Was This the Most Transparent Fundraising in Startup History?

Rand Fishkin, the CEO of Seattle search marketing software firm SEOmoz, tried to raise some venture capital this year -- and he didn't leave much to the imagination. Through a series of posts in various channels, Fishkin laid out in extraordinary detail his thought process and the particulars of his business and personal life, for everyone to see.

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  1. The first public tracks I found about this round started back in the first months of 2011, when Fishkin posted this question on Quora, asking for some general thoughts on "taking money off the table" by cashing in some of his ownership stake, similar to accessing equity in a home. 

    The questions on Quora aren't dated, but the first answers are dated Feb. 13.

  2. A few months later, Fishkin was leaning against raising more money. This post from his personal blog in May reported near-weekly inquiries from possible investors, but he felt the additional risk and dilution of existing shares wasn't worth it.

  3. That post also includes a great, simple infographic that details SEOmoz's general revenue picture over the next four years, from around $12.5M this year to about $60M in 2014. It also lays out an estimated pre-money valuation of about $40M for the company.

  4. Sometimes VC Just Ain’t Enough « Rand's Blog
  5. (This wasn't the first time that SEOmoz was thinking about a new round of funding. And yes, that one is heavily documented as well. Here's an extremely long post from the SEOmoz blog in early 2010 recapping the unsuccessful fundraising drive of mid-2009 ...

  6. ... which also includes this reply comment, revealing that Fishkin has "never owned a car or a house, never had 5 figures in all my bank accounts combined ... and never spent more than $5K on any one thing" ... 

  7. ... and was followed up by this November 2010 post, in which Fishkin declares the summer he spent unsuccessfully pitching 40 VCs "the most wasteful 3+ months I've had at my job." His advice: Don't start selling yourself until you know someone's willing to buy.)

  8. Flash forward again to 2011, and Fishkin is facing down that advice as potential investors start getting in touch with SEOmoz. 

    In May, he was leaning against the idea of more capital. Come August, he's reconsidering, "thanks to a number of internal and external factors." That doesn't mean all the previous worries are gone: "It's an arduous, nerve-wracking process," Fishkin writes.

  9. Another remarkably transparent moment happens here---as Fishkin is noodling through the question of whether he and his co-founder (who also happens to be his mom) should take money off the table, he again notes his pretty frugal standard of living. But his bank balance has improved at this point, now at around $25K in a checking account.

  10. In a reply post on his own blog, HubSpot co-founder Dharmesh Shah runs through several reasons why Fishkin should raise more money for SEOmoz, and offers some tips about what he should expect from new VCs and how to protect the company culture. 

    Shah incorporates several points made by his own co-founder, Brian Halligan, who left extensive comments on Fishkin's blog.

  11. Entrepreneur Jason Cohen adds his voice as well, blogging specifically about why he thinks Fishkin should cash out some of his personal stake.

    His basic argument: Putting your personal finances in better shape will give you more security and peace of mind, allowing you to focus more intently on the business for the longer term.

  12. It's worth noting Fishkin's reply comment to Cohen, in which he notes the weirdness of having people discuss his checking account balance online, but says "it also feels oddly liberating." He also notes that the whole exercise is part of SEOmoz's company values, which place a high priority on transparency.

    One of his chief concerns now is any awkwardness back at work, where he's involved in day-to-day activities, once it's known that he has a much bigger bank account.

  13. As a reporter, I was of course monitoring all of this with the idea of eventually writing a story. Perhaps counterintuitively, the fact that Rand was laying almost the entire process out there meant I really had nothing to add. 
    There are a breed of tech startup stories that report "Company X is Raising $Y" but I didn't think it would add anything in this case, yet.
  14. Anyway, I don't recall seeing any more activity out there in Fishkin's public discussions until I saw this pop up on his Twitter feed:

  15. ... which looks and sounds like a term sheet being signed. I should have poked around more once I saw this, but honestly the whole information dump that preceded it just made me feel like I should be kind of sly and try to check in with sources in a couple of weeks.

    The appearance of paperwork doesn't exactly mean it's a done deal. He also puts a timeframe on the actual news delivery, so I figured I'd have some time to snoop around.

  16. Perhaps I should have done that sooner, since someone anonymously tipped VentureBeat that SEOmoz was raising around $25M. That turned out to not be the case, exactly - below is the corrected story based on Rand's follow-up with the reporter.