Investing in beehiiv and the Invoice-Emotion Test

A question we like to ask when analysing an investment is the following: How will a customer feel when they receive their regular invoice from this company?

If the answer is ambivalence (as in most cases) or annoyance, it’s not a deal-breaker, but the path to a multibillion outcome might be treacherous and strewn with churn. If, on the other hand, the answer is appreciation, or even joy, then you might have something special. I call this effect the “Invoice-Emotion Test”.

(Side-note: I worked at Uber 2015-17, and Travis Kalanick used a characteristically provocative alternative: “we need to be so low-priced that consumers feel like they are stealing from us”.)

It was clear for us since we first met Tyler from beehiiv that they were going to build something that changed the game for newsletter creators. Our first investment in the company was before their launch in November 2021, and we now couldn’t be happier to be co-leading their $1.6m seed round alongside our friends at Blue Wire Capital and Social Leverage, with some remarkable value-add angels alongside us (Alex Lieberman @Morning Brew, Anthony Zaccaria @Linktree, Codie Sanchez @Contrarian Thinking, David Perell @Write of Passage, Nik Sharma @Sharma Branks, Shaan Puri and Ben Levy @Milk Road, Ankur Nagpal @Teachable, Jason Yanowitz @Blockworks, Cody Hock @Up North, Litquidity, WillNE and others) after incredible product-led growth and execution (every consecutive month 30%+ revenue growth with zero marketing, tracking to exceed $1m ARR by year-end).

For an in-depth overview of the investment thesis behind beehiiv, see Exec Sum’s (Litquidity's) excellent piece from November 2021. Little has changed, other than more of beehiiv’s vision becoming a reality. Most importantly, the team are product velocity and execution machines. It almost seems as though the beehiiv founders were rock-chiseled by an almighty power to ship and distribute newsletter software.

The email newsletter market is ripe for disruption, with Mailchimp (over-complex, expensive, legacy), Substack (broken commercial model, poor product development) and other incumbents together holding multiple billion dollars ACV-worth of unsatisfied – joyless – customers.

But before we dive into beehiiv’s customer feedback, collated from several of their customers, let’s take a quick run into why creative tools like beehiiv make such attractive investments.

Creative tools vs. creator tools

Since the creator economy became a trend in the last few years, many companies that look like typical enterprise software or fintech companies "for creators" have been funded. Without wanting to single out any startups or investors, many of these companies miss two simple truths about the creator economy.

First: creators are fundamentally consumers. This is something my partner Caspar Lee learned first-hand as a creator and creator economy founder, and he reminds me of it regularly. They are people (in a small number of cases, very small teams of people) and they have emotions.

Second: consumers spend money and time on things they enjoy.

So what do creators enjoy? Creating and sharing content.

And what do creators not enjoy? Workflow optimising, financial planning, invoice factoring, and other typical SaaS products. Exactly the type of product that attracted much of the venture funding in the creator economy over the last few years.

This is a mental model breaker for VCs. For the most part, productivity software, financing solutions and business-in-a-box concepts are the ones that investors have been trained to hone in on for new verticals. Creative tools are viewed as “too consumer”, and assumed to have lower retention or limited TAM. The opposite is true. Creative and “consumer” software is the only category that creators have an emotional attraction to. This is the part they enjoy. These are the invoices that will elicit appreciation in creators' hearts and minds when they receive the invoice. This is where the spend is, and these are the products that can actually retain creators.

What’s more, creators are inherently sharers. For products that creators do not care about, creators are the hardest to reach audience in the world (every brand with a pulse and a TikTok account is trying to reach them). But for products that creators are passionate about and want to talk about, there's almost nothing more viral.

beehiiv has this virality and growth dynamic characteristic to successful creative tools, and underpinning it all is its remarkable customer love. This is why we think beehiiv can become one of the next great venture outcomes.

beehiiv in its creators' words

To demonstrate beehiiv’s Invoice-Emotion Test, I sent a Tweet out to beehiiv’s customers, and gathered feedback from them.

I got dozens of responses and DMs, all beehiiv customers that were excited to share their positive feelings about the product.

Note the language these customers use. In many of these examples, a word with emotional resonance is used, which call out how the product makes the creator feel: ("fun", "delight", "amazing", "love").

You can see this for yourself. If you go into Twitter and search "beehiiv", and look at the most recent Tweets, you will see an outpouring of admiration and positive feeling.

One (unprompted) from the past 48 hours:

I will always want be excited to learn more about a SaaS company for whom 💃 is a paying customer's emoji of choice.

Final thoughts

We have never seen a company that performs as well on the Invoice-Emotion Test as beehiiv. The next step will be to take that emotional resonance and transpose it onto SME and enterprise customers. That has already begun, and is proving out quicker and more successfully than we or even the team expected.

Thank you to all the beehiiv creators (including me, joyful no less) who have used and promoted the platform so loyally, and to those who gave us quotes. And most importantly thanks to Tyler and the team for having us as investors (and customers) on this journey.