always valued the power of marketing - even if he didn't necessarily want to pay for it all the time. At the tender age of 11, Allis set up a consulting business, Allis Computing, that, for $5 an hour, taught local senior citizens "how to use AOL and send pictures to their grandkids and that type of thing," he says. He handled his own marketing by putting up fliers around town. The initial response wasn't what he expected: "My first call was from the postmaster yelling at me for putting them in mailboxes without putting the 29 cent stamps on them," recalls Allis. Along with the roughly $500 he earned that summer from the business, Allis says he learned a valuable entrepreneurial lesson: Act first and ask for permission second.
By age 14, Allis started doing website design and founded Web marketing consultancy Virante at 16. (Allis still owns Virante, which employs 12 staffers.)
The first business of his eventual partner, Aaron Houghton, involved scavenging at local junkyards for parts to repair bikes. But in high school, Houghton also realized tech was his calling when he built a website for his basketball coach's bed and breakfast. He met Allis in 2003 at an entrepreneurship club while attending the University of North Carolina at Chapel Hill.
Within three days of meeting, the two had the idea for iContact: They would leverage a tool that Houghton had developed to help small businesses manage their e-mail marketing. The company ran lean and struggled with cash flow. Houghton and Allis got a $5,000 loan from a friend to keep them afloat after being turned down by a bank and the SBA."We kept costs very low until the revenue could support higher expenses," Allis says.
Those first dollars of revenue went into hiring a customer service person to handle the phones. After covering that expense each month, every dollar went into Google AdWords, the foundation of iContact's early marketing strategy. The appeal, Houghton says, is that the return from the cost-per-click model is predictable and scalable. By gathering data over several years, iContact was able to show that, for every dollar they put in to marketing, they got back a customer that would spend a certain amount of money with them over a number of years. "That equation is what allowed investors to see that the business had a very profitable long-term model," says Houghton.
E-mail marketing software with AdWords as a major component of the business model may not be the sexiest business line for two young guys to be in, but with Allis as the front man and Houghton guiding the strategy, iContact generated $26.5 million in revenue last year and has raised a total of $18 million from NC IDEA, North Atlantic Capital and Updata Partners. The company is seeking further funding to support its expansion in Europe and Asia. iContact now boasts 63,000 customers, who pay between $9 per month and $699 for iContact and between $700 per month and $15,000 per month for iContactPlus. The co-founders are eyeing a public offering in 2012.
Even though they met in college, Allis and Houghton haven't had much time to bond except a few trips to a lake for some waterskiing. "He and I are both so busy that we see our team more than we see each other," Houghton says. "Some day when the next chapter of this business is written - after an IPO or an acquisition - I think we'll have more time to hang out."