Why Raising Capital VS Bootstrapping | With Rand Fishkin CEO of SparkToro

In retrospect, why did you decide to still raise capital? You still did go out there and, you know, find some investors rather than bootstrapping. And do you anticipate you'll require future 'Cause you've done it before with Moz, right?

Right, yes. I mean, my hope is no, we don't require a future round, but I will say we've had so much inbound interest from other angel investors like the ones that we did that if we want to, I think we would have a reasonably good time doing that. And certainly our structure allows for raising more money in the same way that we did. The other thing that is, that is definitely true is that we raised money for, I think, for 2 big reasons, right? One is because we wanted to be able to be patient.

Mm-hmm.

We did not want to rush a product out the door, and we had a lot of risk in building the product. Like, I think what would have happened if we hadn't raised money and tried to bootstrap is that I probably would have done consulting for a while, and Casey would have stayed at his job, and we would have Very, very slowly tried to validate this idea. And instead of rolling it out in 18 months, you know, getting from sort of funding to launch in 18 months, we probably would have taken 4 or 5 years, maybe even longer.

Right.

Neither of us really wanted to wait that long. You know, Casey's in his late 30s, I'm in my early 40s. We, you know, we want to, we want to get this going. We believe in this product and we believe it's the right time for it to be in the market. And I think there's, there's also secondarily, I wanted to prove that you can make this work.

Right.

Like, I want to show other entrepreneurs who need to raise money because they can't, you know, self-fund, and show other investors that instead of putting your money into angel list funds, instead of putting your money into deals that you hope raise venture and become unicorns, stop it. Stop funding that system. It is— it's not good for any of us. It's not good for founders and entrepreneurs, right? Because 90% of us are gonna go bust.

Yeah.

It's not good for the employees or teams. It's not good for the customers of those companies. It's not good for the world. Like, stop it. Put your money into different forms of investing. And I think if SparkToro and a few of these other Folks who are passionate about creating alternatives can have success, we can start to shift that conversation. We can start to shift those— the mentality of investors.

Yeah.

And so, yeah, that's why, you know, what I want, I want 35 investors who, for, you know, the next 10, 20 years, go out and tell people, you know, the most successful investment I ever made was not in a venture-backed company. That's what I want.

Nice. Well, we'll share that template that you shared with other entrepreneurs. I'm actually jealous I didn't get to invest in SparkToro. Maybe the next round.

Very kind. If we do another round, I'll drop you a line.

Thank you. Thank you. I appreciate that. Yeah, that's why we're not in the VC world. We don't like VC. We know it's full of sharks. We get that world, so we stay away from that. So 50 Cent coined the term get rich or die trying. What's kind of your— you have this term, succeed on a massive scale or die trying when launching SparkToro. Can you share that? What that was about?

I mean, that is, yeah, that's the opposite of what I want to be, right? So I think the right thing to do is, right, when I think about what is good and evil in the world and what is something that is worthwhile to put your life toward, I think it's very, very obvious that everyone on the planet should be thinking, how do I make people who are suffering suffer less?

Mm-hmm.

How do I make people who have less opportunity, who have less of a voice, who have less wealth, how do I give them more of all those things? And if, if you are doing good things in the world, then you are helping to do those. And if instead what you're saying is, I want to make the difference between the powerful and the less— and the not powerful greater, if I'm trying to increase that gap intentionally or unintentionally, I'm doing the wrong thing.

Mm-hmm.

And therefore, get rich or die trying is a very problematic, very problematic statement, right? I don't think there's anything wrong with desiring to grow wealth, to grow your own wealth.

Sure.

I think that capitalism can, if well regulated and well structured, it can increase the income of everyone, right? Because we all find our specializations, we all trade the work that we want to do for the kinds of work that other people want to do and are willing to invest in, right? And capitalism, when well regulated, does a great job of that. It's better than any system human beings have previously come up with. Maybe there'll be an even better one in the future. I don't know. But it can be, it can be great that way. What's, what's not great is the mentality that wealth is personal wealth gain at the expense of everything else is the end-all be-all. I think that's a really unhealthy negative, terrible way to live your life and, and try and build a company and try and exist.

That's a very selfish statement, right? I look back to like, you know, hundreds of years ago, if we were out there hunting, I think look at capitalism. I don't talk politics here, but it's like you're trying to go out there and hunt and you're trying to build the biggest wall for yourself, right? Versus like where before, you know, go on tribes and you go out and you know, hunt together and share food and everybody would eat together and, you know, we'd enjoy whatever we go and hunt, right?

So, um, well, and I think inherent in the idea of like this get rich or die trying is that, um, the people who do get rich somehow deserve it and the people who don't deserve that. And that is, we, we know that that's untrue as well, right? And so, um, I think there, there has to be a deep recognition that most wealth in the United States and in most Western countries is inherited, right? It comes from our families and that, like it or not, most inherited wealth can be traced back in the United States, infuriatingly, it can be traced back to slavery, right?

Mm-hmm.

Like, America became rich because it forced human beings into bondage who built up wealth and, you know, it required no sharing. And that systemic injustice obviously has still not been addressed. And so if you value, you know, if you start to ascribe morality and ethics and, you know, laud and amplify wealth—

Mm-hmm.

You're playing into a historically ugly, ugly game, my friend.

Right. Yes. I mean, just pure luck, right? Born into the right place, right time. Yeah.

I hate the idea that genetic lottery is how you— is what we amplify and promote. Like, let's stop that. Let's stop that.

I love it. I'm sure I can have this conversation for hours, but this is super interesting. You know, so after launching SparkToro, you guys launched in a, I would say, a difficult time. Yeah, right, right. What is the— yeah, April 2020, right? So right in the middle of the pandemic, the situation when things were shutting down, marketing budgets probably being cut, one of the first things. What is the trajectory, or what did it look like for you launching?

Yeah, so we sent out our first group of early access emails at the end of February, and our conversion rate in that group was almost 5%. So we were like, oh my God, this, you know, this company is gonna be amazing. It's taken off like a shot. And then over the course of March, we just saw, you know, we just saw COVID take this incredible, you know, bite out of our conversion opportunity and out of the marketing world. I was, you know, we were sending all these emails to folks inviting them to try the early access product, and more and more of them every week were bouncing back with, so-and-so no longer works here. Right, so people are just getting— we were seeing these like, I was literally getting— there was a day when we sent a couple thousand emails and I had like 150 bounces saying so-and-so no longer works here.

Ouch.

I was like, holy shit, right? Like marketing is just getting decimated, decimated. People are, you know, people are losing their jobs, budgets are being cut, tool budgets are being pulled. We were getting emails from folks, I still get emails from folks like, oh, I love your product, but corporate pulled our credit card earlier this year. We're not allowed to do any spending on marketing tools this year. Okay, well, there you go. So yeah, very, very rough. Despite that, SparkToro is going, I would say, okay. I think our hope, our sort of hope was to be profitable by the end of the year, and it looks like we might actually still be able to do that, which is fairly remarkable in a year like this.

Sure, yeah. So looking back now, obviously hindsight 20/20, would you still have launched in April? Would you have just delayed that? decision?

You know, given that we took, you know, 18 months to launch and had to, you know, we had to get out there and start making some money. I think, you know, we're cutting into our— we have plenty cushion, right? Like, we've got a couple of years of runway to go, but I don't think waiting would have been the right decision. As frustrating and infuriating as launching in April was, like, I somehow wish we could have launched in 2019 or, you know, or that we had, I don't know, gotten funded in 2019 and 2020 was our development and building year. Like, sure, that would have been awesome, but it just, it just didn't work out that way.

Sure. So back to some kind of luck, right? And just timing and nothing, nothing you did wrong that you could have controlled.

Exactly. And I will say right there, so there's a lot of examples of companies that are— that start during economic recessions and depressions and, you know, become remarkable companies, become market leaders, that— yeah, that is possible.

Hmm.