How This Entrepreneur Raised $18 Million From Investors Wit…


Courtesy of Rand FishkinCourtesy of Rand Fishkin

Rand Fishkin is one of the most sought out experts in the startup world. His recent appearance on the DealMakers podcast reveals the man behind Moz, and an unorthodox approach to everything entrepreneurs want to do today (listen to the full episode here).

I’ve been a big fan of Moz, and a customer of theirs for years. Rand Fishkin is the company’s former CEO. He was generous enough to recently appear for an exclusive interview on the DealMakers podcast. The show features many of the most high profile entrepreneurs and investors. Rand really brought a lot of insight to the mix, with some very unconventional methods for starting, funding, and growing companies.

The Evolution of Moz & SEO

After dropping out of college Rand joined his mother’s marketing consultancy. As a small business they couldn’t afford much in the way of SEO staff, so he learned it himself. He took a chance on creating a blog. That became what is now probably the top authority on SEO – Moz.

On the future of SEO, he says “I think Google has made it very clear that they are trying to do more and more on and in the search results themselves and sending less and less traffic through you know to other people’s websites. So, I think a lot of the SEO over the next 5 to 10 years is going to be about controlling what people see in and on Google search results and sort of claiming opportunities for rich results for everything. From what’s now called the featured snippets to the knowledge graph, the advertisements, image results, video results, etc.”

Don’t worry, he’s doing something about that for you. His new venture Sparktoro is a marketing software company designed to be “a search engine for audience intelligence.”

When publishing his own book, ‘Lost and Founder’, Rand says the publisher was like “Okay, well, send us a list of people that you want to send a copy.”  He struggled a lot with this, and trying to figure out good amplification targets, where the audience was and who they pay attention to. Where should he market the book? Where should he tell Penguin Random House to go spend their marketing dollars, right?

This is exactly what Sparktoro has been designed to do. So you could say, “Oh okay, we’re launching a new piece of restaurant equipment. We want to target chefs in Los Angeles first. We’re going to try and maybe do an event. Let’s figure out which events chefs in LA go to so that we can most wisely spend our marketing dollars on that.” You can type in ‘chefs Los Angeles’ and get a list back. This new startup has already raised over $1.3M in funding.

The $18M Blog Post & Accidentally Discovering Millions in Subscription Sales

During the process of building Moz, Rand Fishkin had created a variety of tools to help with search engine optimization and marketing that he wanted to share. His programmer thought it would require too much bandwidth and would be far too expensive. So, they decided to ask for $30 via PayPal to offset those costs. They soon found those subscriptions outpaced everything else the company was doing in revenue.

Michelle Goldberg and Kelly Smith from Curious Office reached out to offer capital to try and grow the company. They ended up taking just 14% of the company for $1.1M in 2007.

After that Fishkin says he spent four to five years pitching investors and flying out to Silicon Valley, Boston and New York. All without a cent to show for the fundraising efforts. Then Brad Feld of Foundry Group in Boulder was passed on a post from his wife, via Rand’s wife’s blog, and one of his. He says Brad authored his own blog post in response, publicly giving him a shoutout with an offer of help. Brad ended up pitching Rand on why he should take his money.

That resulted in an $18M financing round. After Rand stepped back from being CEO, the company raised another $10M in a follow up round bringing the total amount raised to almost $30M.

Non-Traditional Thinking in the Era of ‘Disruption’

Ironically in the the era of ‘disruption’ and tech startups, we’ve become very traditional in many ways. Entrepreneurs, advisors and investors have become very stagnant and uniform in their thinking in many ways. Many of the beliefs carried on all sides of the table when going in, don’t seem to actually be shared by the most successful funders and founders who have been through the experience.

Having built and led boards, Rand says, if you brought him on he’d probably “just be questioning orthodoxy all across the board.” He says he prefers the German model. One he describes as being “really, really smart, where essentially you have a board of directors with at least one to three people who are working on the business. They represent the employees and the team and they work at the company and they’re on the board of directors. I think that’s a really smart thing that almost no American company does.” He believes it is one of the reasons why the American work experience is often so exploitative, and that doesn’t necessarily lead to the best outcomes or the healthiest priorities for the business itself.

Burnout is another area in which this entrepreneur thinks differently. In the interview he details his own battle with depression. Then recommends preventative maintenance and measures including getting a real eight and a half hours sleep, exercise, and limiting working hours. Otherwise he is adamant that you and the business will suffer.

The way he has raised money is different too. With Sparktoro it was from a group of 34 personal connections. He reached out with a simple offering by phone and email, and created a structure that was heavily weighted in the investors’ favor.

However, after having successfully raised millions, he looks back at Moz and says “I think we were healthier as a bootstrap, well, mostly bootstrap, profitable, reinvesting growth type of business.”

Summary

If there is someone who knows online marketing and SEO it certainly seems to be Rand Fishkin. Not only he has a great vantage point on these subjects, but now has the experience of raising money and creating the ideal corporate structure (listen to the full episode here).

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