In this episode of Behind the Deal, Thoma Bravo Partner Hudson Smith talks with former Mailgun CEO Will Conway and CTO Josh Odom.
AIR DATE:
May 8, 2025
LENGTH:
38:13
DISCLAIMER:
This podcast is for informational purposes only and does not constitute an advertisement. Views expressed are those of the individuals and not necessarily the views of Thoma Bravo or its affiliates. Thoma Bravo funds generally hold interest in the companies discussed. This podcast should not be construed as an offer to solicit the purchase of any interest of any Thoma Bravo fund.
Transcript
ORLANDO BRAVO:
Welcome to Thoma Bravo’s “Behind the Deal.” I’m Orlando Bravo, Founder and Managing Partner at Thoma Bravo. And that was former Mailgun CEO Will Conway and former CTO Josh Odom, who joined Thoma Bravo partner Hudson Smith in an insightful conversation you’re about to hear.
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At Thoma Bravo, we pride ourselves on our deep understanding of the critical infrastructure that powers the digital economy of today and the future. One vital component of that is, of course, email. We recognized the significant potential in Mailgun, a company that enables over 100,000 businesses to send and, more importantly, track billions of emails sent through their respective applications.
Mailgun’s journey began as a spin-out from Rackspace, quickly evolving into a leading email API provider. Their API-first, developer centric approach empowers developers to seamlessly integrate email into their marketing strategies. Today, Mailgun stands as a testament to innovation and strategic growth, but also to focusing on the different skills each member of the leadership team brings to the table.
Will and Josh have been friends since college, a deep personal connection that they have used to their advantage. You’ll hear about how they identified each other's strengths and used them to build and scale a notable technology company from within a larger organization.
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So today, we’ll uncover everything that went on Behind the Deal; with Thoma Bravo partner Hudson Smith, followed by his conversation with former Mailgun CEO Will Conway and former Mailgun CTO Josh Odom.
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HUDSON SMITH:
Hey, I’m Hudson Smith. I’m a partner at Thoma Bravo. I co-lead our Discover Fund efforts, which is our middle-market buyout efforts here, covering all sectors of software across application infrastructure and security.
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So, Mailgun was born out of Rackspace, which is a big cloud infrastructure business based in San Antonio, a public company, and Mailgun provides email API technology to over 100,000 companies, enabling developers to send, receive, and track email from within their applications. So developers build this into their applications, and then Mailgun does the execution. And currently, they send over $2 billion emails per month. Use cases for this include kind of transactional emails like receipts, two-factor authentication, password resets that we've all gotten, which have been growing part of the market, as well as marketing emails, promotions, previously viewed items on email, e-commerce infrastructure, etc.
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I learned about the email infrastructure space really through having looked at other sectors within marketing automation. So, one of the benefits of Thoma Bravo is really the breadth and depth of our expertise, and we've looked at most software assets in different sectors, and a past investment of mine personally in marketing automation software gave me an understanding of just how difficult it is to successfully deliver emails at scale.
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And some of the marketing automation engines were trying to do it themselves. And we actually had one at a company that we owned, but it consumed a ton of R&D, it was a lot of effort, it didn't work, and it caused our customers a lot of problems.
And the issue is, kind of email inbox companies like Google and Microsoft, who we all know, they are actively trying to block emails and put things in spam folders and protect their customers, which is great but if you are a sender, and you are a good sender and a trusted sender, you want to get your emails through, whether it is a marketing email or a receipt. And so I really understood the challenges of the email space, and when I was introduced to Mailgun and two of their other competitors as well, it became clear that there was a big growing trend where this would be outsourced and people would just want to have this taken care of by an expert and there were kind of three players in that space and we looked at all three of them and Mailgun was the most interesting. Before being introduced to Mailgun, I'd contemplated investing in SendGrid, which is now owned by Twilio and as well as SparkPost, which is owned by MessageBird. And SendGrid was growing rapidly, not profitable, but a very successful company, and kind of the leader in the space. SparkPost was growing more slowly, but was very profitable. And when I got the numbers on Mailgun, it became clear that this was an extremely special business because it was growing the fastest of all of the players, and it had the highest margins.
So we acquired Mailgun in 2019, and we got to know the business in early 2018 and the first thing I remember is we fell in love with Will and Josh, and at Thoma Bravo, first and foremost, what we want to do is support existing management teams where possible and it was just very clear from the beginning that they were absolutely critical to the organization and, you know, really doing something special culturally, but also strategically in the market, particularly with respect to innovation. It really was one of the most innovative companies and teams that we had seen. The second thing that got us excited was just having covered so much of the other companies in the space, we really got excited about M&A. This company hadn't done it. It had grown very rapidly. It had areally incredible product and a great sales and marketing motion, and so we felt like if we could buy some other adjacent products and or competitors in the space, you know they really had this culture and this technology and the sales and marketing infrastructure to really go and make that a successful business.
So when I first met Will and Josh, and we had our initial meeting, three things stood out to me from that meeting. One, Mailgun's technology was differentiated. So developers loved working with Mailgun, and they were the furthest along in their journey to the cloud. You know, the other vendors in the space that we had looked at were much earlier, a fair amount of their bigger customers were on-prem, and they hadn't really solved how to execute scale email infrastructure in the cloud environment. So that was a big factor.
The second factor was their go-to-market model, which is incredibly unique. It is a C-Tri buy model. It is extremely powerful. When you have the best product in the space, developers find out about it, they know where to find it, they want to buy it, and they can just start using it for free and then they add a credit card and they then get enough users within their company that Mailgun calls them and they get an enterprise agreement. So that ratio was just incredibly important. And I remember when we looked at the business, they were only spending three million on sales and marketing in 2018, and they were adding like $15 million of new business.
It was just incredibly efficient, and it is just a rare business model that you have that just almost viral adoption of the product that leads to revenue for the company without having to put a lot of enterprise sales capacity behind it.
And then the third thing that we loved about it was really the usage-based pricing model, where this business, once people started using it, they started to send more emails, and they started to have other divisions send more emails, and they would find out how valuable it was, and volumes would increase. And so on average, a customer would spend 34% more the next year than they spent the previous year. And so that just natural growth without adding any more customers was just incredibly valuable and rare.
So early in the deal, when we were pursuing Mailgun, we had looked, as I said, at a number of companies in the space. And Mailjet was a business in France that had half of their business that was extremely complementary to what Mailgun does in overlapping, and half of it was additive in terms of new product features and functionality, and customer use cases that we hadn't had. And so we knew from day one, before buying Mailgun, that Mailjet would be a very logical acquisition to do and so we started talking to Mailjet even before we had signed the Mailgun deal, and so literally two weeks after closing the deal or signing the deal, we were sitting down with Will and Josh to go through the Mailjet acquisition opportunity and we had already started to tee that up with the goal of kind of closing that right away.
In an ideal world, we would have done it simultaneously, but it moved a little slower given the French cultural deal, but we ultimately ended up getting there and closing the Mailjet acquisition shortly after the close of Mailgun. And then the last thing was this company, since it was growing so fast and so new, having spun out of RackSpace, it still had a lot of scaling to do. They were incredible people doing incredible things, but they still needed to focus on building some processes and systems to grow the business. And that's one thing that at Thoma Bravo, we're really good at.
So, building an enterprise sales function, implementing new systems like Salesforce and NetSuite, and Zendesk, and really adding to the management team. They had great players, but, you know, the team could be bigger, and the business was growing, and the market opportunity was big enough where just adding to the team was a big factor in us getting excited about the deal.
When thinking about challenges of this business, it was really thinking about where to focus, given how much was going on at the business. Because on the one hand, they were growing 60% organically, and there was a lot of initiatives to try to drive that, whether that was new products, whether that was sales and marketing, whether that was new sales models, like adding an enterprise team, adding more people to call into the existing customer base. There was a lot of focus on building systems in terms of the infrastructure to run a company and scale, because we wanted this company to potentially be a public company, and so it needed to have that infrastructure to do that, and then they were also integrating acquisitions, we threw two sizable
acquisitions at them, and they had to integrate those businesses and pull them into the culture.
And so it was an incredibly hard triage, really daily, weekly for us, the board, the team, and our operating partners to think through where do we tell this company to focus? Where do we constantly pull things off the plate, put things back on the plate, and move things around because there is only so much bandwidth that people could handle but we were trying to do it all, keep the growth going, build the infrastructure, and do M&A in a pretty short period of time and the entire soup to nuts deal was really over, you know, really over three years.
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In 2021, you know, Mailgun was growing rapidly and we were pursuing an IPO path. We had built the infrastructure, we had the performance metrics to go public, the market was big enough, and we had seen, you know, one of our competitors, Twilio Sendgrid, have a lot of success in the public markets and their stock was doing well and they were growing and doing well.
So, we engaged a bank, we were preparing for an IPO, and at the same time, we were also doing acquisitions and so we were contacting every company in the space, trying to figure out creative partnerships or acquisition opportunities and we came across a public company in Sweden called Sinch, which had really strong SMS capabilities, so text messaging communication capabilities, also sold to developers and it was a natural partnership, we had the email, they had the SMS, we had a lot of common customers, you know, why don't they sell our product and we sell their product? And so we started talking about a partnership and as we got engaged in getting to know each other and the management teams and the leadership teams and boards of our respective companies got to know each other, it became clear to both of us that maybe, maybe we should just merge and instead of going public, maybe we should merge into Sinch. And so we structured a deal where they provided a fair amount of cash, but then also stock in Sinch, so in a way, it kind of got us public faster. It was just public through Sinch, but then also de-risked us. So when we were evaluating the Sinch deal and the IPO, Will and Josh were great partners.
They had been in a big company called Rackspace, which is a public infrastructure company, cloud company. And that is where they started their careers. Mailgun had been acquired there when it was a very small technology product, and they were assigned to it and were able to grow that into Mailgun and ultimately spin it out of Rackspace. So, they had experience with big companies, and so they were open to the opportunity to make this bigger, and try to continue to grow it within Sinch and get the synergies across the two businesses.
So while we're spending time with Sinch, kind of getting them comfortable with our business, you know, we were also working with Josh and Will to assess Sinch’s business and make sure that we were emerging into a good company and kind of thinking through the pros and cons. And ultimately, we kind of all sat around the table and agreed that, yeah, this was the best thing for the company. It made sense for the business. It made sense for the people. There were good opportunities. It made sense for the shareholders, especially given the hybrid compensation we were getting between cash and stock. So, kind of the stars aligned, and you know, we worked it out with Will and Josh in a deal that made sense for everyone.
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I think what's unique about the Mailgun deal for Thoma Bravo and for myself was really just the growth mindset that we had in the deal.
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We bought a company that was growing 60%, and our goal was to keep it growing as fast as possible while also building infrastructure and doing M&A and so that flexibility in our model in terms of working with our operating partners, working with the management team, constantly prioritizing things to where we were continuing to lean into growth and we aggressively grew cost from day one. We built out an enterprise sales team.
We increased the R&D on adjacent products because it was in the transition from a single product to a multi-product company. We changed pricing and packaging again as we introduced new products to provide more value to customers. And then finally we did M&A.
So, at the end of the day, we grew a business from, you know, 33 million in revenue in 2018 to 123 for 2021 when we sold it to Sinch. And at the end, the business was still organically growing 41%, which I am pretty proud of, given the scale of the business.
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Will and Josh are a dynamic duo. Incredible partnership between the two of them. They have an amazing yin and yang where Josh is just extremely thoughtful on the product side and innovation side, and technical side. And Will is just a complete expert guru in sales and marketing.
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But yet both of them have sales and marketing, and product DNA within them. So it is an incredible balance of strengths across two individuals that truly trust each other a lot and can make decisions together. And if you are thinking about both the product side and the marketing side and sales side, at a kind of senior, senior CEO, CTO level decisions, you're going to have an extremely successful business.
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Up next, my conversation with Will Conway and Josh Odom.
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HUDSON SMITH:
All right, Will and Josh, welcome to Miami. Thanks for coming down from San Antonio.
WILL CONWAY:
Yeah, thanks for having us, Hudson.
JOSH ODOM:
Yeah, thanks for having us.
HUDSON SMITH:
Well, Will would love to hear about the start of your career. You joined Rackspace just out of college when we're there for I think about five years before starting Mailgun within Rackspace it was one of the largest technology companies I think in San Antonio and most successful at the time, and so, just yeah curious how that experience at Rackspace a big company helped you you know start this interesting entrepreneurial venture called Mailgun.
WILL CONWAY:
Yeah, no, it's been an exciting ride, and looking back on it, it is pretty unique that where I am now is kind of still working with the same people that I was working with that long ago. Really, I was waiting for my girlfriend to finish school, and we were gonna move to Houston, and while I was doing that, I needed a job. So I worked at a company that did BI, and they were not doing as well. So, I called a good buddy of mine, Josh, and I said, “Hey man, I hear you are having a good time at Rackspace. I hear they are doing some interesting stuff. You know, can you tell me more?” And RackSpace was really trying to be early to cloud. So they’d had an asset that they had named MoSo, completely separate. And you know, back then, really, most of the go-to market was around self-service, me being a sales guy. So it meant going from kind of a traditional sales role where you're talking to people and you're going to conferences and stuff like that to online chatting, selling cloud sites for $150 a pop. So, it was a lot of it was me coming in and taking the chat and copying it, and posting it to Josh and asking him what is the actual way to answer this? And then I would put some sales flavor on it, and you know, that was kind of the second graduation of our relationship after being college friends.
HUDSON SMITH:
Well, I knew Josh was responsible for a lot of this, but I didn't realize he got you your first job as well. Hey Josh, please talk about your eight years at Rackspace and how it prepared you to be CTO.
JOSH ODOM:
Certainly, so actually I started at Rackspace as an intern while I was still in college. So I would pick up support shifts at night and over the weekends and holidays, anything to kind of pay the bills. And after I graduated college, I moved into a full-time engineering role, and very quickly thereafter, our boss disappeared. So there was a little bit of a vacuum, here I am, brand new college graduate, been doing software development professionally not a very long time, certainly had been building things since I was in high school, but the team actually kind of pushed me into the role of leading the team because I was the person that was trying to create a little bit of clarity, ensuring that there was direction as to what we were building. I naturally gravitated to doing all of the things a manager otherwise would do. So it really was not that long into my time as a full-time software developer then I started pursuing the management track, and I think for me, and still, my biggest point of advice and feedback to people brand new into their career is find yourself in a growing company and industry because it is such a tailwind for anybody who is kind of involved in that vacuum, right? Organic opportunities are everywhere. You kinda just see a hole, you rush to it, and good things are gonna happen in your career. And I think for both Will and I, that is our story, right? When there was like an obvious thing to go do, we would just go do it, right? And when you are in a business that is growing 60% 70%, which Rackspace was at the time, that just creates so many career opportunities and learning lessons along the way.
HUDSON SMITH:
Mailgun is such an entrepreneurial story within a big company, which is rare, because most startup companies that are successful have venture funding, you know, go through the typical venture path and growth equity path, and then private equity path potentially. But this was kind of born within this big entity, and it sounds like Josh was already there, and I think at the time, Mailgun was like less than a million in revenue, just a startup product, Rackspace at the time, I think in that year was a $1.4 billion revenue company, so this was tiny within there. How did the two of you become basically the GM and Chief Technology Officer of this small little product line at a very young age? Like you guys were young 20s, mid-20s at the time. Maybe talk a little bit about that.
WILL CONWAY:
Yeah, yeah, so you kind of have to tell these stories in a little bit of a parallel, right? So while Josh and I are kind of spending our four and a half years at Rackspace, me in sales and development, you know, Rackspace was really trying to push as quickly as it could through the cloud. So for anybody who had an appetite to learn and kind of be API forward, the space was wide open. And we saw a lot of great technology companies emerging out of this, and obviously, they're trying to run more modular, they are trying to be cloud-enabled, so whoever was quick to the information, probably not dissimilar to AI, you got the first seat. So, for me it was starting on the online sales team and I did that for six–I think it was six or seven months and I was promoted to manage the team and then it was about every year or so I would move up, I mean we would start kind of a larger sales cycles, so online, then mid-market, then enterprise, then we open-sourced our cloud and we were trying to sell private clouds. So, you know that happened in such rapid succession because we got in so early, and we kind of knew the technology, we were able to write it up. Obviously, Amazon gets into the cloud space. Google gets into the cloud space, you know, Rackspace, that used to be really big, has just now become really small. So they have to go out there and build out, and obviously it is gonna be easier to do that through acquisition. So we had a great team that went out and bought, I think it was five different companies, right?
JOSH ODOM:
I think so.
WILL CONWAY:
Yeah, kind of all trying to surround the modular aspect of cloud, and Mailgun was one of those companies. So I was gonna leave Rackspace, and I tell Josh, and I was like, “Hey, what do you think I should do?” Josh was like, “Well, let me ping a couple people in racks before you go, because I think some people would be interested.” He pinged this guy, Pat Matthews, Pat is a CEO of an email company that got acquired, Pat Matthews calls me, he tells me, “I bought all these companies, you know, maybe there is one that you want to look at, but there is on company in particular that I think is really great.”
Yeah, it was interesting because I left a decently large team that we'd built up on the sales and go-to-market side to go be an individual contributor at Mailgun, and kind of looking back on it, it's wild that I did it. So, Mailgun gets bought, the founders kind of decide that they;ve had enough of the Rackspace entity, they go out and start another amazing company, and that was really how I got my opportunity to take more leadership on with it.
HUDSON SMITH:
That’s great to hear. Well, Josh, let's back up and just, for the listener's sake, can you just describe what Mailgun does for our listeners?
That’s great. So we heard a little bit about the start of Mailgun, and then you guys get involved, you grow it pretty nicely over a few-year period. How did you then convince Rackspace to let go of this and spin this off into a separate entity?
WILL CONWAY:
It took a lot of convincing, as you can imagine. We, you know, when I joined Mailgun, the first six months was just trying to scale it out. So we were just running tactics that we had seen work well in the cloud. You know, when you have a self-service model, there Is a lot you can do with assisted sales at that point. There Is a lot that you can do with additional levels of support. When Rackspace acquired it, it was 12 people. It got enough budget to jump up to 25 people, and for them, the company's doubling, so there is a lot of great energy. The office is in San Francisco, and I am sure everybody has different opinions on this, but my opinion, Mailgun was, and the leaders were really leading the charge for the future of tech for the company, because of that, it was just an enormous, an enormously energetic place to be. I am going out there once a week, every month, because I am living in Austin at the time with my wife. And first, the former CEO and founder decided that he wanted to move and do something else within Rackspace. So that kind of opens up a little bit of opportunity. And then after that six-month mark, really, RackSpace realized that it was struggling in the cloud wars. Being a service company at its origin, really centralizing around Linux support and making sure that they have high critical fanatical support, like this has always been Rackspace's bread and butter. So there was a debate going on: Does Rack stay product or does it go service?
Well, it had decided to go more “product”. And Pat Matthews, who had kind of been our champion in the boardroom to get us the budget, he decided to leave, and really, we were frozen and stayed frozen so we got an initial investment to get to 25 people and then, you know, for two and a half years, despite the fact that Mailgun was continuing to grow and a lot of the practices that we had learned at Rackspace were really just complemented by amazing technology that they built. We worked really hard to convince Rackspace to sell us for all the obvious reasons. If you can't invest in it don't let it just wither and die on the vine; give it its next life. So, eventually, we were successful, and the day that we got the word that we were gonna be allowed to sell it, I went to Taylor and I said, “Hey, good news, we get to go run a motion to spin this thing out”. And he says, “Good news, I'm out”. But I'm positioning you to be the leader because you have been leading it. He was leading the San Francisco office, and I was leading Mailgun at the time. We have technologists that are here, and they're excited about what they are building, but we dont have any leadership. So what do I do? I call my boy Josh up, and I called you and I said, “Hey, man, I got a five percent chance of something that's gonna be crazy. Do you want to hear about it?”
JOSH ODOM:
That’s right. And of course I said, absolutely.
WILL CONWAY:
So I explained to you we are going to spin it out and we are going to most likely have to go and find a way to make it profitable because right now the infrastructure is, you know, expensive because it is Rackspace and if we can find a ways to have some debt be put on through the margins I think we are going to be a lot more successful. Here is the problem. You have to migrate the entire infrastructure over, and you have to do it while we are trying to be ready to build an instrument, you know, new product sets. And I only have 25 people. We don't have any more people, but the good news is that if we lose somebody, we can hire them back and keep it fixed at that 25. How long do you think it will take?
JOSH ODOM:
And it took about a year, right? From start to finish. And during this time, right? We are meeting with any investor that would take our call, right? And, you know, picking up some bits and pieces of advice along the way, but ultimately we get told no about 150 times along the way, we're trying to pop the clutch, get our margins under control, get on AWS, and you know here are these two guys who have never led a company in their life, who are, you know, making all these claims about what we can actually do. But during this whole time, we held things together. The growth accelerated. We continued to build and diversify the team. And ultimately, from a business plan perspective, our revenue, sales plan, our migration, we just continued to execute. And it took a while, but we got there.
WILL CONWAY:
Yeah, it really was a very much a two-pronged approach, you know, what we've learned at Rackspace is that when you're dealing with critical systems, you can have the best technology in the whole world. Something is going to fail. And when something fails and it is critical, you don't wanna deal with the computer anymore. You wanna call somebody, and you wanna make sure your things are being handled. And obviously, email is critical. Nothing is more embarrassing than not having your password reset go out or transaction email taking two, three days to deliver, you know, when these things turn off, we know that customers are gonna pay more to be able to get on the phone with a true expert, somebody that's mutually potent at API conversations and deliverability conversations. And so we kind of repackaged that managed offer that we had learned at Rackspace, and we implemented it into Mailgun.
HUDSON SMITH:
So you guys spin the company out, you make it profitable, you take on growth equity, you are independent now, you are growing the team, you are doing well. How did you think about picking a partner, and why did you pick Thoma Bravo to be the partner to help you scale for the next phase of the journey?
WILL CONWAY:
When we talked to you guys, obviously, we knew that your pedigree in doing quick acquisitions was already felt in the fact that I think within a month or two, we'd kind of gotten the terms on just about everything. You understood the market, you understood our position in it, and then kinda you understood us.
First off, you got it. Not everybody gets it. And when you're just getting bludgeoned to death in these diligence meetings, just knowing that somebody gets it is the first step. You can't really move off of it if you don't get that.
Second, there was a clear vision of what to go do next. So, it wasn't, “hey, let's go do an acquisition.” We had both been looking at the same company to go and acquire. We both had been looking up Mailjet. We both understood what it meant for the financials if we could bring it together. We both understand the geographical expansion that this would cause. I don't know if either one of us understood how hard it is to buy companies in Paris, but we learned. I think we closed, and the next week we're out in Paris, your ability to keep pace with us and be able to kind of work on multiple streams, that was just really attractive. I think more than we love winning, we hate losing, and we really felt the pressure coming down from Twilio, and I'll just say, you know, I know that I am a bit of a non-traditional CEO.
I went from director to CEO at 30 and it was cool that ya'll saw, you know, the value that we brought to the table with Josh and I and the team that we built together, that you saw a lot of the magic of what we had put together and you knew that this is gonna be difficult to scale going forward, that was really helpful. And you guys had pretty reasonable expectations, frankly, like coming in in the beginning, yeah, as we were building the model to go do Mailjet, I don't think there was too much misalignment.
JOSH ODOM:
Not at all. And I would say like the business still had tremendous runway, right? And that level of ambition is what we needed from a partner. And that is what we got with Thoma because it was really clear what was happening, right? Twilio bought Sendgrid. Everything was consolidating down. And we had a moment and an opportunity. and had tremendous alignment with what the right targets were to continue on our path.
HUDSON SMITH:
Exactly, and some of the targets were big and some of them were small, and we wanted to have the opportunity to look at all of them. The big and the small.
JOSH ODOM:
And what was really cool still is we had just such tremendous organic growth. So, taking that great organic growth rate and layering on acquisitions was really magic for the business.
HUDSON SMITH:
For sure.
WILL CONWAY:
And scary, like when you do acquisitions, you are so distracting, so to be–we had to be able to do this on a bit of a playbook, we just didn't have time to go learn the lessons that we learned on that was feeding our organic growth and other business
HUDSON SMITH:
And I mean, we learned a lot from working with you, both, and the team there. And particularly one thing that I've taken away that I'm using, I think, at one of my companies right now is how you were always placing bets, with these growth businesses, when we bought the company, it was growing 60%. When we sold it, it still growing 40% on much bigger numbers after acquiring a couple of companies. So, pretty rapid growth, and I think you always said, you are always placing these bets. I think you guys have a specific term for it, but basically, always keep those bets going because not all of them are going to play out but you know you need to have these next products or these next initiatives. So, maybe Josh, why don't you talk about some of the innovative new product bets that you were placing along the way, some that hopefully paid off and grew the business?
JOSH ODOM:
For sure, so for us it's always a pivotal moment to decide when you go from a single-product company to a multi-product company in a portfolio, right? Because if you do that too early, you lose focus, people get distracted, revenue slows down. If you do that too late, then you don't have enough to sell, upsell, cross cross-sell, etc, so like that moment was something that we were always really thoughtful about. Our first ancillary product actually was an email validation tool, right? It was something that we treated as a feature. It was free. But one of the things we actually noticed is that we had a bunch of free customers that were consuming millions of validations, which is kind of an interesting signal, like what exactly is going on here, right? But it turns out we had people that were just interested in validating email addresses. So that was kind of an important thing that we were looking at in our data. And that led us to say, let's actually invest in this feature and turn it into a product, add some additional capabilities. And it ended up being an incredibly high margin, 95 percent plus margin product that was kind of just a side feature for us, right? So, that was our first step into really turning this into a multi-product company. And over time, we focused on expanding capabilities like inbox placement, preview features, things that would allow our customers to have higher assurances that their emails are going to get delivered in a reliable way, because the worst thing in the world, right? is to send an email that ends up in your spam folder, or send an email where the template variables aren't replaced properly, or the links are broken. So everything we were doing around our product strategy was around adding additional capabilities to help our customers send better emails, and you know, not stuff their toes, if you will.
WILL CONWAY:
Thinking about it now, we almost never built anything that we couldn't sell.
JOSH ODOM:
That's right. You often pre-sold.
WILL CONWAY:
Yeah, that's right, that was a lot of our strategy. I mean, we like markets where they are pulling us in, so it's okay if we think this is gonna be the right way to go. Like, if I can't sell it, and if Josh can't sell it, then I doubt it's even worth building and that was just so helpful for us as we were kind of trying to surround this market, that was rapidly moving, you know, email plus SMS plus and you no longer could just stay in one communication medium, you really had to anticipate how these things were coming together. At least have a strategy around it.
JOSH ODOM:
And we stayed so nimble during this time, right?
We certainly had a roadmap, we had a product strategy, but when there were clear demand signals leading us in the direction, and we had multiple customers committing and saying, “Yeah, I'll buy that”. We adjusted on the fly all the time, and I think we did that better than most.
HUDSON SMITH:
So, going back down memory lane a bit to 2018, I remember our first two meetings.
I've never asked you about this, so I'm curious to get your thoughts on them because the first one was at Hotel Emma, an awesome hotel in San Antonio where they kind of, it is a former brewery and they put some sort of smoke through the HVAC system that smells like this woody, it is like you are smoking a cigar or something and it smells really good throughout the hotel and then we had a great meeting. And then we knew we were on to something and so we came right back and came back down to San Antonio and I remember we had meeting, lunch, and then a long walk down the river of San Antonio going through and just talking about what we could do together, the business, how we work, you were grilling us on Thoma Bravo but yeah, just curious of your initial thoughts after those two meetings.
WILL CONWAY:
You wanna go first?
JOSH ODOM:
Yeah, so, you know, it's always a little bit uncomfortable in the beginning. It is kind of like that first date, right?
WILL CONWAY:
Forced Dating.
HUDSON SMITH:
For sure.
JOSH ODOM:
You don't really know what to expect, obviously.
HUDSON SMITH:
And you are dating multiple people.
WILL CONWAY:
You're dating most people, which is only a little weird.
JOSH ODOM:
And then, you have Will Conway, who is a little of a wild card. I am a little of a wildcard. Like you are always trying to figure out, like, how are these people evaluating me? There's a lot of fear, right? Ultimately, the thing that a lot of people worry about that we had to just put on the back burner is, are they just buying the company, and are we gonna be gone? You never really know in the end, so it's a leap of faith, right? Like everything that you were saying, the team was saying felt right, like our ambition levels felt like they matched, and it felt like it was good. But like until you are actually in the room and doing the work, you never really know for sure. That's right.
WILL CONWAY:
The great thing about working with Thoma Bravo and other private equities who can move quickly is like, you guys were quick. You guys were on site, like, we were moving fast. So, you are just going through all of these emotions, while you are trying to decide, is this person, is this the right person for me to trust my career with? This business that I've put every single good person that I knew in my entire life worked at Mailgun. I emptied, and Josh emptied our entire network out into that asset. This isn't just my employees. These are people, these are my friends, man. These are the people that we have been together–we've been through everything together. So like. For us, it was, we just wanted so badly to be good stewards of the asset. Fortunately, what we found in you guys, well, in you in particular and Peter, is that you guys thought the same way. You were in the same stage of life that we were in. You were trying to put it all on the line because you wanted this outcome, and ultimately, the best idea in the room wins, which isn't always true. You in particular was fun because, you know, you come off as like, you know, comb over, like tuck your shirt in, you're very polite. [laughs] but in reality, like you talk to you for 20, 30 minutes and we get on the subject of commerce or something, and then you see your eyes just like fire out and there's a real competitor there too.
HUDSON SMITH:
Competitive side comes out.
WILL CONWAY:
Yeah, it is very competitive, so we wanted to work with people that we trusted, but more importantly, we wanted to work with the people that would keep pace with us. And yeah, that was the initial first impression.
HUDSON SMITH:
Yeah, I'll tell you guys. So, well, three days before the meeting, I was deciding, should we go? Because you were a little small for us, you know, our fund size had grown. You were $36 million in run-rate revenue, growing 60%, but we didn't know that right away. We knew you were an emerging player doing really well, our market work had suggested that. But it was a little smaller. And I remember, pushing the banker and saying, “Hey, I need numbers. I need these five things before I go” because I'd already committed to going, but I was just making sure that the numbers were good and the numbers passed the test, and I was like, okay, it's a little small, but there's something here, and we know this space, and we'd seen it before in commerce and then we took the meeting, and this is one of really only a few meetings where after the meeting. I walked out of the meeting, and I called back my partner, A.J., and I'm like, “we are buying this company,” and it's rare, and A.J. knows this. It usually takes me some time to develop that decision. But for this one, it was right there after that meeting. Something was special about the two of you, the way you worked, the metrics, the business, the opportunity, what we knew about the market. It just all came there, so it was one of those where hopefully we did move fast after that because we lit a fire under the team internally and said, okay, we are buying this company and we know what's special here, so let's build the plan and figure this out and start contacting Mailjet and some of these other companies and make it bigger fast so that it can be big enough for our fund.
WILL CONWAY:
You made that kind of clear to us. Like we had, in that long walk, you kind of went at me, and “hey, are you ready for this and this other stuff?” And I remember thinking like, “hey, if you'll back me, we'll go all the way, we'll take it all the away, but if you don't, that's okay, like, this has to work.”
HUDSON SMITH:
I remember you said that.
WILL CONWAY:
Yeah. And then we have these, third, fourth largest capital provider in the world who comes in the room, dude, I was imposter syndrome out of my mind, you know? I am just, I am going like, “how did I get here? Like, what am I doing here?” And when you guys said like, “no, we want the asset and we want Will and Josh, and we think you guys are gonna be awesome,” and I had that reverberate back to me in a lot of different ways, that was so confidence-inspiring for us. Don't you think?
JOSH ODOM:
100%.
WILL CONWAY:
Yeah, cause like, again, and before the three years of trying to spin out, we had been a part of Rackspace, who’s in its painful initial decline. So, to just, kudos to you guys, man, cause we know what we look like, you know, from the exterior. We know this is a bit odd, and that you guys saw it, that you saw it so quickly. It was very confidence- inspiring, and I think that's what made it so fun to go right out of the gate and do that acquisition.
HUDSON SMITH:
When we sold Mailgun to Sinch in 2021, I think the key diligence question for them, as well as other people interested in the business, was, you know, what is the outlook for email going forward? Right? You know, people think of this as the very early communication channel, right? And eventually, you know, people are going to age out of this and younger people aren't going to use email and they're just going to be texting each other or other chat applications or WhatsApp or whatever. And so, how is this going to be an important channel going forward? And after selling the company to them, and you stayed on with Sinch for a little while, the company did continue to grow. And so it appears they don't report numbers anymore, but it appears to be still growing nicely. I mean, what is your outlook for the future of email going forward? Or will the people who? You know, are betting against it. Will they be right eventually? And this will move to other channels?
WILL CONWAY:
I think we are always gonna have an array of communication vehicles, right? Push notifications are really helpful because they are showing up in an app, and they are informed by the application that they are trying to connect you to. SMS, obviously, gets your attention the second it hits your phone. What makes email such a valuable channel is its cost. I mean, I think we were doing the math, but for every one text message, you can send 100, 1,000, 10,000 emails depending on how they are pricing it. So if you are trying to go and figure out what the best possible strategy to meet this ICP is, using email as your tip of the spear is a very, very cost-efficient way to do it. Also, it is not going away. Like, I don't know anybody who doesn't check their email every day, except for people that may have just exited their company. But if you are working, you're checking your email every day. When you get a receipt, you are getting it there. There are so many ways with which all of our applications and technologies are trying to get in contact with us. What we've seen on this side is that it's not that you're moving away from one, it's that you are adding in addition to. And as we become more mobile, we want these things to find us in the ways that we want them to find us.
I have a high value for things that I don't want to go to my text message or interrupt my day, going to my email. And I have high value to the tech companies who allow me to make that decision and be contacted the way that I choose to be contacted. So I don't think email is going anywhere. It was the origin of the internet, and I think it's going to be here for a very long time.
JOSH ODOM:
Yeah, it is a multi-channel world, customers want to be engaged in whatever their preferred medium is. And I think what you see looking across the marketing automation landscape is the automation providers that are allowing customers to have preferences and choice. They are growing like gangbusters right now, and each and every person has their own preferences and these platforms, profile customers and figure out, like what is the best way to engage with someone for a particular type of message, and I think there's plenty of differentiation opportunities there but at the end of the day it's a multi-channel world and I think that will continue to be the case for some time to come.
HUDSON SMITH:
Well, we'll go to–how about one of our last events together? We had an incredible closing event in Texas at a ranch, very San Antonio, male gun culture-approved event. And yeah, maybe the best and the scariest moment from that event.
WILL CONWAY:
We were trying to think of something to do that was like some type of closing dinner that you guys had never experienced before.
JOSH ODOM:
Maybe push people out of their comfort zone. Just a little bit, maybe.
WILL CONWAY:
But maybe in the way that you push us out of our comfort zone a few times, so we are going to bring you on our home turf. So we ask you guys, “hey, we are going to go up to this ranch”, and you are like, “okay.” Well, you fly out, and then you have to drive three hours to get out there. That was quite a drive. It is in the middle of nowhere. And then you come on this beautiful luxury resort owned by an oil billionaire who loves hunting and fishing, and it is all catered to, so I wasn't real sure how I was gonna go, like, “hey guys, who here shot a gun?” Not a single hand goes up. Okay, guess what we are gonna be doing today? Shooting guns, not just any guns, we are going to be playing games and trying to knock each other out, and skeet shooting, target shooting. So, surprisingly, everybody did really, really well up and to the point where, I will not name the person, immediately shot and then hit their target and, in jubilation, swings the gun around and says, “Look guys, I hit it”—pointing it at all of our heads.
JOSH ODOM:
I remember that. Thankfully, he had shot it already.
WILL CONWAY:
Yeah that aside it was it was great you kno you guys you guys kind of let us bring you into our culture and we got to kind of burn it down in an intimate space because we really it wasn't a long time you know what was it two and a half years three years.
JOSH ODOM:
Yeah, it is a short journey.
WILL CONWAY:
It was a short journey.
JOSH ODOM:
A lot happened, though. Exactly.
HUDSON SMITH:
A lot of war stories were told over the fire that night.
WILL CONWAY:
Yeah, it was a great journey, man.
HUDSON SMITH:
Yeah, Josh, as you look back at Mailgun today, what are you most proud of
in terms of building?
JOSH ODOM:
Great question. I think I still talk to my Mailgun buddies almost every day, right? And I think as a leader, what you want to see is that when you step away, things continue to go up and to the right. So talking to some of my friends there, like they've crossed two billion emails a day, right? and this is, it wasn't that long ago where two billion messages a day was like peak volume during holiday season, so to continue to see both the technology continue to scale, sales continue to grow, attracting larger enterprise customers. A lot of the ambition that we had for the business is continuing to be met and exceeded. And you know, finally, to see these leaders who have stayed with the business continue to grow their scope and continue to do what they do and do it so well is the thing I'm most proud about.
HUDSON SMITH:
Yeah, Will, why don't you add, what are you most proud of with respect to the Mailgun story?
WILL CONWAY:
It’s same vein, differently said, the people. I mean, watching these people grow and become leaders and do things that they never expected to be able to do, to create wealth for themselves and their family, to expand their horizons. The journey for us, because we'd worked with these people now for nearly 20 years, 15, 20 years, just to watch them flourish and to succeed, you know, I had the vantage point of knowing that all these people were just amazing. And when the market left us a little bit at Rackspace, we were kind of stuck. So that Mailgun could be a, it can be a vehicle for us to go and kind of put our skills out there on display, just watching these people come into their own and thrive was absolutely amazing. ust a pleasure, absolute pleasure.
HUDSON SMITH:
That's awesome. All right, yeah, thanks so much, Will and Josh, for coming. This was a phenomenal session, and I look forward to dinner tonight with you all in Miami.
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WILL CONWAY:
It's gonna be great.
HUDSON SMITH:
Thanks to Will Conway and Josh Odom for coming on today. If you like this episode, be sure to listen to next week's episode of “Beyond the Deal”, our mini series, where we get to ask them anything. Thanks for joining us.
ORLANDO BRAVO:
Behind The Deal is brought to you by Thoma Bravo in partnership with Audacy’s Pineapple Street Studios. Join us next week for more stories Behind The Deal. Thanks for listening.
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