Y ou read a lot about entrepreneurs who land that big funding round. But the more common story is of entrepreneurs who don't. Rand Fishkin is one of the latter, having spent about nine months talking with venture capitalists about funding his search engine optimization firm, only to be denied in the end.
Fishkin, founder and CEO of the Seattle-based firm SEOMoz, took to his blog Monday to chronicle his woe. Under the headline " Misadventures in VC Funding: The $24 Million Moz Almost Raised ," Fishkin's post makes for a great read if you want to know how the funding process really works. He's sharing his story, he writes, because:
My hope is that by sharing, others can learn from our experience and possibly avoid some of the mistakes, pitfalls and pain we faced.
Raising money for a startup is an inherently risky proposition. You step up to the plate knowing that the odds are slim and that, for every story of success on TechCrunch, there's two hundred companies pounding the street, getting nowhere.
It all started out to be so promising. Fishkin speaks of being courted, and courting, numerous venture capitalists. The list is impressive: Bessemer Venture Partners, GRP Partners, Stripes Group, Insight Ventures, JMI Equity, Level Equity, Mayfield Capital, Accel Partners, Summit Partners, NEA, General Catalyst, K1. and Industry Ventures
One in particular, who goes by the pseudonym of "Neil" in Fishkin's post, gets the most attention and was the final choice of partners by Fishkin and his SEOmoz colleagues. As the tale goes, Fishkin spent from the beginning of the year until August talking and being vetted by venture capitalists. The process involved meeting after meeting, letter after letter, and became a time-suck for Fishkin and his colleagues at his firm. He writes:
In June and July, the funding process probably entailed hundreds of combined hours of work on the part of our team"much of that was me, but plenty spread to other departments and functions. We knew this was a very big decision"one that would massively impact the future of the company " and thus, we wanted to be as diligent, thoughtful and cautious as possible.
But things weren't all work. There were lunches and dinners, introductions to spouses, personal notes. Everything seemed to be on track, until in August, it wasn't, and the funding fell through.
The experience left Fishkin philosophical, as he offered a few lessons to any entrepreneur who follows him on the great startup financing game:
Don't let fundraising distract you from what really matters : "We should have let the investors do more of the work and kept the team more focused on the mission at hand. If an investor really wants to be part of Moz, a few missing, non-standard business metrics aren't going to change that."
Be excellent to everyone, all the time: " I can definitely confirm that the world of venture capital and private/growth equity is a very tiny one, and that entrepreneurs, partners and service providers talk incessantly and vociferously about nearly every experience with an investor or company. If you're in the startup world on any side of that equation, it pays to be a great human being and to treat everyone with respect (this is probably another full post worth writing at some point)."
Never, ever get cocky : "A bunch of investors wanted to put a LOT of money into our company. We were beating revenue month after month. We turned away investors instead of the other way around. I tried to stay humble, stay hungry and not get overly excited about things, but the idea of having liquidity for my family, the ability to grow Moz in a new and exciting way and, yeah, the idea of finally having some personal savings were all dancing in my head."
Fishkin's full take is definitely worth the time to read , especially if you're either a startup founder looking for money or a venture capitalist about to starting "dating" the hot young company down the block.
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