Rand Fishkin, Founder of Moz & Sparktoro, Investor | The Dark Side of Venture Capital and Startups

Welcome to success story, the most useful podcast in the world. I'm your host Scott D. Clary. The success story podcast is part of the HubSpot podcast network. The HubSpot podcast network has incredible podcasts for you to check out. Like remarkable people hosted by Guy Kawasaki. Of course, brought to you by the HubSpot podcast network. The remarkable people podcast with Guy Kawasaki helps you better understand the changing world with interviews from thought leaders, legends, and iconoclasts. If you are interested in business, leadership, entrepreneurship, he interviews the best of the best leveraging connections that he's built over his career. Here's some of the episodes and interviews that he's done. He's spoken to Seth Goden, marketing god, blogger, author. He's spoken to Pat Flynn, entrepreneur, power podcaster and popular YouTuber. He's spoken to Jen Lim, happiness evangelist and author of Beyond. Happiness, he's spoken to Steve Blank, author, entrepreneur, and startup Whisperer. If you want to listen to incredibly intelligent conversations with some of the most remarkable people on the planet, listen to remarkable people podcasts by Guy Kawasaki, wherever you get your podcasts. Today, my guest is Rand Fishkin. Now, Rand is probably most well-known for being the founder CEO of Moz. He grew that to over 130 employees. $30 million in revenue traffic at its peak was over 30 million visitors per year. He raised two rounds of funding, led three acquisitions and a rebrand. After Moz, he built inbound.org alongside Darmesh Shah. That site was sold to HubSpot in 2014 after inbound. He founded Spark Toro. Obviously, he's had a string of successful entrepreneurial ventures. Outside of building companies, he published a book, Lost and Founder, a painfully honest field guide to the startup world. He had co-contributed the two books, The Art of SEO and inbound marketing and SEO. He's been profiled in Seattle Times. He has been named 40 under 40, named Business Weeks, 30 under 30. He's been written about in Newsweek, the next web, Inc. 500 and hundreds of other publications. He has been around the block in terms of marketing, entrepreneurship. Obviously, his background was building marketing tools, but now he works with entrepreneurs as an advisor, as an investor. Let me just go through some of the things we spoke about. Firstly, we spoke about some marketing topics. There's very tactical marketing things you can't bring, Rand Fishkin on a podcast and not speak marketing. We spoke about some of the strategies that he used at Spark Toro, his most recent venture on how to grow it and some of these strategies that he's learned and implemented at Spark Toro. Obviously, have come from his success at Moz and at inbound. We also spoke about some startup and entrepreneurship and startup culture things. How to build a more equitable startup culture? Why is that important? Why does startup culture suck now? What can we do about it? We spoke about some tactical advice for entrepreneurs who were starting their own companies. We also spoke about venture capital. He pulled back the curtain on venture capital and exposed some things about the VC world that may not be all sunshine, unicorns and rainbows. How does some of the traditions that usually accompany VC and VC backed companies potentially negatively impact the growth or the business that the entrepreneur is trying to build? Some great marketing lessons, growth lessons, entrepreneurship, VC startup lessons, Rand's done it all. So let's jump right into this. This is Rand Fishkin serial entrepreneur, author and investor. Yeah, I dropped out of college in 2001. My first job was actually working at the Wizards of the Coast Game Center. I don't know if you remember the little Pokemon cards. I 100% know what Wizards of the Coast is. I think they made or they resold on behalf of the Japanese company that makes Pokemon cards. They sold these distributed them throughout the United States for their base tier in Seattle. They used to have this big game center tournament center for playing Pokemon and Magic and all the other games that they make in the university district right near where I went to college. I was working there over the summer buying Pokemon cards with my employee discount and then reselling them on eBay and Craigslist. And that is how I paid for my last year of school before I dropped out two classes away from graduating. So you're arbitraising Pokemon cards and exactly exactly and you know I kind of had this like affinity for just internet commerce in general and the idea of the web I've been doing web design since high school since my mom brought home a copy of Microsoft front page I think in 95 or 96 and I wanted to do that full time. So you know basically got into got into web design was a failing web designer for years and years. My mom and I were working together but very unsuccessfully we're you know spending way more than we were making and we eventually pivoted the business to SEO not not through any like genius discovery but because our clients who needed SEO for their websites that we had designed and built we were subcontracting network we couldn't afford to pay our subcontractors anymore like we ran out of money to pay them and so it was hey Rand you have to do the work now. And so I started learning SEO and I started this blog called SEO Maws around you know sharing what I was learning about SEO mostly sharing my frustrations around trying to learn SEO and then that website probably about 18 to 24 months into me operating it started to get some real traction and clients were coming does not for web design anymore but for SEO and so we you know pivoted the business essentially entirely to that service model and at that point things started growing you know I was getting invited to speak at conferences and events and was building like a little bit of a you know tiny niche of a name for myself in the SEO world which was very small at the time people still thought SEO was mostly this black cat manipulative you know spammy scummy place and SEO Maws was trying trying to improve the reputation of SEO and and over time I think that eventually worked basically what happened SEO Maws switched to a software business from consulting I became the CEO we raised some funding traditional venture funding over a few rounds I got to about maybe 35 40 million dollar in revenue I stepped down as the CEO in 2014 and promoted my longtime chief operating officer to the CEO role and then I was with the company another almost four years and then then left in 2018 and the next day started Spark Toro which is in audience research and and you know very different sector but still in marketing software in between those two companies are with this book lost and founder which a lot of people have read and obviously you know you're part of the world of HubSpot right so I detailed in that book the offer that HubSpot made at one point along Maws's journey to buy the company and sort of all work together and that I I turned that down which was in retrospective very very foolish mistake yeah so that's that's essentially my career and these days you know I'm operating Spark Toro it's a super different company than Maws it raised money a different way it is run in a really different way there's only three of us 200 of us at Maws there's a very different philosophy around growth and around the marketing model and how we attract and build our our customer audience and who we serve but it's it's still marketing software and I like that world a lot but I'm yeah I'm trying to like we said in the preamble Scott I am I'm trying to not stay in my lane so was that was not staying in your lane and something that you incorporate into building of Spark Toro doing things differently I want to understand how you've built Spark Toro I want to understand first of all the inspiration for Spark Toro why you even decided to go into that lane but or that you know with build that build that company but also your growth model walk me through some of the things that you're doing okay I'll try and answer the first question first yes and then the second second so why sorry why do we see our mean or how did we not stay in our lane how did you what did you do differently what did you do differently with Spark Toro yeah the list is so long that we we I would spend the rest of this podcast explaining it to you what are the main ones yeah yeah I'll pull out some some big picture ones so Spark Toro is built for profitable long-term survival not growth at all costs high riskiness so traditional venture startup model right which which I'm sure you're familiar with right you know HubSpot was this model models this model 100,000 other venture back startups are are all this model which essentially you raise money with the expectation that you will attempt to grow as fast as you possibly can and that you will do so unprofitably I think I think I saw from HubSpot's latest results like they're they're a public company now but they're still unprofitable right they lose money every quarter every year but the ideas that they're their growth rate means that investors are willing to fund that unprofitability with the hope that eventually they will be like Amazon was after 19 or 20 years right extremely profitable at some very very large growth rate because they'll be a monopoly player in their space and they'll you know remove all competition and then they'll be able to charge higher prices and you know essentially corner the market and that that model has worked very well for investors because the United States tax code rewards growth over profits because of capital gains right so if you and I you know start a company and it grows a lot and we sell it we pay zero dollars on the first 10 million of you know money that we make and we pay 18 percent 16 percent whatever on the next you know 10 to a hundred million dollars of profit that are of sale revenue that we get but if instead every year that company kicks off a million dollars to it and we run it for 50 years we're paying 40 percent or whatever you know maximum high tax rate for ordinary income is so investors right wealthy investors LPs that the limited partners that back venture public market investors hedge funds all these people they don't want profitability they want growth because that's you know that's how you get capital gains tax rate and so you've probably seen that the Biden administration has proposed potentially making the capital gains tax rate the same as or as income which would be absolutely revolutionary to the world economy it would be very strange I don't I don't think we understand at all well everything that would happen I think it's a great idea but I know lots of people don't like it but so in that in that model right essentially your job as a startup right if you and I invest in a startup what we want them to do is to try to become a unicorn or or or die somewhere on the way there and both those outcomes are what's not really fine with us if is if you get to you know a few hundred thousand or a few million in revenue and you're sort of happy and content and you have a profitable business and your customers like you in your product and your employees and team are happy and you're happy but you're not growing or you're not growing very fast and you're not also dying and going away and getting off our you know our reports both of those outcomes are fine the middle one the the sort of happy long-term profitable growth not good it's not good for our model it doesn't fit in there there's no place for it and that that is the biggest thing that SparkToral rejects right the biggest thing that we reject is the idea that you have to be you know grow it grow as fast as you possibly can at all costs or die trying I say die death of company right bankruptcy yes not not not literally yeah no human beings right yes but this that model I think is only good for a portfolio theory right so essentially if you and I own a hundred companies like this and we probably don't want to very well if we own 500 companies like this we'll we'll start to right the the averages the portfolio theory of it says there'll be two to three huge winners in that group of 500 you know there'll be 480 complete failures but those those two to three winners will make up for it and and then there'll be maybe 10 or 15 that do pretty well right and so those two or three whatever the the Airbnb and the Uber will make up for you know all the all the other bells yeah yeah everything else and that portfolio theory works great for investors and works terribly for entrepreneurs because if you and I start a company and we're told hey you've got a like three and 500 chance of making it you're like what company what what happens in the other cases well in 485 of those cases things are going to go pretty bad for you like you're going to be real sad you're not going to make as much money as you would have if you just gotten a regular job it's going to be a stressful very emotionally turmoil filled adventure and your employees are going to be very unhappy and your customers are going to be very unhappy your investors are going to be unhappy with you but it's fine you go away and die and be the failure because you'll help us find who the few winners are I think that model sucks terribly I want I have all sorts of swear words I want to use about that model you can swear as much as you want but I think the I think the point is that nobody entrepreneurs this idea there's a lot of ideas around entrepreneurship that I don't think are are discussed that much and even when we were doing the preamble it was like okay do you want to talk about marketing or you want to talk about all the other things that have to do with entrepreneurship I get a lot of people talk about marketing I'm sure you have some great ideas about marketing my god like we know we know the past know the history you're in this space you've been living in this space but I think that the the the ideas that you champion around around entrepreneurship are very important because it paints a very pragmatic picture for people that want to start something and potentially are just just looking to go find VC money and think that that's the only path that they can take which it's not it's yeah well and even for people I one of my big frustration Scott is that even for people who don't raise venture they build their companies in the media ecosystem and the echo chamber that is dominated by venture right and so even if you are a startup that is you know an agency for example a consulting business the the concepts of blitz scaling and hyper growth and growth hacking and you know maximizing growth rate of hustle culture all of these things are weighing down on you regardless of whether you are actually you know in that in that funded structure so I think this is this is one of my big challenges right is that even though many venture capitalists would say and they do say this all the time right they say VC is wrong for 99% of companies and if you're a tech entrepreneur it is marketed to a hundred percent of us right it's the it's the ocean that we're swimming in so I um I think it's really really wise to understand why does that asset class exist how does it function what's the goal behind it right the goal behind it is to avoid taxes and the goal behind that is essentially maximize growth at the expense of long term survivability so you know if you look at the small business and administration right in the US which which looks at tons of small businesses so people with whatever two to a hundred employees the average survival rate over five years is like um I think it's 55 58 percent it's down a little bit in the last few years because of COVID and stuff but um the average five year survival rate for a venture funded as soon as you raise that first venture round or the the pre-seed or the seed round that would lead to a venture round um your five year survival rate drops like 15 percent that's a lot worse than a restaurant right yeah so so it is it is a um it's a very strange strange world if you are an entrepreneur and I don't think it's talked about enough that that these these high failure rates exist there's also the culture of you know I think the the whole ecosystem around it creates this idea that you know Scott let's say you you start something tomorrow what what you're essentially told is hey yes there's a high failure rate that's part of the game but you are special and if you are good enough if you are a true champion if you work hard enough if you sacrifice enough of the rest of the things in your life and you put your full energy and effort and you devote everything to this venture you may be able to prove yourself as one of the big success stories um I hate that too like that does not work well with my mental model and how how I want the world to be right I want a world of far more equity and far more distribution of opportunity rather than um maximizing inequality by saying forever you know 500 entrepreneurs there will be two or three big winners and a few who do okay and the vast majority will fail entirely I think that's what we have in society um American society at least overall right now you know if you look at the wealth distribution income distribution it's basically a tiny few massive winners right a few you know maybe another 10% who's doing pretty all right and then kind of this oh man you do you know whereas when we were born you know maybe I don't know how old you are but 30 40 years ago you really didn't want to be in the bottom 40% of Americans now you really don't want to be in the bottom 70% and it feels like we're going to a place where you wouldn't want to be in the bottom 90 percent you know in another 20 years that that's ugly that's not the world I want to live in that's not the world I want to be in it's an ugly version of capitalism it's an ugly version of capitalism in that yeah yeah super ugly version and look I you know I think um extremely highly of a lot of people who are in that world right I have a bunch of investors who are venture back Darmeshaw Darmesh the co-founder Fabsox yeah he was he was the lead investor in Spark Toro he's been my friend for forever I love that guy to pieces I think he's a wonderful human being I don't love the model of investing that he generally does and supports right and he's had obviously an incredible success with HubSpot and and with venture backing I know he thinks highly of HubSpot's venture investors two meters ago and he invests in a lot of startups that go on to raise money but I don't I don't I don't love it and I think I think in order for us to change that we have to have lots and lots of role models that are showing a different path and doing it well and that's that is the most fundamental thing that Spark Toro is trying to be is a role model for a different kind of path so we are doing our marketing differently we're doing our growth differently we're doing hiring differently we think about what we want the next quarter in the next year to be differently we technically we are growing at a rate that a venture investor would be excited about but we don't have to be it's almost unintentional right it's sort of like oh well look at this happy accident that is going along you know Spark Toro is going quite quite well especially at the moment I'm sure we'll have some down months in the future but yeah that's not our goal is not hyper growth my goal is to work 30 or 35 hours in a week right I want French or Italian hours I don't want American hours 100% yeah all right so that's pretty good of course I know exactly what you're talking about if I remember last time last time I went to I was I was last last European trip was Vienna Austria and yeah the I was on my phone on a Friday afternoon and everybody was looking at me like I had three heads like the fact that I was on my phone on a Friday afternoon it was just a regular it wasn't a holiday it's like what are you doing like what are you what are you what are you working on it's so different yeah yeah get off your phone look look look at the beautiful sunset look at this incredible plate of pasta before you let's go to a vineyard let's go drink let's go eat let's go eat let's go get an aperitivo that's so I mean I I don't think I don't think that at the you know at the end of my life I'm going to look back and say I wish I'd made more money you know like I just can't see it I just cannot I wish I wish I'd grind it harder I wish I'd hustled more like I don't I don't think those are the things I'm going to be thinking about I think it's weird that there may be there are people who will feel that way I don't know I don't think well I think that that's why you have to find a way okay so let's let's break now I want to break down some some tactical device for entrepreneurs on on how they can build a company like Spark Toro because everybody like you said is marketed and they're they're in this ocean of VC investment or if not VC investment then okay I have the bootstrap but there's not a lot of bootstrap success there are some but I mean there's not a lot so how do you yeah and buddy do it and these are not the only two options right there's a whole bunch of stuff in between that is poorly understood and not well marketed and not it gets very little press gets very little media and and for obvious reasons right it's just there's not that much of it and also it is rarely the case that those people have power influence and wealth to impact media in the same in the same way right so so what I would what I would urge folks to think about is in the structure of your company you can raise money from investors private or crowd funded in ways that let you build the kind of company that you want to build and there are supportive groups of investors who are like like myself right who are looking for opportunities to fund companies that have a hey we're going to exist for a long time our first priority is sort of paying back our investors their initial sum this is this is how the Spark Toro model works we raised 1.3 million dollars from 35 36 angel investors they're mostly folks gosh from my personal network over the years so you for our model you do need accredited investors but there are innovations on that model that'll let you crowd fund this this same sort of thing you can look at what saw Hill Langavia did SHL on Twitter and he you know he basically built a fund structure that that's a little more crowdfunding style but those 36 investors put in between 25,000 and 100,000 dollars each and our goal at Spark Toro is essentially to become profitable which which we have been for a while now and then pay back that 1.3 million at which point everybody gets to participate pro rata meaning to their amount of shares in profit sharing so if we make you know 100,000 dollars in profit for 10 years everybody you know all the investors get to split whatever it is 35% of those profits and founders get to and employees get to split the other part hopefully right our hope is that Spark Toro is a several million dollar a year business maybe even a 10 million dollar a year business and that our profits are seven figures right and that we can pay out that money every year annually and that compounded over time Spark Toro will actually be one of the best maybe the best performing investment in our investors portfolio and the only downside the only shitty thing for them ordinary income taxes right they'll have to pay ordinary income taxes on the money that Spark Toro makes them but if you can find you know sort of um tax progressive investors right who who believe in this that the one nice thing is if and when Spark Toro ever does sell right if it if it if it's acquired by some other company in the future good news on that money our investors will get capital gains so so you set up multiple exit options or no exit options or no exit option yeah exactly and what's and what's the goal right the incentive for us is essentially keep costs slow get to profitability maintain profitability for a very long time keep our team happy keep our customers very happy invest in true long-term thinking right 10, 20, 30 year thinking because we don't have to worry about 18 months or now we're going to run out of cash how do we get our burn rate down far enough that we can survive or how do we raise our next round of funding because realistically we have to raise our next round of funding and that is virtually every startup I've ever been involved with is our you know we have this many months left of survival that I I find that model incredibly tense and I don't think it predicts the best performance from you and your team they're right there there are people who will say hey it keeps the entrepreneur hungry it keeps the team hungry they know that they're out of a job that they're screwed that their life is you know doomed to be bad right that they're not going to have health insurance and like they're screwed in life but if you think about that if you think about that that's the way that the person that you're partnering with for your future is thinking right off the bat you'd be like I don't want this I don't want to work with them yeah you don't want to work with someone who basically says hey if you don't reach these milestones and and get that hyper growth going real real fast your life is going to be bad and that's what I want for you yes that's not fun and that's why and the biggest issues that people don't realize that their version of entrepreneurship is is not like that version of entrepreneurship is not what it has to be and it's definitely not what they want until they've taken on that first round of funding and now they're now they're stuck they're stuck with these people that they can't get out and that's the number one thing I tell people like if they're looking to raise money like you better be damn sure that people you're getting to bed with are the people that you want to work with long-term and I think that early on they don't think they don't think through and they just jump into whoever's going to give them an offer and that's scary I just want to take a second and thank the sponsor of today's episode express VPN now I know most of you are probably thinking why don't I just go incognito mode well let me tell you something incognito mode does not hide your activity doesn't matter what mode you use or how many times you delete your browsing history your internet service provider can still see every single website you've ever visited that's why even when I'm at home I never go online without express VPN and it doesn't matter who your internet service provider is ISPs in the US can legally sell your information to ad company so what is express VPN will express VPN is an app that rerouts your internet connection through their secure servers so that your ISP can't see the site to visit express VPN also keeps all your information secure by encrypting 100% of your data with the most powerful encryption available when I'm using express 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acknowledge what we did right the things we want to continue doing more of the relationships we want to show appreciation for and what if we did that for our businesses HubSpot is challenging businesses to focus on how to grow better starting with our customer because the HubSpot CRM platform is dedicated to making the connection between you and your customers better than ever how well new tools like native payment links and recurring payments that directly embed in HubSpot's quoting tools and emails mean seamless delivery and payment collection and cost them surveys easily capture feedback unique to your business share insights with your teams and help you understand what makes your customers tick learn more about how HubSpot CRM platform can help build maintain and grow your customer relationships at HubSpot dot com it is it is really scary I mean I'll tell you honestly I thought the world of Maz's investors I still think that in the venture world they are some of the best investors that you can find right they you know they're very entrepreneur friendly they leverage their networks on your behalf they'll give you all the advice that they can they'll take time for you on personal issues as well as professional ones they're you know emotionally smart people they they they clearly cared about me as a human being not just an entrepreneur it's not the individual right the person that that investor is not the problem when you meet with them they're going to be friendly they're going to care about you they are a real human being just like you the problem is the incentives the problem is the model don't I'm trying not to blame the individual people inside the model for the way that the model works right because it's not this investor screwed me it's this investor just could not can't realistically break out of the incentive model that they are given and treat me differently from how their you know financial goals are designed right because they have investors too they have LPs those LPs expect the valuations on that you know sheet every whatever it is every year that the reporting is done by the venture firm so it's the model man yeah and I think that the the issue is further propagated by the fact that people that are these investors they make their money from other investors that were part of this model and that's the model they know and it's it's self-fulfilling prophecy so yeah yeah right that might there's not a lot of innovation almost no one is trying to break out of this field we Geraldine and I my wife and I just had a meeting with Janine Sikmyer from from overlooked ventures right and overlooked is trying to do something really cool very innovative for the venture space which is essentially they they exclusively black overlooked and underrepresented underserved founders right so this is people you know women founders black founders native founders right that kind of stuff awesome super cool mission frustrating part for us at least was like same model same underlying structure and model and I you know that's that's the part that I just can't get my can't get excited about at least so so to this you know the spark tour model we open sourced our funding documents so that you don't have to pay a lawyer you know a whole bunch of fees to sort of like recreate what we did those are available online a few startups have already raised money using our documents and I encourage anyone who wants to if you just search for spark tour funding you'll find the docs link to you can update them with whatever numbers you want and then we also invested in a fund called tiny seed which is backed by Rob Walling of microconf and Minneapolis and tiny seed uses spark tour funding structure for all of its investments so it you know invest in a whole bunch of companies each court and that that that that fund is doing very well right like the crazy part is the survival rate is so high that and and the the hyper growth of several of the companies does not appear to be negatively impacted right it's not like well you know by having a model where more people survive fewer people grow fast that does not appear to be the case and that this was my theory all along right my theory is you're not everyone can win every yes yes thank you that's maybe that should be the title the next book everyone can win I like that that's good I like that a lot okay let's let's let's let's I want to I want to pull out some differentiators in your marketing strategy uh for spark tour because you're doing that differently as well so how are you marketing and growing the company so we figured out the investment model now let's figure out the the marketing model yeah yeah so um the interesting thing right about spark tour is coming out of ma's you you would expect that like well Rans really good at content and SEO so he's gonna create a bunch of content and a rank really well and then people come from google search and they'll they'll find spark touro and they'll they'll give it a try and that is uh we get almost spark tour gets almost no search traffic and nearly all of the search traffic that we do get is for uh one phrase or one keyword alone spark touro almost everyone who who finds us uh simply searches for our brand name and that is um very very different than ma's right of course which was built on this engine of you know what maybe the inbound folks would or sorry the house thought folks would call the inbound marketing model right of like content and SEO and building a flywheel around that that model works great i'm not against that model it's just not how we're doing things and that is mostly because spark touro is not something anyone would know to search for um so we you know we haven't talked about what spark touro does specifically but essentially i mentioned its audience research it's it's essentially you go to spark touro and you search for a particular online audience like i want to know what um chemical engineers in the uk uh what podcast they listen to and what youtube channels they subscribe to and what social accounts they follow and what websites they visit right and you can do this with virtually any describable online audience so it's not search data it's essentially behavioral and demographic data that is uh crawled from public social and web profiles so spark touro has this you know um idea of a forever free account different than ma's which was a free trial model you can just sign up get forever free access every month run a bunch of searches um the that is the primary driver of growth for us so essentially people sign up run free searches have some good experience out of that get some you know um value some real value from the free version and then over the months and years ahead they do two things they share it with other people they're like hey boss team friend you should see this and secondarily they come back and try it again when they need more audience data um the the primary way we have let people know that we exist and and you know figured out that spark touro is a thing is experiences like this one literally um we you know i do probably a few podcasts and webinars and shows and interviews and whatever live chats and social media discussions uh every week and that is what's fueled spark touros brand awareness and growth over the last what what have we been around for 16 months 17 months uh that we've been live and you know essentially today we've got about maybe 45,000 people using the free version um and i'll i think right around 900 paying subscribers so you know it's a it's a very low cost product obviously um i think it starts at 50 bucks a month is the lowest price plan and then you know it goes up to like 300 a month so even at the top tier it's less expensive than like the lowest price top spot whatever or you know any any sort of enterprise marketing product uh and that works great for us right we have a tiny team we can afford to do that um Amanda our our new marketing architect Amanda in the tv.dod she is you know helping put together like a biweekly office hours event right that we um that we do we do some we're planning on having um like a podcast or video cast um in the near future but i've blogged maybe 50 times in the company's existence right it's just a very it's a very very different model it's essentially through influence marketing right going out finding sources of influence making some connection and influence with like product led marketing or product led grow yeah it's it's that combination it's essentially product led grow well it's influence that leads to a product that creates a loop of um engagement and recidivism and eventual conversion and do you think that the reason why you're having such success um i uh one of the things that you have spoken about in the past is that there's a problem with MVP culture and i think that maybe by engineering a slightly better product that's what's allowed you to use this viral loop of so walk me through walk me through uh walk me through quickly problem with MVP culture lean startup but then also you know we're going into everyone today yeah yeah yeah but then what you do differently so what was the first iteration of a spartoro oh okay um let's see so i'll i'll answer that and then we can talk about MVP culture okay um first iteration of spartoro was essentially a super early alpha where i sent queries manually to kc my co-founder and um you know our cto he basically does all the the technology behind the scenes and i was like hey kc can you tell me about you know whatever it is architects in california case would be like okay i'll query the database and then i'll send you some like here's a dump of you know basically what's what's going on and then that version was very tough for me to get my head around um and so kc built a very simplistic UI uh that would let me essentially run my own queries against it and that um version existed about i think about six months after we got funding so maybe the fall of 2018 january 2019 somewhere around there and that alpha version was absolutely an MVP right it was it did a a similar thing to what spartoro does today right so it was like the the early nascent version of it but there's no way in hell i ever would have launched that publicly um and that's that's kind of the difference right so i think that you know the air crease lean startup model which is which is sort of overtaking the startup world in terms of popularity that model says once you have a version like like that version that early version of a UI that you you know built get it out there publicly see if you can get traction see if people will pay attention to it and use it and find it valuable um before you go and do anything else with your company and what did we do uh we spent another year and a half and four hundred thousand dollars um of you know sort of our investors money uh iterating on that before we are willing to launch anything and that is absolutely contrary to the MVP model right it's super against it the the thing that i think is great about MVPs and i here's the in the case where i was a founder with no following no traction in the marketing world no way to get my message out you know i had no contacts or connections virtually no network i probably would have launched that version i would have launched that super early UI because what do i have to lose it's not like the ten people we're going to see it are going to be you know hugely impactful on the market but when when spark toro did it finally did its launch 25,000 plus marketers including many of the most um well followed and influential people in that world checked out spark toro within the first two weeks of its launch you you get one chance one chance to show those people who and what you are and if they already have an association with you uh you will not get a second chance to do that right so it'll basically be is ran fishkin's new thing good no it's a piece of crap mm-hmm so i think the MVP model works great if you have virtually no you know marketing impact at launch and i think it works terribly if you have a substantial you know sort of um audience that you're going to be launching too because that first impression is hugely important couldn't argue maybe made that even if you don't have a following that that first impression is still important and maybe instead of worrying about launching an MVP too early you don't go all in on a startup don't quit your job so you can support a more completed product yeah potentially i let's see the the way that i like to have my cake and eat it too in this scenario is many alphas and betas with private groups of people who are invited to test something behind the scenes and then once they are so crazy excited about it and they're obviously using it and that usage rate is high and they're coming back to the product again and again and you know they're telling their friends and asking if they can invite them then you launch right and so then essentially you get the benefit of both things you get hey yes i have some people who are testing this and playing around with it and validating whether it's good or not and also i get the benefit of when we finally do a public launch it's really exciting this is how a lot of classic industries work um we have some friends who are in the theater world right and i i don't know if you're familiar with like how broadway or or local theater works right probably not probably i i i just watched it if if i get invited but that's about it so so they have this thing right where they basically do rehearsals right obviously you know they're rehearsing the play or the musical or whatever and then some people get invited to those and then there'll be a thing called previews where you know if you're a member of the theater you can like come and see things early there's like yada yada and then then there's opening night right and opening night is when press and reviewers and people who are going to potentially amplify and decide whether the finished product is worthwhile right and that that's when you stop sort of iterating generally on the play that's uh that happens often you know uh 10 to 30 performances after the the very first time you've performed it for a live audience pretty smart right like yeah you you have an MVP model where you launch an MVP to a group of friendly even if it sucks and is terrible they're not gonna like go out and you know trash you in the New York Times right and and then you iterate on it make it better and better and better until you're ready for opening night and then you get going so if it's good enough for musical theater it's good enough for uh I know the tech startup world really doesn't like thinking of themselves as uh it's a proven model industry but it's a proven model that yeah that works okay um and last last thing that I wanted to pull out uh was you know you are you have achieved product product focus or product led marketing um now if you go a little bit deeper into what constitutes the product um talk to me about the focus on feature sets and roadmap in relation to uh what your customers want versus if you have a VC traditional VC backed roadmap that you're trying to achieve and you mentioned it earlier how that negatively impacts your customers and how you have customers that aren't happy with you so walking through that dichotomy I just want to take a second and thank the sponsor of today's episode get abstract now if you're trying to figure out where to get information from where to learn where to read there's so much stuff out there it's like information overload what get abstract does is it finds rates and summarizes top business books articles and video talks into 10 minute abstracts to help people make better decisions in business and their private lives I know you don't have hours to kill but you still want to learn you still 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don't fall for subscription scams start canceling today with true bill at true bill dot com slash success story go right now true bill dot com slash success story that's true bill dot com slash s u cc s s s t r y it could save you thousands a year that's true bill dot com slash success story take control of your subscriptions yeah so first off I want to say this is not it's not a universal that a you know sort of the that the classic venture hypergrowth model structure is always absolutely negative for customers it's just that the incentives will often create conflict and sometimes that conflict can be healthy and sometimes it can be really unhealthy but essentially what you have is you know let's say today um spark toro is serving primarily marketers agencies um it is serving a lot of you know consultants and in-house marketers at teams of small and mid-size companies primarily a few enterprises here and there but but not very many right and in a venture model we might you know get together with our board of directors and look at the opportunity and say hey we're growing really well among the sesame set but that's not where the dollars are flowing in the global economy like the you know because of the the structures that we talked about most of the dollars most of the revenue is going to the very big companies and so the question isn't how do we get 10,000 more SMBs on spark toro the question is how do we charge 10,000 times more to Amazon Microsoft Facebook you know what Deloitte you know a ton of big companies who are going to use spark toro in the future and so what we want to instead do is start to move up market go enterprise build a sales team make the product ideal for them that doesn't necessarily mean that we're going to make compromises and do bad things for our SMB customer set but you can see where the tension comes into play right the road map is essentially focused on how do we get to the next level of growth rather than how do we keep making these customers that we're already serving happier and happier how do we make them more and more successful and by making them more successful you know over the long term we have confidence that spark toro will be a better company for lots more people like them and that they'll stick around longer right and that kind of stuff this is the this is the big challenge right and I know that HubSpot for example had lots of conversations around this and had I think very healthy conflict around you know sir do we serve existing customers do we go from serving marketers to serving sales people right and you know does that take our eye off the ball in terms of this at my old company Moz we had this discussion a bunch Scott and decided made the absolute worst wrong decision which was hey we need to move away from being just SEO and serve all these other marketing practices as well you know content marketers such as social media marketers email marketers press and PR public relations marketers all that kind of stuff so let's build a platform for all of these our own metaverse I think that's the new thing everybody calls it and and and that basically we did that at the worst possible time because SEO is growing so fast and our competitors took advantage of the fact that we had taken our eye off the SEO ball and we're like hey we're focused on this and a lot of people moved from Moz to AA traps and SCM rush and and and other competitors and and Moz lost its market leadership position as a result so hey you know it's one of those things where it's like high risk high reward I like the model right now of how do we serve the customers who are finding Spark Toro valuable better and better every month how do we iterate on that you know maybe we have some visionary ideas that are you know no one asked for this specific thing but we think it's going to be really valuable to those people and so we try and build that in addition to building the things that that we know are being asked for right so the biggest thing that people are asking for right now is more language support they want German and Spanish and French and Italian and you know Japanese and all these other languages right in in the product we don't currently support those showcases doing a bunch of work to support that and then we have a visionary idea that maybe people will want to not only search for an audience but also track it over time and sort of see like oh okay my audience is changing in these ways they've started following these new podcasts they've started using these new hashtags they've started talking about these new topics they've started sharing these new content what we think that a lot of marketers will be interested in seeing that but nobody asks us for it nobody's like hey I want to track my audience over time and like get graphs and data of what's changing so that's a you know an intuition it's it's a vision for what where the product could go we're building both these things and last point on just some some startup lessons or thoughts on startup culture and then I want to go into some just some rapid fire to pull out some some insights from your career how do we build what what are your final thoughts on building a more equitable startup de facto culture versus what it is right now yeah so I I think there are this really big question and a tough answer I know but I know it's something that you're passionate about that's what I want to question about and and you know there's also the difficulty of like all right let's get the two white Americans cis straight able bodied white guys together and and have them discuss these topics and that you know that alone has its problems but I do think that that those of us who have benefited from historical inequity have the lion's share obligation to help fix the problem right maybe we ourselves did not create the problem although arguably I think we we could say we probably have contributed to it but we absolutely have to be the solution and so my feeling is you can't do this without recognition of the fact that like you basically have two options in your belief structure right you can either look at the current state of you know generally the world at large but but even just like focused in on startups and technology and marketing in the United States and then say well either it is the case that almost all of the best and most talented most qualified people happen to be white men who look like us right and and have like our profiles or there is bias in the system right I think there's definitely bias in the system I think that's it's not really an argument but yeah so in order to in order to think the other thing you have to be deeply misogynist and racist right you have to be like at your core a have this horrific hatred of others and and a belief in the superiority of a of a very certain kind of person well you just follow the mic right where does the money come from and that that leads to to bias all right so so then you start to ask yourself right then the the next step is to find where that bias exists and the answer is everywhere and so you tackle piece by piece where are the structural biases existing right and it's it's access to education it's access to money it is where and how you grew up and who you grew up with and around and who your friends were at school and you know what colleges you did or didn't get into and what you or your parents could or couldn't afford and so fixing those things is part of our challenge and then the other part of our challenge I think is to say let's start to recognize that talent is equally distributed but opportunity is not and when we realize that what we say what we can say from there is we need to understand that the bar of measurement that we use for people who have had every privilege and opportunity in their life cannot be the same bar that we use for people who have not had that if you if you started here and you stayed here and you get venture funding because oh hey look you're up here that's not nearly as impressed as as you started here and got here right that is you made some progress but if you look at the background of technology founders in the startup universe you will see that almost I think it's more than 90% come from backgrounds of top 10% wealth but just like you know if my parents owned whatever gem mines diamond mines in South Africa and gave me tens of millions of dollars off the backs of arguably a modern form of exploitative at the very least and potentially not that far off of slave labor maybe I too could make rockets and but there's also a lot of well I was gonna say there's a lot of yes so that's one one example but there's a lot of level there's levels to this shit too right like it's that's that's one that's one extreme but there's a lot of wealth that comes and even then if you if you're brought up in that in that family that you have wealth from less less conflicting you know jobs and whatnot say you just have from from regular every day owning brick and mortar shops parents doctors lawyers whatever that may be and you have wealth from that I was just gonna I was the point was there's a lot of a lot of people that come from wealth you don't I mean just the right that I think there's a huge difference in the United States between like almost 50% of the population who if they had a $4,000 or $5,000 expense emergency expense next month I've heard this that be over right like they're financially bankrupt essentially there's no way they could afford it they would be deep in debt for decades to come through the you know extractive and exploitative payday loan industry and the you know nasty stuff around that you know one of my least favorite statistics that horrifying statistic is that if you are a woman in a domestic violence situation your partner spouse whatever is beating you and you know threatening you and you need to get out of that situation it costs it costs that woman something like $750 on average to get herself out of that situation and for those women who do who invest that $750 almost all of them in the US go through the payday loans industry and they will pay over the course of the next three or four years over $4,000 in interest payments and that that keeps them in poverty that keeps them in bad situations it is gross and disgusting well I never thought that I've never thought a thought of that particular stat but that's that's that's disturbing I know that I know the stats that like if you have you know five cents in your pocket you're richer than x percentage of the of the population of the US right like most people are living day-to-day in debt but so just extrapolate on that and it makes sense yeah but it's you know so there's there's horrible inequity and I think the job of an investor of an entrepreneur of you know you you when you're doing hiring is to recognize that just because someone is up here and someone else is down here your job is to look at the trajectory not the where they are like I always graduated from a four-year school that was very expensive and they got this kind of degree so they must be qualified more qualified than someone who went to community college and you know had to drop out but has you know some skills and showed this grit and perseverance and has you know has this kind of a trajectory I I don't think so you know people talk about like oh you work so hard I you know what I have never never in my life have I worked as hard as maintenance or janitorial staff not one day and and you know look how American society rewards me versus them it's pretty it's really weird do you know anybody that you know any VC groups incubators that you'd recommend people I don't know I'm putting you on a spot here so if you don't have but you know any that are doing it right in the venture world there's not a lot I mean I mentioned overlooked ventures backstage which Geraldine and I are also investors in you know Arlen Hamilton as the founder there she you know she came from like homelessness herself right living in a car I I don't know a lot of venture investors who have a background like that which is pretty awesome and I think that there's probably a few others you know I I would mention village capital clear bank gosh Indy VC was one but unfortunately their fund shut down oh earnest earnest capital I would check out tiny seed again we're investors in that one but there are a few and my hope is that more people will think harder about this and think harder about what they want to fund versus how they can avoid taxes and it's got a it's a it's a hard thing to change man so really hard thing it is a hard thing to change I was I spoke to his name was Keenan Keenan Beasley from Not Mistake and it was a wild dog I spoke to him and he was and he was an investor but he had opened up for underserved minority groups like an incubator and and he this is what he lives every single day and I will try and find the name of his incubator but basically basically he's focused on everything you mentioned so all the the network the connections the the family you grow up with those relations and it was something along the lines of like there has been it was some incredible set it was like there's only been one investment in a black individual at a siege stage for over a million dollars in the history of the US it was something like so insane that I like I couldn't believe it till he actually proved it like it was just unbelievable and I hope my stats are right but if you if anybody wants to look him up and yeah Keenan Beasley he's the he's done a couple things but he is focused on and I had him on a while back now focused on everything that the brand you just spoke about and his venture is called venture noir and he has some really shocking stats but he's a really fascinating yes so really interesting guy but I think the you know the other thing that you have an obligation to do outside of whatever tech startup world outside of you know our our little universe is to in my opinion if you recognize this historical inequity you have an obligation to try and fix that and and that means doing it in your everyday life and in your civic life and in your voting and in your charitable contributions and in your you know in your in who you network with and how you help them so look at you you know everyone has their biases and their options around this stuff but it's it's pretty hard to like break out of your you know cycle of oh well this is my friend group that's why I want to help I don't I don't really think about you know how am I going to make friends in other communities and how am I going to get more people in my network who don't look like me and how am I going to help and your company hire and your company did yeah yeah and you know even outside of your company right just like yeah you have none of course of course yeah how am I going to how am I going to build those relationships like I think one of the you know one of the most disturbing and discussing things to me is I think like something north of 60 or 65% of white Americans have no black person in their life who who's like phone number they have or you know that that they have any type of contact with apart from incidental they not a friend not a colleague not a relation right and and a big part of that obviously is like the white flight of the 50s and 60s where white communities like in the US you know intentionally excluded themselves from and anywhere where they would have a diversity and and tried to maintain segregation through kind of economic and geographic patterns but hey you you got to make an intentional effort to do this stuff and I don't know I realize I'm like throwing pebbles in the ocean here but I know but it's listen man it's it's all important to talk about this stuff and I think that the more it's talked about the the more that it's normalized to talk about this stuff yeah yeah and at least right at least we can do that at least we can be like oh well you know I'm a startup founder and I have a reputation and blah blah blah and I don't want to get criticized for saying the wrong thing about race or saying the wrong thing about sexism or saying the wrong thing about you know trans folks LGBTQ plus folks you know what you you gotta at least start to get comfortable with these conversations and and be willing to make some mistakes and apologize and be like okay I'm sorry I'm still learning I'm gonna get there you know I'm hoping that over the next I think that the US has never been more divided due to a multitude of reasons obviously leadership and cova did not help but I'm hoping that things a little bit Scott with the understatement oh no I've never seen I actually I you don't know this about me I'm actually Canadian and and one thing that still shocks me is is the is oh no I can tell from the eyebrow I was like is that a thing you were so slick with that that was all I you almost convince me for a second anyways so no I just I've never seen such polarization yeah yeah we have left and right groups obviously as well but you don't see the same level of polarization and that's something that is very very sad me and it permeates much more than just start us but that's the whole other it's a whole other podcast but yeah it's I mean that stuff is intense but you know it has negative knock-on effects for all of us right if you if you think if you think that talent is equally distributed and opportunity is not then when you imagine the the sort of world as it is today and you look at all of the option opportunities that have been missed by the investment class by by the startup world by hiring you know in and out of tech you think to yourself oh my god we could have had twice three times as many amazing companies we could have had way more performance we could have had you know not just a more equitable world equitable world but a better world for all of us because we were inclusive and equitable because we recognized talent from across the spectrum and I you know I think that the the reason that that Geraldine and I put money into funds that specifically serve underserved underrepresented historically overlooked folks is is is not exclusively because we are trying to make the world a more equitable place it is also because I am confident absolutely 100% confident that those that that talent is equal or better than the talent than the best talent that you know current funds are finding yeah yeah is funded right now yeah okay let's do let's do some rapid fire that was a really good discussion man I don't I don't know if you I don't know if you planned out to go down that route but I'm glad we did that was great before we before we do rapid fire where is the best place for people to go check out you right now where do you want to send website social all that let's see I yeah so if you are interested in giving Spark Toro a spin seeing what we're up to there getting our funding docs checking out how we're building things different and using the like zebras versus unicorns mentality all that's at spark Toro.com you can also create a free account and play around with the product and then if you are interested in following me and hearing all my wackadoodle views on all this stuff best place is Twitter where I'm at Randfish okay perfect perfect okay let's go into it I just want to ask the normally I don't ask this one rapid fire question but I need to because you're your Randfish can so what is the single most important marketing concept that you believe has stayed with that is relevant to marketers over the course of your entire career oh um things that are more measurable will get more investment and therefore are more competitive and therefore are less likely to provide an advantage so paid search paid social display advertising per basically what's called performance marketing hyper measurable almost everyone puts a bunch of money into it almost no one can get a competitive advantage out of it versus a lot of organic channels especially things like press and PR and and influence marketing and going on people's podcasts and speaking events almost impossible to measure therefore very easy to build a competitive advantage that's great that's that's that's something that's a whole other spin on where to focus on marketing well I mean what do you want right do you want to be able to prove to your team to yourself to your investors that your dollars are returning you you know some amount of money for every investment or do you want the best performance it's always the best performance yeah I mean I personally am willing to not have it be proven to me that my marketing dollars are working in exchange for a competitive advantage and almost no one's willing to do that which is awesome for me because it makes all those channels way easier I love it great amazing okay one the largest challenge you've had in your personal or professional life what was it and how did you overcome it I think the biggest professional challenge for me was separating my personal identity from the identity of my previous company ma's and just just um believing that I could be someone anyone anything worth anything outside of how well or poorly that company did that was the biggest challenge I think I think I'm probably there today but I it was like a 20 year slog man um that's something that I think a lot of people left trouble with regardless even if they're not building a company their their own self-worth is tied to their career yes I mean I think this is particularly true for for men that like you know the the world sort of tells you that you're supposed to be valued based on what you do professionally and how much you earn and what field you're in and how it's going um breaking out of that is real hard hmm um okay so what would be one lesson that you would tell your 20 year old self oh god only one only one you got to pick this is the right it's supposed to be the first thing first thing first time okay rapid fire answer hey 20 year old ran here's this book lost and found you just read that you'll be good I mean I basically wrote it as here's a bunch of advice to young me so that I don't make all the same mistakes and you know a lot of those are in terms of like conceptualizing the business differently and how to fund it and how to structure it and how to think about being able to grow and and being able to be profitable and long-term growth versus short-term hacks all that good um what would be uh so you've had lots of mentors in your life who was one person that was very impactful what did they teach you oh man I mean there have been yeah so many wonderful folks I um man so a great friend of mine out in Philadelphia is Will Reynolds he runs the agency see your interactive I don't know if you've had him on the show if you haven't you should I'm happy to make an intro but Will has taught me a ton but but a huge part of what he has taught me is that the um the confidence in yourself and the um confidence in what you know you want to do with your life does not have to conflate to what anyone else wants or expects from you uh that's a pretty that's a pretty hard lesson for me because I'm a people pleaser I want to make everyone like me I I have always wanted to be that when my parents asked me as a kid what do you want to be when you grow up I told them I wanted to be a dog because everybody always loves dogs and people are sweet to dogs and they pet them and they're never mean to them and so uh breaking out of I want to be a dog when I grow up um has been really hard and and Will has been the biggest impact for me on that front amazing um what would be one uh book or podcast besides your own that you recommend people go check out oh man there's so many good books right now let's see I just got I just started reading Amanda Russell's uh influencer code look at look at how I have a conveniently just set up yeah right and uh and that has been a great start I okay I read uh randomly John's product led onboarding which you know it's hyper tactical but I read it I got maybe halfway through the book and I was like this is so great I just emailed him immediately and was like hey man can I hire you like I need you to do this for us this is freaking phenomenal anyway he's working with us right now so that's amazing if you if you if you're looking for uh for one of those oh this is how much I like that book I have two copies look look at me I'm basically a randomly John shill that is me no I um yeah a huge fan of that book amazing um and then last question what does success mean to you it's so different than what it used to mean so so different um success to me means that I make the world kinder and more equitable uh every day at least a little bit amazing that's all I got man that's it I love it