Reflections on 12 years building a software business, the lessons learned and mistakes made along the way.
It is an absolute pleasure to be here in Scotland. I have only visited the country once before. And this time, we got to spend a little bit of time out in the Highlands and on the west coast. And oh my God, when it is sunny, there is no place like this, holy crap. I’m so sorry it’s never sunny. It really seems unfair. I mean, it’s like a cruel joke of irony. All right, so we have a tremendous amount to get through today. I have shared a link on Twitter under the Turing Fest hashtag to basically more detail about these slides. But I’m gonna spend a little bit of time, just a couple minutes giving you some background for those who might not be familiar with Moz or with me. And then I’m gonna spend some time talking about things that I would change, that I’d keep the same and things I don’t know yet.
So in 2001, I dropped out of college and started working with my mom, Gillian, who some of you might know through the web marketing world. For the first four years, we were web design development consultants, did very…Well, did a crap job building a business. We built about $500,000 in debt, credit card debt. It was a truly shitty time. In 2005, I think it was, we had creditors, you know, kind of knocking on the door and coming and asking for, asking for money and we had nothing to pay them back with, right? So these were all mostly credit card loans and bank loans, that kind of thing.
We could not declare bankruptcy because we hadn’t actually told my dad that we had any debt. And so if he… if he found out, we were worried that, you know, he would divorce my mom, and it would break up our family and my brother and sister, and all that kind of stuff, younger brother and sister. And B, we were worried that the banks could take my parent’s house and my grandmother’s house which my parents owned as part of that bankruptcy. So just a total crap situation. There was only one saving light and that was a blog that I started in 2004 called SEO Moz. I had a lot of frustration at that time trying to learn search engine optimization and started this blog out of that frustration in order to help myself mostly understand how SEO worked. And in those days, you know, the search engines were very quiet. The online communities were much more secretive about SEO. And that blog took off. You know, it turned out that after a couple of years it got some momentum. It started bringing us clients that eventually helped us pay off that debt. And in 2007, we were able to be debt-free which was, you know, felt really remarkable at the time.
2007 was also when we launched our software product. We didn’t know what SaaS was. We were not in the startup world. We just had a bunch of tools, and we made them available via PayPal. You could PayPal us $29 a month and get access to our tools. And turns out a lot of people who were reading the Moz blog, the SEO Moz blog were, in fact, great customer fits for SEO tools. And so we had a lot of people signing up. And that same year, we had a venture capital group in Seattle reach out to us and say, “Hey, is there anything that you guys would think about taking this bigger.” That was pretty exciting. We ended up raising around that year $1.1 million. We built a link index. We grew into a more formal software company. We learned what it was to be a SaaS business. And Moz grew from there. In fact, grew quite well for the next six years. They asked me to be CEO which led to a really tough conversation with my mom. That was no fun. She’d been running the business since…This business that became as sort of her business since 1981. That was a real hard conversation.
You know, from 2007 to 2013, we basically grew from, you know, $400,000 in revenue to 29 million in revenue. You know, that was kind of a rocket ship ride. We raised another big round in 2012, this time from Foundry Group out in Boulder, Colorado. And Brad Feld joined our board. You know, we had a business crush on him and a blog crush on him for years. It was a great experience. But a lot of tough things happened too.
In 2012, when we raised this round, we invested very heavily in this theory that we had that a lot of inbound marketing channels, search, social, content, email, etc., were gonna be combined and that marketers wouldn’t just be doing one. They would do them all together, and they needed a great piece of software to do them all together. And that made us try and build something for all these folks. That strategy did not work very well. At the end of 2013, we launched that product. It went terribly. Hard to separate cause and effect, but I at the time had, and continuing into 2014, had some pretty severe depression which I’ve written about and probably some of you have read about. The beginning of 2014, I actually stepped down as Moz’s CEO and promoted our longtime chief operating officer, Sarah Bird, to that role. She’s been leading the company ever since.
Yesterday, literally yesterday morning in Seattle, afternoon here, you might have read about it, I got on a WebEx in my Airbnb that I’m sharing with Wil Reynolds, who’s speaking tomorrow. And Wil and I watched together while Sarah made some announcements that Moz is gonna be closing two of its business units and laid off right around 50 people, I think, which was super sad. Well, about 220, so I think around 27% of the company. And that was really hard. And it’s hard not being in Seattle for that. I’ve never worked anywhere else. You know, I’ve never been a part of any other company. It’s weird too because Moz is growing, not at a fast clip but doing better especially in like June, July, and August than it had in the months before. It’s very strange weird time. I built this presentation obviously before that event but I’m happy to talk about it too. So if you have questions or you wanna chat about that, I’m happy to do that.
With that background, hopefully, you’ve got a sense of what Moz is, right? It’s essentially a self-service software business for SEOs. It has a couple of different products, four until yesterday, kind of two. I think we’re gonna do around $41 million in revenue. We’ve got about 160 people on the team. Most all of them are in Seattle or venture-backed which means a bunch of different things. So let me take you through some things that if I got to start this over, I would change. I feel like, in a lot of ways, startups are like video games. You know, when you’re a kid, you’re playing a video game, right? You’re playing Super Mario Brothers. You know, you choose Luigi for this one level. And you’re thinking like, “Well, you know, Luigi’s taller, It’ll help.” Let’s pretend we’re at Super Mario here, right? He’s taller. He can make…You know, get on the higher jump that you need. But you play a level through once or twice, you feel like you’re a lot better at it. You know, you want that second play through, that third play through. You wanna take a different character this time. You’re like, “Oh, no.” You know, “Well, thought Luigi was good, but I bet Mario can make that same jump and he can squeeze under that one rock fortress.” Startups feel a lot like that to me. I hope that someday I get to start another company and do it again, and maybe choose Mario this time.
So first thing I would change is I wouldn’t just learn to code. I would actually learn software engineering. I would go back to school. I would try and become a software engineer. I think it is really, really hard to be truly empathetic to engineers and developers without having a background in that world. And if you are starting a company that’s primarily building software and making this product, man it’s just tough, right? One of the things I really struggle with is it the case when an engineer or an engineering team tells me, “Hey, Rand, this is really hard. It’s gonna take us a long time, and we’re not sure if we’ll be able to do it.” I can’t call bullshit on that because I have no idea. I have no clue whether that is a thing that is possible, right? It’s just like if a bunch of, you know, building constructors came to me and we’re like, “Oh, you want a building like that? That’s gonna take seven years.” I don’t know. I mean, I held a hammer once in high school, but that’s about it. You can tell, right? I guess pretty obvious. So that’s something I would change.
Another thing that I’d change, you know…Moz is my only experience. I have no point of reference. In fact, the only real point of reference that I have is my wife, Geraldine, who had worked at a couple of other startups in Seattle, including the board game company, Cranium. She wrote questions for that game and content for them and actually got laid off when they closed down and sold to Hasbro many years ago. And so not having a point of reference, that is really hard. You know, I would do this, and I would probably encourage you to do this. If you’re thinking about starting your own company, even if it’s gonna be a crap experience, go join at least one or two others so that you know what it’s like, and you know the things that you do like and that you don’t like, the things you do wanna do and the things you don’t wanna do. I think that’s powerful. I would reject no-touch onboarding.
So this is something… say, you know, you decide, “Well, you know, Moz sponsored my lanyard.” This has never happened in the history of lanyard sponsorship by the way. But let’s say you’re like, “Ooh, Moz, look at that. It’s on my lanyard. I’m gonna go sign up for a free trial.” There wouldn’t necessarily be anyone who would have direct contact with you, right, like you wouldn’t have a person assigned to you. That’s not true for most software-as-a-service companies. Most SaaS companies, they have onboarding specialists, you know, customer success representatives who work with you to make sure that you’re getting a great experience. At Moz, I was always like, the product should do that. If we build a good enough product, we don’t need people to onboard like you’ll just understand how it works. Well, I don’t like that approach anymore. I think I’ve finally, after many years of pushing for it, changed my mind on that and Moz has started some experimentation on that. You know, if I come back next year, maybe I’ll be able to tell you how that went.
Number four, these are my investors. That’s Brad Feld over on the left. He’s sort of looks like the guy from The Big Lebowski. He sort of acts like him too, like he’s very peaced out. He’s pretty awesome. And then on the right is Michelle Goldberg and her husband who’s also named Brad, coincidentally. Michelle was my first investor back in 2007 and Brad invested in 2012. And actually, one of Brad’s partners Seth Levine is on our board now. I always felt like I got too much of a free ride from that, right? For a few years now, I always feel like in board meetings that I’m the heavy. I’m the one who has to come in and give folks a hard time, and I’m the one who’s toughest on the company. I don’t like that. I think that, you know, in looking for board members who are very empathetic and who were very kind and who I had a close relationship with, I don’t think there was enough of the healthy conflict that can drive success. And so, I think, in the future, I will, I have been, and I would continue to push my board members to be a little tougher with me and with the company. I don’t want them to be assholes like god, no. I want them to keep being kind empathetic. But I want them to be tough with their questions. I want them to be tough with their beliefs. I want them to make me prove things to them or make Sarah prove things to them. I think that matters.
I know there’s a lot of love for the Lean Startup. And I have a lot of love for that methodology as well. But I hate MVPs. I think most MVPs suck horribly, just miserably horribly suck and are not good enough to release. A lot of companies get in this mindset of, “Hey, it’s just an MVP. It’s our first stab.” Yeah. You know what, your first stab is how every customer is gonna judge you. And if you’ve already built up a community and a customer base, that is how they will view that product and changing someone’s mind. Instead of introducing them to something new, is incredibly hard. It’s incredibly hard from a branding perspective. It’s incredibly hard from a memory perspective. Human beings are just not built to change their mind about things. That’s why it’s so hard for big brands who suffer PR disasters to recover from them because reintroducing a product or trying to re-earn people’s trust is really hard. And I think this applies to the MVP model as well which is why I love EVPs. I made that up but exceptional viable products. Products are massively better than what else is out there in the market the day that they’re released. I think the MVP model works great for internal dogfooding and beta testing as long as you don’t release it publicly. I would hire fewer people. I would hire fewer people. I told you. I built this before yesterday’s, you know, really horrible news. But in the future, I would hire fewer people. I would build fewer things, and I would have more focus. That is something that I strongly believe in. I love the quote. I think it was from Bill Gurley that said…Bill Gurley is a very famous investor at Benchmark Capital in Silicon Valley. And he said, “Startups don’t die of starvation. They die from indigestion.” I think that is absolutely true. I think it’s really hard to focus. When you’re an entrepreneur, you think you can do a lot of things. You try to do a lot of things, doesn’t always work.
Number seven, I would… So Moz historically… Now, we tend to pay at the higher end of scale now. But historically, we paid probably between about the 40th and 60th percentile in Seattle, especially our first few years. We just didn’t have a lot of money. We thought we needed a larger number of people. I would change that calculus if I were to do another startup, and I would tend to pay in the 80th or 90th percentile. If I were doing it in Seattle or Silicon Valley, I would probably not try and do, you know, 95th percentile or higher because it’s completely unaffordable. But I would shoot for those higher numbers and fewer people for two reasons. One is because I think that when you recognize that people are being paid in that percentile, you can also set a bar that is in that percentile. I think it’s really tough to say, “Hey, we’re paying you in the 50th percentile for a software engineer but we expect you to deliver in the 90th.” That doesn’t seem very empathetic, that doesn’t seem very fair. I’d much rather have fewer people paid more doing fewer things and focusing but doing them better.
I haven’t written about this but at some point, I will. I’m in the process of writing a book, and I’ll include it in there. But in 2011, Moz had a single offer. The only very serious offer we’ve had to sell the company, and I turned it down. I thought it was not for enough money. And I thought that… We were actually… As of today, we are making more money per year than what the price would have been. And yet still today, I wish I could go back in time and sell for that amount at that point. There’s a bunch of complex reasons. But I would say that the biggest one is that once you have one of these business successes under your belt, I think you gain a tremendous amount, more understanding about, you know, what it’s like to be at a bigger company, what it’s like to go through the sale process, what it’s like to build that startup, and you have that experience to be able to do it better the next time. I wish I could do that. Oops… we’ll go fast. So, seven things I’d keep the same. It’d be really embarrassing if this slide weren’t’ in here. That would not go well for me. This is my wife Geraldine. I have made her a huge part, she has made me a huge part of each other’s lives. We are huge parts of each other’s lives. That is true personally, and it is true professionally. And I would not change that. For those of you who are familiar Moz’s culture and Moz’s core values, TAGFEE. Geraldine actually wrote those. For many years, Geraldine did all sorts of, you know, free labor for the business. She continues to this day. Having a partner with me who loves me unconditionally for whom I can do no wrong, that is really amazing. That is powerful. I think, you know, being an entrepreneur, especially being a CEO is an incredibly…It can be an incredibly lonely tough unforgiving job. And there’s tons of benefits. You know, you can’t legitimately complain. You get to control your destiny. You’re generally earning a nice amount of money especially once you get funding. But it’s tough and having someone there who believes in you, makes all the difference.
Second thing, I would take TAGFEE with me wherever I go. So the next company that I start or you know, if I join a company or whatever it is that I get to do, investing, I would take these core values. The core values that we developed at Moz in its early days, I would take those with me again. They’ve served as well, but that’s not why I like them. I would choose them even if I knew for sure with data that they were a competitive disadvantage. Even if they hurt the business and I could prove it, I would keep them because they represent, for me, how I want to live, how I want the world to be, and that is more important to me than any business success or money. I think if you can find those things, if you can identify those things inside yourself and you can apply them in the companies that you join or the companies that you can build, you will get something weird, something that is more powerful than the sum of its parts, something that other people wanna follow. You will have an architecture for choosing who you should work with and who you shouldn’t. I would strongly urge you to do that.
Number three, we established something at Moz that I really love and that I wish every company had. We have two tracks. You can see. They’re up there at the top. That’s the individual contributor track, and down at the bottom is the people-wrangler or manager track, right? Not everybody loves managing people. But in a lot of ways, modern corporate culture and startup culture has made it such that the only path to more influence and a higher salary and, you know, job progression is to manage people. That’s crap. That is total crap. You do not need to become a manager to be better at your job, to deserve to be paid more, to add more value to your company. I am infuriated with that. And so we created this so that…You can see. There’s people who are advanced roles, right; midlevel engineer or senior engineer, designer, who are making the same as people at the VP level. And they have similar amounts of influence. They just don’t manage people. I think every company should have this. A few companies do. Places like Google and Microsoft, but they’re only for engineers, which is crap to me. I think this should apply for everyone. We have people at Moz who are on these levels, who are on our help team, individuals on the help team. I think that’s great. I think that’s awesome. I hope they get up here, and they’re making as much as the, you know, chief technology officer, be amazing.
Number four, I mentioned that Moz, before we ever launched our software, had three, four years where we essentially built our audience, right? The community of people who knew about Moz and liked the content we were putting out and were learning things through our blog. And then when we launched our software, we had this built-in way to get customers. I would say that even harder than building product in the startup world is having an affordable scalable way to reach your audience and earn customers. That is one of, if not, the toughest things that I see startup struggling with. I think it kills more startup than anything else. If you can start your marketing even before you start your product, I think that’s usually powerful. And I would certainly do that again, right? So if you see me start a new blog on some new topic in a few years here, you can bet there’s probably a company coming.
Number five. This is a photo of me at my friend, Wil Reynolds’s house. Wil who’s speaking tomorrow. I’m at his house in Philadelphia running his company for a week. And he was actually living in my…well, in my apartment in Seattle walking to Moz every day being CEO of Moz for a week. That’s an extreme example of living in your customer’s shoes but a very powerful thing to me to have a real understanding of what it is like to be a customer. You know, I did this even while I was CEO of Moz. I felt like I needed to understand our customers better, and I had this an amazing opportunity with Will. You know, I think it built a great friendship as well, but it was a truly powerful life-changing kind of experience. If you have that opportunity to be your own customer, to put yourself in their shoes very literally, that is a wonderful thing. This time, if I were to do this first company again, I would raise funding again. It creates a lot of complexities and a lot of demands. You know, one of the things, for example, right? Moz is growing, I don’t know, 10, 15% year-over-year. This year, it’s gonna do $41ish million in revenue. Maybe that’s not great growth but if I’m a private company, a wholly-owned company by a couple people, I’m feeling phenomenal about that. That is awesome. But if you’re a venture-backed company, you are in the bottom half, if not, the bottom third of performance, right? You are an unacceptable level of growth. It is not okay to be a profitable slightly growing company 10%, 20% company. 30% sort of the minimum bar and 50% is where they want you to be or 100%. You need to be returning 10 times the millions and millions of dollars have been put into you, which means you need to get to hundreds of millions if not billions of dollars in your exit, right, in a sale or an IPO. That is, you know how bad the odds are for that. Those odds are shit. You literally can play many lotteries and do better, right, in terms of odds versus how many companies are started that actually make more than a billion dollars for their investors like tiny, tiny numbers, right? Scratch & Win is better. Do you have Scratch & Win? You know Scratch & Win? It’s real fun. If you get drunk and you go to a gas station in the United States at 2am, play yourself some Scratch & Win. Great way to spend 75 pence. I would also, once again, choose a sector like SEO, a sector that other startups avoid that have kind of like…especially in the early days. Now, it’s not so much true. But in the early days of SEO, it had a dirty reputation, a bad reputation. Other companies, other entrepreneurs, were staying away from it. I love places like that. I love places where other money is not going that is not a hot sector. I mean, social local mobile augmented reality, woo, very hot. Not interested, right, not for me.
All right, last ones. Some mysteries I don’t yet know the answer to. First one, I do not yet know whether having multiple products and now again, Moz is now down to sort of two or two-and-a-half if you include our API. I don’t yet know how that’s going to do versus the one product that we had for the first six, seven years of our life. It is definitely very different, right, the marketing demands, the work that you do building the brand of a company when you have multiple products is spread out across those multiple products. And that makes marketing much, much more challenging. It also makes division of labor internally an organizational complexity much more challenging. I am looking forward to seeing how it goes with this more simplified strategy that Sarah’s put together and hopefully learning from that. I also don’t know whether I’m actually any good at building products, designing and building products. That is something where I hope I have the chance to keep pounding on that for a few more years at Moz and to learn whether I really trust myself or not. You know, this past year, I got to build this keyword, explorer product. I sort of, you know, got permission to have this small team inside of Moz. I lost a lot of internal, as you may imagine a lot of internal credibility after stepping down as CEO and putting us on this path that hurt our growth for a while there. Yeah, I had a great time doing this. It was truly enjoyable, and I was very proud of the team and of the product. But I think it’s…History will judge, right? Six months from now, I’m gonna know a ton more about whether I think I’m good at that and whether I wanna keep doing it or whether I need to hire people who are great at that. I think that’s another big lesson here is that you need to find your strengths, right? I need to find mine so that I know in my next company, should I do that again personally me, should I run that team, should I be in charge of that strategy, or should someone else.
Third one… Oops, did we miss one? Nope, got it. Okay. Third one, self-service for the enterprise. So Moz is a self-service software as a service company, right? You can go, you can put in your credit card, take your free trial, you know, sign up. You don’t have to talk to a salesperson. In fact, we only have two salespeople, and they work on Moz Local which is a product that I don’t work on very much. It is a great product. And it also has a self-service funnel that has this enterprise one. I don’t know. I’m learning about enterprise. Can I be honest? I really dislike salespeople. I’m sorry to those of you in the audience who might be some sales, like there’s something about the culture that doesn’t sit right with me. It’s not my style. It’s not who I am. But I don’t know whether that means it’s bad for the company or whether that’s a great thing for the company that I’ve been avoiding because of my personal biases. So I wanna learn that.
Number four, acquisitions. So this is a photo of several of our friends in Portland along with Geraldine. So that’s David Mihm, who we acquired when we built Moz Local and Matt Brown from AudienceWise who we acquired. We’ve done, I think, four or five acquisitions now and probably have another one coming up on the horizon. I don’t know how those are gonna go. That’s something I’m really looking forward to learning about. I think that in the past, we’ve had a few that worked and a few that didn’t work. But I don’t know whether that capital could have been better deployed.
Last one, if you can’t tell, I make Moz, I make my work incredibly personal. You know, Moz is part of my life and who I am. The values of the company are the values that I hold personally. The people that I work with are often my closest friends. And that is something that has had wonderful positive impacts and also awful hard negative ones. This morning, I have texts in my phone that are just fucking hard to read, right, from people I’ve worked with for years who were laid off yesterday, who are friends, who feel like I betrayed them. That’s hard. That is really tough. I don’t know yet whether I have the fortitude and the empathy to do that again or whether I would change how I approach that and make work a little more work and keep the personal separate.
So with that, I wanna leave you with one thing which is I would urge you to go through this process. This was cathartic for me. It was powerful for me. This was not my idea. It was, you know, Mark Littlewood, actually, from Business of Software, asked me to put this together. I was really impressed about how powerful going through this exercise was. I would urge you to do the same thing if you can. Thank you so much.
Rand Fishkin is founder of influencer intelligence startup SparkToro, founder and former CEO of SEO software startup Moz, host of Whiteboard Friday, co-author of a pair of books on SEO, co-founder of Inbound.org, and serves on the board of the presentation software firm Haiku Deck.
Rand is also the author of Lost and Founder: A Painfully Honest Field Guide to the Startup World, a book on the ups and downs of startup culture to be published by Penguin/Random House in April 2018.
In his minuscule spare time, he loves to travel with his wife, author Geraldine DeRuiter, and read about their adventures in her books and blog. Geraldine and Rand are also small investors in Backstage Capital and Techstars Seattle.