July 14, 2022

The End of VC with Rand Fishkin of SparkToro

The End of VC with Rand Fishkin of SparkToro

Today we are joined by Rand Fishkin, co-founder and CEO of SparkToro, former CEO and Founder of Moz, and Author of Lost and Founder. He shares practical advice on how to build a non-venture backed company that is long-term profitable using the lessons he

How do you feel about the “succeed on a massive scale or die trying” model? Other unconventional routes to building businesses, including independent funding, crowdfunding, and bootstrapping, are now better alternatives. If you've ever thought about building a profitable company instead of raising cash, stay put… this episode is for you.

Today we are joined by Rand Fishkin, co-founder and CEO of SparkToro, former CEO and Founder of Moz, and Author of Lost and Founder. He shares practical advice on how to build a non-venture backed company that is long-term profitable using the lessons he has learned from his experience as the founder of several companies.

In this episode, we discuss:

  • How Rand raised funds for SparkToro (HINT: no VC was involved)
  • How SparkToro is different from Moz
  • What to prioritize for long-term business survival
  • The role of audience research for sustainable growth

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Rand Fishkin: What I found even more then, people will use really crappy products if they have the problem that the product solves. For us a ton of the learning was not the product isn't good enough it was. This person doesn't have this problem painfully enough right now to spend any time and effort to go solve it.
Voiceover: Welcome to SaaS Origin Stories. Tune in to hear authentic conversations with founders as they share stories from the earlier days of their SaaS startups. We'll cover painful challenges, early wins, and actionable takeaways. You'll hear firsthand the do's and don'ts of building and growing a SaaS as well as inspirational stories to fuel you on your own SaaS journey. Here's your host, Phil Alves.
Phil: Hi Rand and welcome to the show. Thank you very much for taking the time to talk with us today.
Rand: Yes, my pleasure. Thanks for having me, Phil.
Phil: Oh, no problem. First, could you please tell us a little bit about SparkToro? What problem is your new product solving specifically?
Rand: Yes. SparkToro is all about audience research. Essentially, if there is a group of people whose demographics and attributes and behaviors and sources of influence you need to learn about, SparkToro is there to help you uncover that, and do so in much more of a scientifically rigorous way or mathematically rigorous way. Essentially, we don't use any fancy algorithms, or machine learning, or anything like that. All we do is look for profiles that match the criteria that you say you want.
If you tell us I want to learn about interior designers in California, we will go into our index and look for public profiles that we found across the 12 different social networks that we index and find people who match that criteria and then show you demographics, behavioral attributes. What they read, what they listen to, what they watch, what they follow, websites they visit, social accounts they subscribe to, all that stuff.
Phil: Awesome. Let me see if I understood. I'm trying to promote my business but instead of just going bottom of the funnel, let me go do paid ads, or do SEO, where else these people hang out? Where else can I go to speak with my public? That's the problem you're trying to solve? Is that right?
Rand: It's one of many. The interesting thing about audience research is it has infinite applications. There's people who use audience research to try and figure out their company branding, or what to name a product, or whether people are familiar with the term or phrase, and they can use that in their landing page copy. There's people who use it for their Facebook and Google ads just to basically optimize the targeting and the audiences that they reach inside those platforms or across their web networks or figure out, "Oh, I really want to be advertising on this YouTube channel. I'm going to add that to my YouTube ad account."
Then yes, like you said, there's tons of folks who use SparkToro to break free from the chains of the marketing duopoly that Facebook and Google have, and expand where they do their marketing and advertising to look for, "Oh, a lot of my audience reads this website. Oh, they've got an email marketing list. All right. Gosh, they've got like, 60,000 subscribers, I wonder if I could sponsor their email newsletter, or I wonder if I could get covered in their email newsletter? Or maybe we could do some partnership together. Maybe we could do a webinar together? Maybe I could be a guest on their podcast? All those kinds of things are questions that SparkToro can answer.
Yes, it's very broad, which means that one of our challenges is marketing it. Telling people, "Yes, you can do this with the tool but you can do a million other things, too. It's just about what problem you have to solve."
Phil: That's awesome. I feel like you really give the founders the superpower to do a lot with that, too. My follow-up question and I want to talk a little bit more about your product in the future but that's great I think that's an amazing introduction about what the product does. You clearly not a first-time founder, you need no introduction. People know you from the old days like I know you from the Whiteboard Friday.
I would like to know how you're approaching things different now that you're building SparkToro versus when you were building Moz. How's those years as founders I mentioned, you learn a lot and you're probably doing a couple of things very different than you did before building your other business. What are those things?
Rand: Yes, now tons of very, very different things. With Moz, we were building a venture-backed business, which meant trying to reach a certain scale and a certain rate of growth. Our targets in terms of what would be considered a success was essentially an IPO or a very, very large sale getting to over $100 million in revenue, and preferably bigger than that.
Moz did not, at least while I was involved achieve those goals, and that is pretty disheartening and very frustrating, but not at all uncommon. I think something like 95%, 94% of all venture investments don't meet the minimum bar for their raises, and most of them go out of business in just the first few years anyway. Moz did better than most, but not as good as the top 2% or 3%.
Yes, SparkToro is very different. We are funded differently. We are not trying to build a big team. Moz when I left was a couple of hundred folks, SparkToro was three people. Moz was almost exclusively in-person in the office SparkToro we are entirely remote have never had an office, I never plan to. We are not focused on growing that team at all. We're not hiring or recruiting. We're planning to make a go of it with the team that we've got. We are very laser-focused on building just one product that solves just this audience research problem and not expanding out to other kinds of things.
We'll see how big this market is. I think the audience research software market doesn't really exist, I guess you might say that surveys. Surveys are probably the thing that-- SparkToro doesn't replace them but it adds lots of data that is very hard to get or nearly impossible to get from surveys on top of that, and that is a huge market. I think everyone from SurveyMonkey and Qualtrics to Typeform and all those others are in that space. They're all competing for the survey stuff and we're trying to help on another layer, another level.
I do think we learned a ton. My co-founder, Casey worked at Moz for a little while too. He was also at Wistia, and HubSpot, Ookla, and both of us took away a passion for independent work and very low-touch communication. We have very few meetings, maybe once every three to five weeks, we'll hop on a call together and be like, "Okay, what are you up to? yes, what are you up to?" Most of it's like, chatter about what's going on in our personal lives or how angry we are at the Supreme Court. Then sometimes we'll be like, "Okay, I'm going to do this at work and you're going to do that at work and we'll circle back and see where those things are." It is a very, very chill work environment.
Phil: Well, you do say you're much happier now because it's a very different approach. I feel like so many times as founders, we forget to optimize for our personal happiness.
Rand: Yes, this is infinitely happier, more productive. more interested in going to work every day more excited about it. I think Moz I always felt like I was under a hammer and that the goals I had set for myself were so lofty, so difficult to achieve that it never felt like we got close. There was never a time when I'm like, "Hey, I think we're on the right track. I think we're going to get there." It was always just a desperate clawing for the next million dollars in revenue and yes, that doesn't make for a very happy existence.
Phil: Yes, and I think even like in your book, that doesn't even make you more money because you're just working harder for the very few, but most people don't even make more money living their life.
Rand: I think one of the weirdest things to realize about SparkToro versus Moz and just a venture-backed company versus an independently owned one is that it is ludicrously unlikely that you will make a fortune running a venture-backed business, being a founder. Even at sale time. Even if your business sells for $100 million. Many times founders own 2%, 3%, 4% of those businesses by the time they get to that point. Yes, you get a nice little nest egg, but then if you go back and look at your salary over the last 15 years or whatever you might be like, "Oh, geez, I think I would have made more working as a mid-level Microsoft manager."
If you're optimizing for personal financial gain, a venture backed business is not the way to go. It's statistically at least. That's not to say some people don't make fortunes, obviously, they do but I think those outliers, drag everyone into thinking that that's how the whole field works. That's silly. That's like saying, "Well, I know a guy who won the lottery, so I should just play the lottery all the time. Oh man, that's a terrible way to do evidence-based research." That is anecdotes, not data.
Phil: That's a great takeaway. So many times we all think we are outliers and most of us are not. You don't have to be an outlier to be a successful founder, to have an amazing business, and to live a great life.
Rand: That's absolutely right. I think what's really amazing, what I hope that we can do here is prioritize an amazing life. The business comes second. It just does. That's not to say that some weeks or some days, "Hey, I got to crunch down and there's a whole bunch of hard work and I'm going to have to work late some night." Sometimes I do it. We all do it sometimes. It's okay.
There's nothing wrong with that, but the vast majority of the time it's, "Ah, gosh, I really want to see my cousins down in San Diego this summer. You know what? I just got to book a ticket and make it happen." All these work priorities, I'm just going to email some folks and be like, "Hey, I'm sorry I committed this thing, but I can't do it." It'll probably cost me some business and that is okay. That's fine. You get to make that choice because it's your business. Man, there is something really beautiful about being able to prioritize your life by what's important to you as opposed to a commitment that you've made to a billionaire capitalist who wants you to make him a few hundred million more.
Phil: The guy that's already rich.
Rand: Right. This is the weirdest part. The weirdest part is when you're working for venture folks, they're all so filthy rich. Just disgustingly rich and all the people who invested in them disgustingly rich, billions of dollars. There's the occasional pension fund or something like that that you might be helping out, but they allocate very, very small amounts of their dollars to venture as an asset. It's just a little odd. You go hang out with your investor and you're like, "Oh, that's a great Ferrari." They're like, "Oh, you should see my other one."
Rand: I don't know.
Phil: Another thing, you make me think about a book that I read a long time ago. I read the book all the time, the Million Dollar Consultant and he talks about how real wealth is discretionary time. You having control of your time, that's what wealth is. Here in Utah, where I live, the startup community, it's so strong and there's a lot of people raising a bunch of money. I have a lot of friends and I have friends there in VCs and those are the people that get attention from the media.
Sometimes you want to be one of those but then I look at their life and I look at my life and I'm like, " I don't work on Fridays. I probably got paid more [laughs] because I'm the owner of my business and I get to make the decisions. Everyone can make their own decisions and there's learning and doing out the paths. I personally too, love the path of keep control. The money is not the most important. It's going to follow if you do that.
That being said, how did you fund that? First time you fund Moz with VC and now you're building your second company. Then you have to figure out how you're going to go about funding. That's always the question.
Rand: I did not have the money to fund it myself. That would've been awesome but that was not the case. I left Moz with a nice severance package. The kind you'd get after being let go from a job, but not a large amount of capital by any means. Basically, when I started SparkToro I had to raise money for it. I did that with a very unique investment structure. Essentially our investors are all private individuals, angel investors that believed in the product. Casey and I felt that they were willing to take a chance on an alternative model.
The way it works is we're essentially an LLC that pays dividends on our profits each year rather than, "Hey, the only way you'll ever make money is if SparkToro sells, or if it goes public." We wanted to have the freedom to run this company ourselves for 20 years, 30 years, if we wanted to 40 years, pass it on to the next generation, that kind of thing. The way the investors benefit from that is that essentially they get pro-rata distributions of any profit sharing that we pay out. The first thing we have to do is pay our investors back their initial sum. If they put in 1.3, they'll get that money back. We're actually pretty close to on track to doing that early next year.
Phil: Nice. Basically, it's like they own a normal business. Every year when you guys take a distribution, they get their portion and it's going to be long-term.
Rand: Yes. The idea would be essentially rather than SparkToro being all or nothing. You roll the dice and either you get double sixes or you get nothing, which is close to the venture or angel odds. In that universe, we're the thing where we're built to survive for a long time, be profitable, sustainable, keep going for a long time, and hopefully compound our growth over time and get to an interesting and exciting place.
The weird part is, SparkToro can be a successful business for its investors at $2 million a year. Moz couldn't be at 20 or 40 or 60. I think I think when I left Moz it was doing about $50 million in revenue, and that was very significantly underperforming what it needed to hit.
Phil: If you think about risks too, if you're doing a SaaS in the B2B space, I feel like it's not unreasonable to think that you can take the SaaS to $10 million and solve a problem for the niche. Now if you're building a SaaS in the B2B space, you'd have to make $100 million, $200 million. That's pretty hard. [laughs]
Rand: The odds are very much against you. Don't get me wrong. Getting to a million dollars is difficult. That's a real challenge. That's a huge milestone. My caps off to anybody who can do it. Oftentimes 0 to 1 million is more extraordinary and more rare than-- Or takes a very different set of skills than going from 50 to 75 or something. What I do believe is that if you fund those kinds of companies in ways that incentivizes and prioritizes survival rather than growth at all costs, what you say is like, "Hey, maybe you and I feel-- We form a little mini investment fund and we give it to 10 SaaS founders or software founders, founders of any kinds of companies."
We just say, "Hey, we want you to take this, million dollars and build a business that's sustainable, that can survive for 20 years." That's a really different goal. They're going to make really different decisions with those dollars than if we said, "Hey, here's a million dollars. We need you to show these growth metrics in the next 18 months so that we can give you $5 million more." That's a completely different picture. Then you're going to basically spend all the money right up to that point. If the investors decide, "Oh, I'm not going to fund it," you crash and die.
Phil: Then you have all the layoffs that we are having right now because people can'T raise more money and you have all kinds of problems. Again, there's a way you can pick any route that you want, but if you want a route that's going to be less stressful, they are more likely to be successful. The route they were talking about here makes a lot more sense. Let's talk about how you build the Version 1 of your product. Looks like you have a founder. Did you have any hire or was just you?
Rand: Just the two of us.
Phil: Just you and your founder. How was Version 1? How long did it take that to build?
Rand: I think it was just about 18 months to build the V1. We had a working prototype about-- I think it took maybe seven or eight months from our first funding to get a prototype. It didn't have much of a UI or anything, but you could essentially try some of the searches that you can in SparkToro today. It had a little bit of an index behind it that was maybe about a 10th the size of the current index. We were running searches and able to see like, "Okay, this looks promising. I think this is the product we should build. This seems to solve the problem that we want to solve, which is essentially how do we help people understand their audience online, their behaviors and source of influence and all that stuff."
We worked with Claire and Gia from Forget the Funnel. I'm not sure if you're familiar with that. They're a small consulting team, but they helped folks in the SaaS space specifically, and I had known Gia in particular for many years. They helped us do a bunch of early-stage customer research. We invited a lot of people from my network in the digital marketing universe to try out the alpha of the product and the beta. Then we collected feedback on that. This was all through 2019.
At the end of 2019, we made a bunch of decisions around, "Okay, these are the other features we need to add and this is like UI and UX stuff that we need to do and we need to work with a visual designer on some stuff." This is some content that we need to put together. We did that over basically December, January, February. Then at the end of March 2020, we were like, "Okay, I think we're ready for launch." Then this other thing happened at the end of March 2020. We hit the market with the worst possible timing in 100 years.
Phil: Perfect market timing the other way around. [laughs]
Rand: The good news was a lot of people were investing in digital marketing, advertising, and content creation, all these kinds of things that hadn't before. There was still momentum around understanding online audiences. We probably had a much slower first few months than we would have, but it started to pick up, especially September, October, November, as the stimulus made its way through the American economy and started to drive marketers to invest in online and digital advertising because people were stuck at home for quarantine. That time period worked well.
Phil: That's very interesting because again, going back to the normal startup advice, people are like, build quick, try to go super quick to market, break things. Of course 18 months, it's not quick. They also talk about having a big team. You took a little bit longer. You also made decisions to work with a small team. I don't know if you did contractors. Talk a little bit about that and if you also think the advice of like, "Go to market as quickly as you can." Is that a wrong advice your opinion too?
Rand: Again, our goals and incentives are just fundamentally different from the go-to-market strategies of a venture-backed company. Our goal was essentially how do we build a product that is sustainable, that a very small team, meaning a very affordable team. Casey and I, the two of us we have decent salaries, but they are not high. They're certainly much lower than what we'd make in the Seattle market if we were just job hunting probably by 50%, 60% lower than what they would be.
Our goal essentially was, hey, we want to build this product in a way that is sustainable, that it can last for a long time. It won't need a ton of maintenance. We also want to be absolutely sure that we are building the right product. We're not going to launch something, find out it's wrong, and then iterate on it. We need to have a near guarantee or as close as you can get pre-launch that this product will work in this market. It will solve these problems.
That was really probably the first nine months was like build the product and the last nine months was refine the product, keep improving it, get all the bells and whistles, get the user experience, the place that it needs to be. Do all the testing, we had three different cohorts of beta testers. We wanted to be rock solid. Really it's completely different. Our goal was not speed. Our goal was how do we survive for a long time. We're taking that cockroach mentality, like, "Okay, we'll hide, we'll borrow down, we'll build something. When we launch it, it has to do well."
If we were two founders who no one had ever heard of, we had no audience, and no one paid attention to us, we could launch a crappy product. Then we could iterate on it iterate on it. But when we launched, SparkToro had 25,000 people on the sign me up for it list. If we let those people down, if the product got a bad reputation on day one, it was going to sink us. We had to be just way more rock solid than the-- the standard advice around MVPs just wouldn't work for us.
Phil: Makes sense. I believe that's the thing. Sometimes you have to really challenge all this standard advice. I like how you guys did it. I like how you thought about, "Okay, who I am, I have all this following, I can't mess this up. Where are we coming from?" I think that's all advice because sometimes people again, just follow what the masses say. That might work for you or that might not work for you. You talk about, "I want to build something that people love," and you talk about the three cohorts, but how did you know, like we really have something that people are going to love, we are right?
Of course, software's never done. I always say that. It's never going to be done. Then I'm like, "I have a software agent." I'm like, "Forget it. It's not going to be done. You're going to be developing this, forever. It's either making money or not making money, or people love it or people don't love it, but it's not done." When do you know, like I have something that people love that I can keep improving upon?
Rand: I think in that last cohort in January, February, March, we were seeing I think it was only about 20 or 20-- Excuse me. About 25% of our beta customers were going back twice a week or more, and using the product for real business problems. That test was the sign that was like, "Okay, we've got it." We have something that these people need, are using regularly, and they're logging back in. We're not reminding them to log back in. We're not telling them to check. They're just going and using it. That gave us the confidence to get to a launch point.
Phil: How are you tracking that? Were you using mixed panel? What kind of software are you using to track?
Rand: Casey just built something internally to basically look at like, he logs when someone logs into the product and the searches that they run. We could just see how many of our customers have logged in. It's very simple analytics, it's the kind of thing that just records in a database, but it works.
Phil: I like it. Are people using this? Are people coming back or they have do I remind them? People are using, I think we arrived. Let's keep improving.
Rand: We have to save everyone's searches for them anyway, so we have to know how many searches a person performs when they're logged into their account and which searches those were. We can just see like, oh, okay, last week 10% of our customers ran 10 or more searches, whatever it was.
Phil: How did you get your first 100 customers? Of course, you have a following coming into this, I think you leveraged that, but tell us a little bit about how did that go.
Rand: Invite list. We had an invite list where you could sign up for the beta. We invited a small portion of that list, to try the beta pre-launch for free. Then when we launched that beta list was I think our first almost 300 customers actually. Well, maybe not quite that many. Maybe our first 150 or so customers came from that invite list.
Phil: There were people that were using for free, like as they were in invite list, and they're like, "Okay, guys we're ready to charge." Out of those people about 150 will come back--
Rand: Sorry. I think out of the people who we had given free access to, which maybe we gave 500 or 600 of the 20,000 people who'd signed up for the invite list, we'd given them free access. A very small proportion had gotten free access before we actually launched. They had seen the product in development and in the beta.
Some of those people did sign up to become paying subscribers. We offered them a relatively steep discount to do it. The bigger invite list, that list of 20,000 people who had never gotten access or 19,500 people who had never gotten access, that's where we got our first about 150 customers.
Phil: Got it. How many customers were in your free beta?
Rand: About 500 of the 20,000.
Phil: 500 of the 20,000. You feel like that was a good enough number that you could get feedback and you were improving the product?
Rand: Yes. What we really needed was an engaged 75 people. Lots of people, you email them and they're like, "Hey, can you go check out the product?" They're kinda like, "What was this? Oh yes, I guess I signed up or something. I don't have time for that this week." That's mostly people on everything. You send out a mass email, doesn't matter how incredible it is, most people are not going to pay attention, but some people will. That's where we got our beta testers.
Phil: That's awesome. I'm going through that myself right now I'm building a SaaS product. I have about 30 users on the free beta. It's exactly the same thing. There's like about 10 people using the product. [inaudible 00:29:02] personally I want to call it and like, "Why you're not using?" [laughs] It's like, probably the product has to be better. [laughs]
Rand: Some of it is product has to be better. People will use really crappy products if they have the problem that the product solves. For us, a ton of the learning was not the product isn't good enough. It was this person doesn't have this problem painfully enough right now to spend any time and effort to go solve it.
Phil: Oh, that's so real, because with having the development agent, so many times people come with us to build Version 2 of their product. They show us the product, the product's really making millions of dollars a year. We look at the product and it's horrible. It's like the interface is bad, it's-- Enough that works properly, but they're solving such a big problem.
It's so niche down again like it's never going to be that big [unintelligible 00:29:58] company, but it's a problem that only they understand, and it's being well solved that people are paying for, and now they have the money, they're hiring us to do a little bit of a better product. That's for sure a reality that I see all the time. If the problem is big enough, people are going to use it, it doesn't matter how bad it is.
Rand: Exactly.
Phil: What's the biggest challenge that you have to date on this new startup of yours? Like SparkToro, what you would say, has been the biggest challenge?
Rand: I think for us it is probably right now we have the challenge that a lot of people who would benefit from doing audience research don't think about it as a problem that they need to solve or prioritize. I think because it is not in the classic digital marketing stack, like it's not talked about, it's not thought of. There's no conference sessions about audience research. Nobody has the job title director of audience research.
When you think of hiring a digital marketing agency or hiring someone to do marketing for you, you think about, are they going to do SEO or PPC or content marketing, or are they going to do email marketing? Are we going to do paid ads, performance marketing? All that stuff, and audience research or marketing through sources of influence, it doesn't have a name. It's not a thing. In my early days at Moz, SEO was not considered a thing. People were like "SEO? That's that spammy, scammy, sketchy thing. Nobody does that. Only a bunch of basement-dwelling butts or you going to try that stuff? I'm not doing any SEO."
It took 12 years, 13 years at least before people-- From 2001 to 2014, '15, I was still hearing people saying, they're not doing SEO. Today no more. Every single online business thinks about SEO. They think about PPC, they think about content marketing. Maybe they don't invest in it actively, but they know it's there. They've considered it. It's in their wheelhouse. That took a long time in the SEO field.
I think this is going to be the same thing. I think that people, it's going to take a decade maybe to get people into the mindset of, Oh, before I go do my marketing, I should understand what social networks my audience is using and who they follow on each of them. I should understand which email newsletters they read. I should understand what websites they visit. I want to figure out what YouTube channels they subscribe to and what podcasts they listen to, and all these behaviors and demographics so that I can reach my audience in the right place at the right time with the right message. I should do that with numbers, not just how I feel about it.
Phil: That's interesting because as you're speaking, the first thing that come to mind that was, you did that before, and then you end up and talk about exactly when you did it before. I remember I was there for the early days. I remember learning everything about SEO when SEO wasn't a thing. Again, was a thing just for the black hat guys, whatever.
I remember learning on the Whiteboard Friday, and I remember like, really you already went to that challenge of teaching people about something that is supposed to be doing that they're not doing.
That leads into my next question. Do you believe in founder market fit and you believe you are the right founder for this product because you understand a little bit better and you have done before in other space?
Rand: Yes. I definitely believe in founder market fit. I think there's some people who already have expertise, already have audiences or a network experience building things in that space, understand why people behave the way they do in a particular space, and are familiar with all the conferences and events and websites and channels to market their product and all that kinda stuff.
That knowledge and experience is invaluable when you're building a company. Absolutely, I believe in it. I think it's really hard. I'm truly impressed by people who are like, "I don't know anything about, I don't know solar panels, but I'm going to make a solar company." That's very impressive. That you knock yourself out. I'm shocked. I can't believe you didn't want to work as a consultant at an energy firm for a little while before doing that. Actually, I think that a ton of failures, entrepreneurial failure comes from that. I'm really interested in this thing, but I'm not going to go spend time on the ground in that field before I do it.
Phil: I think sometimes come back to the original discussion that we're having when you start, what you're doing that, if sometimes you're doing something just for money, it's a big problem. I hear there's a lot of in solar. I'm going to build a product for solar people. Am I the real industry expert? What does this industry need? And how do I understand that? Let me go solve that problem. I think that that's the way that sometimes people don't think about it, like chasing money and that gets you in trouble all the time. [laughs]
Rand: I think I think there's this foolish idea floating around an entrepreneurial universe that you can learn once you start it, as opposed to the more you learn about space, the better all of your decision-making will be around that. I don't know where that comes from, but it's weird.
Phil: I agree. Here at my company, when we're taking customers, that's one of the things that we do. If they don't understand the market, because we're very selective, we only take a couple of clients every year. I just don't take them because I don't feel like they're going to be successful. [laughs]
Rand: I think sometimes hearing that harsh reality from a third party is what you have to do. I've had lots of those tough conversations with founders too but it's painful. Sometimes people have to fail for themselves. They have to see it for themselves before they believe it.
Phil: I like what you said, maybe getting to consulting, go understand the market and then you do that and tell us a little bit
Rand: [unintelligible 00:36:23] in a firm or two. Like you can go get a job in that world, and even if it's six months.
Phil: Exactly. Where did you got all that knowledge that you need to build SparkToro? Tell us about how you got that knowledge and then you're like, "I'm ready to go build SparkToro."
Rand: Certainly one thing, I think this is probably a biasing feature of my background and history, but almost all of my knowledge comes from the marketing universe. There are people with job titles like analyst or business strategist or even founders and entrepreneurs. Who benefit from product managers benefit from audience research, but I don't know their worlds nearly as well as I know the marketing world. SparkToro as an audience research product is quite marketing-centric. The data in there can be used for lots of purposes, but you can definitely see that there's a marketing focus behind the presentation and the data that we collect and present.
That being said, I think that my process for starting this company was I am going to go, I get invited to lots of conferences and events and was especially active in 2018, 2019 after I'd left Moz and was starting this one. I was promoting the book Lost and Founder, so got lots of conference invites for that and that thing. I basically hit up all these events and talk to tons of marketers. I'd even go like research, "Hey, there's this agency in this city, I really want to go visit with them." Let me email the founders and be like, "Hey, would it be cool if I dropped by your office and like, talk to some of your consultants about how they learn this stuff and what are their processes today?"
A lot of what I found was they have no process. They don't think about audience research at all. Essentially it was then how do I make this thing clear that it solves the problem that they do have, that they do think about. I need to go find the podcast to pitch and sponsor. We can position Spark Toro as it does this audience research will tell you that, or I'm a social media marketer.
How do I find the hashtags that I should use and the con topics I should write about the people I should follow and engage with, who's going to amplify my tweet or my Facebook post or whatever. We can do that too. It was a very manual process and tons and tons of calls too. Just get on the phone with people, get on an interview, get on a webinar together, all that.
Phil: That's great. I like how you went about it. It's basically years of experience in marketing, but also you went and went deeper in the field in research and figure out what you want to do. That being said I feel like so many times we always talk about the glory of the entrepreneurs and we don't talk too much about our fears and vulnerable moments. What was some of your biggest fear when you start SparkToro? If you want to mind share of that to us, like
Rand: I was very nervous that Moz was my one-time thing. I became an accidental entrepreneur through Moz. I was very worried that like, what if this is my one good idea? What if I can't do it again? That fear was very real. Paying the mortgage? That was a big fear for sure. I had my Moz severance that was going to last me about a year, and then it was like, "Okay if I can't raise money by then and get this thing off the ground, I got to go get a job. Entrepreneur career over." That fear was real too. I was definitely scared. I was scared that without me Moz was going to not do well and that would mean that all my shares would be worthless.
That didn't quite end up happening but it definitely never-- I think in the, what was that three years between when I left Moz and when it sold, I think it I don't think it grew more than 5%. Pretty bad. It was a pretty bad situation over there and I got very frustrated and left the board in 2020. That was a fear that came true. [laughs] Here we are.
Phil: How did you overcome some of those fears?
Rand: Some of them you? I mean, at least for me, I overcame them by doing the work that would make progress toward them no longer being a problem. Fundraising was an obvious one. Reach out to my network, get this money. I knew that money would last us I think four years a little more than four years. Even if we didn't launch a product and had no revenue, we could sustain ourselves for, I think about four years on that $1.3 million.
Getting that round closed in, what was that, June of 2018. Almost exactly four years ago. That was crucial. That was a big, big one for us. Then it is trying to allay fears one by one so getting the product launched, getting those first couple of hundred customers, getting to profitability, which we did in September, maybe October of 2020.
Phil: What? You have a profitable tech company? That's weird. [laughs]
Rand: I know. [unintelligible 00:42:27]. Profitable? Get out of here.
Phil: It's fair to say that, basically, you move besides sizing a few. You just kept moving, and they help you overcome those fears. The move in the direction that would solve the biggest fear.
Rand: It never goes away. Now my fears are what if SparkToro doesn't grow very much and it sort of tops out at, I don't know, one or two or $3 million and a year and that's okay. There's nothing wrong with that, I just want to have a bigger impact. I would be so excited if people would look to SparkToro in the future and say, "Oh, look, there's a different way to build a tech company, and you can be successful with it and you don't have to raise money in these kinds of ways and you don't have to work crazy hours. You don't have to make your life subservient to your work and that's what I'm hoping we get to build.
Now my fears are more aspirational. What if we don't accomplish all the things that I know we could do if we just make good decisions? I think that's my other fear, is I'm scared that we might make bad decisions, I might make bad decisions. Because my whole job as CEO is make great decisions. Choose what features to build, choose how to promote them, choose when and where and how to hire, choose when to use contractors, choose where to spend money, and not all of that.
Phil: You're right. I feel like the job of the CEO is to make decisions and it's hard for us because we do make a lot of bad decisions and so many times I'm like, "I'm paid to make decisions and I keep making mistakes," but thanks for sharing and for being vulnerable about your fears. I think I love your first book but I think we've been an amazing follow-up book to how to build a company in a different way where you can talk about how you did from raising the money.
Because did you have to convince the investors to raise money in a different way? That was kind of the idea. From there because then that can become a new standard. This new way of raising money is the small team. Let's get profitable, very short. I can't wait for your next book. [laughs] Where you tell us about how you did all that. [laughs]
Rand: No, I'm excited. I, I hope, I don't know, maybe next year or the year after I very much would like to write that book. I think there, there does need to be a sequel. I think it'd be interesting to tell the end of story of Moz, the final chapter there, and close that out for folks who are curious about what went on there. Also try and share this very unique, different kind of story that we're building at SparkToro and hopefully have some great insights there around what worked and didn't and how folks can learn from our experience here.
Phil: That's awesome. My final question Rand, what are you very excited about? What's kind of getting going nowadays and maybe one book that you figure one should read?
Rand: Okay, the book one, I have an easy answer for you. Actually, just got this guy a couple of weeks ago, Big Feelings. It is the follow-up to No Hard Feelings from Liz Fosslien and Mollie West Duffy, and I think the world is, of both of them, I thought their first book was outstanding. This one's great too.
I'd urge folks to pick it up. It will make you a better manager and team member, it will make you a better entrepreneur. It'll just make you a better human being because the empathy that these books create for you and the work situations that you find yourself in and other people do. It's powerful.
In terms of things that are exciting to me, I definitely have SparkToro features that I'm excited about right things that we're building that don't exist yet in the product that I hope will really move the needle, but I think they're valuable and exciting and really useful to folks. Even if they don't end up being big moneymakers for us, or subscription growth drivers.
It's nice to be able to be like, "Yes, it's okay. Did we help a bunch of people? Great. Did we get a bunch more subscriptions? Maybe not, that's fine. That's fine. I still love helping people." The other things I'm excited about, my wife, Geraldine and I are working on a video game together with a team down in Los Angeles, a studio down there. That is making a lot of progress.
I just got a bunch of art sketches for a bunch of the characters back, got to see an interactive demo where the chef that you play in the game is like out foraging for mushrooms and fighting off a boar. I was like, "Oh, this is cool. It's looking good. It's getting there." We're sort of finally making some real progress. I'm excited for that. That's probably still two or three years away but whenever it launches, I'll be doing lots of marketing for our video game, which will be interesting.
Phil: That's a fun project. You should come back and then let us know how it was to build a video game. [laughs]
Rand: I'm hoping that in the next book, I can kind of write about how that went too because that's a very-- Also I'm going to be going out for funding for that next year. That'll be a really interesting experience and making a video game is very different. Super creative, super artistic. It's all about finding fun. Then persisting that fun throughout an experience as opposed to the B2B software world, which is all about delivering value and usefulness. There's overlap. They're both software products. They both have engines and UIs and UXs but it's going to be real interesting.
Phil: That's fun, but that's definitely something very different. Going from serving business to try to make people happy. Thank you very much for coming. I think this was amazing. A lot of great content here. Again, I hope the product keep doing well. I'm sure. Well, I can't wait for your next book.
Rand: Thanks, Phil. Thanks for having me. I appreciate it.
Phil: Thanks again.
Rand: All right, take care.
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