In 2011, Jim Gilliam had a difficult time convincing Silicon Valley investors that his startup company, NationBuilder, had a big enough vision. The company, true to its mission to build software for political organizations to manage their constituents, was only working with political clients. One problem: The political software industry hasn’t spawned many billion-dollar companies. (Actually, it has not spawned any.) Only the venture firm Andreessen Horowitz, which invested $6.3 million into the company in 2012, was willing to back Gilliam’s cause. Angel investors followed, and NationBuilder added another $8 million in funding the following year.
Indeed, 90% of NationBuilder’s clients are from the political and non-profit sectors, who use the startup’s software to manage and build communities around their causes. (They “build their nations,” as Gilliam puts it.) The company sells itself as the best way to manage communities across the fragmented social media landscape. Facebook, Twitter, Tumblr, YouTube, and Instagram don’t let anyone get much information about the audiences they build on those platforms. NationBuilder claims to consolidate those audiences in a single database and rouse them with tools for scheduling, emailing, invitations, and texting.
That proposition has proven to be a nice little business for the Los Angeles-based startup—it was profitable before the venture investment—but most investors don’t want their deals to turn into nice little businesses. Now, three years in with a staff of more than 150, NationBuilder has begun executing on its big vision to expand beyond its political and non-profit roots. The company has begun a push to sell its community organizing software to all kinds of communities, such as artists, makers, writers, entertainers, and small businesses.
NationBuilder’s ambition is grand. The political campaigns it currently serves have budgets for this kind of thing. (The 2008 presidential campaign for Barack Obama taught candidates a difficult lesson on the need for data and software.) In the small business market, many startups have stalled out chasing customers that may not prove as lucrative. The most notable example is Groupon, which moved away from daily deals at local mom-and-pop shops to selling discounted electronics, apparel, travel, and appliances online. The local-focused social networks Foursquare and Yelp have spent hundreds of millions of dollars teaching small businesses the value of their software and ads. Dozens of less-funded startups failed chasing the same market.
NationBuilder hopes to avoid their fates by offering compelling tools cheaply. The company eschews the standard freemium business model, which gives users the most basic version of its software for free and charges money for the most useful or most powerful features, to instead give all users access to all features and charge based on audience size. The smallest customer pays $19 per month to use NationBuilder. That rate “makes no profitable sense,” Gilliam concedes, but it’s intended to align NationBuilder with its customers. As they become more successful and increase their online communities, Gilliam expects them to pay NationBuilder more per month. “Even the smallest business needs all the features,” he says.
NationBuilder is targeting anyone with an online following, including food co-ops, Etsy sellers, entertainers, celebrity foundations, restaurants, writers, even YouTube stars. “They pay us to manage the people that matter to what they are doing,” Gilliam says.
He recognizes that, as a venture-backed company, he has to convince a lot of food co-ops to use NationBuilder. Indeed, the company is doubling its revenue every six months. With a push into the world of small businesses, NationBuilder opens itself up to a potentially large new market. It could be a bust, but that’s how this venture capital thing works —either you go for the big, billion-dollar vision, or you’re stuck running a “nice little business.”