Practical Founders Podcast

#85: Moz Founder Reveals the Pains of VC Funding and an Alternative Funding Approach – Rand Fishkin

Rand Fishkin is the founder and former CEO of Moz, a leading SEO software for marketers created in 2007 that grew out of the active followers of Rand’s popular SEOmoz blog. Moz grew quickly to over $30 million in revenue by 2013, having raised $30 million in venture capital investment. When growth slowed in 2014, the company faced many internal difficulties and Rand dealt with mental health challenges, causing him to step down as CEO.

Rand left Moz in 2018 and later that year published his popular book about his difficult startup journey, “Lost and Founder: A Painfully Honest Field Guide to the Startup World.” He described in detail the growth of Moz and the exciting growth years, but he also revealed the painful challenges he and the company faced in their later years. In this podcast discussion, he is frank about the pitfalls and brutal realities of big VC funding for founders and the companies they created. 

Rand created his second software company, SparkToro, in 2018 with an approach that was opposite to the funding, growth, and staffing he used at Moz. We discuss the benefits of practical funding and sustainable profits to create healthy software businesses that support the goals of founders, employees, customers, and investors.

SaaS funding topics discussed on this podcast:

01:24   SparkToro Audience Research Software
03:20   His Alternative Funding Structure
04:36   The Benefits of Independent Funding
06:04   – Focus on Customers and Flexibility
07:01   – Balanced Work-Life and Avoiding Long Hours
11:19   – Paying Back Investors and Recycling Capital
15:36   The Unhealthy VC Investor Mindset
31:53   – Challenges and Slower Growth
32:44   – VC Pressure and Growth Targets
33:40   – Internal Hubris and Lack of Focus
45:36   – Difficulties as CEO and Regrets
49:47   Missed Opportunities to Sell Moz
51:17   Challenges of the VC Model
57:34   Advice for Software Founders

Best quote from Rand Fishkin, founder of Moz and CEO of SparkToro

“The reality is that 77 % of venture-invested startups are write-offs for the investors, meaning that they didn’t even return 1X their money. Just .9%—fewer than 1%—of funded companies are the ones who hit the unicorn status that we hear about.

“It sucks for all the employees whose options and hard work don’t return anything. Our decision to take the VC path sucked for our customers, too. Instead of serving them, we were serving investor needs.

“A lot of late-stage capitalist investor-driven behavior is for the benefit of a very small number of extremely wealthy people at the expense of almost everyone and everything else. That sucks, right?

“I don’t think that’s what tech, startups, and the true idea of disruption are about. We need to get back to the roots of what made startups exciting and what entrepreneurship is all about.”



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Greg Head recorded this on episode on March 15, 2024 for the Practical Founders Podcast see all of the episodes.

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